Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
4. DEFINITIONS AND CHARACTERISTICS OF SOCIAL IMPACT INVESTMENT
This chapter discusses the challenges related to definitions in the social impact
investment market and provides a working definition based on a set of criteria for
determining what might or might not be included as social impact investment. This
includes a discussion of the core characteristics and definitional attributes.
4.1. Existing definitions and challenges
4.1 While in the early stages of a market’s development, it can be difficult to have precise
definitions, for purposes of scoping and sizing the market, it is essential to work towards a common
understanding of what is meant by social impact investment and agree upon a working definition to clarify
what is included and what is not. This is important for policy makers, researchers and practitioners as well
as for the overall development of the market.
4.2 The term “impact investing” was coined in 2007 through an initiative coordinated by the USA’s
Rockefeller Foundation and its use has spread more widely since then. According to the Global Impact
Investing Network (GIIN), impact investments are defined as investments made into companies,
organisations, and funds with the intention to generate social and environmental impact alongside a
financial return. Impact investments can be made in both emerging and developed markets, and target a
range of returns from below market to market rate, depending upon the circumstances. GIIN further
defines the practice of impact investing by the following four core characteristics:
Intentionality – The intent of the investor to generate social and/or
environmental impact through investments is an essential component of
impact investing.
Investment with return expectations – Impact investments are expected to
generate a financial return on capital and, at a minimum, a return of capital.
Range of return expectations and asset classes – Impact investments generate
returns that range from below market (sometimes called concessionary) to
risk-adjusted market rate.
Impact measurement – A hallmark of impact investing is the commitment of
the investor to measure and report the social and environmental performance
and progress of underlying investments.
(GIIN, 2014)
4.3 The term social investment was established in 2000 by the UK’s Social Investment Taskforce and
was more traditionally used in Europe until recently. In 2013, following the G8 Social Impact Investment
Forum hosted by the U.K., the SIITF and others involved in the international process that followed began
using the term social impact investment, defined as investments made into businesses and social sector
42 © OECD 2015