Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
Figure 4.2. Defining Characteristics, attributes and eligibility
4.2a. Social Target Areas
4.2a. Return Expectation
Notes: The figure depicts two defining characteristics in dark blue: Social Target Areas and Return Expectation. Attributes are in light
colour. Attributes in social needs provided here are examples and not an exhaustive list of all possible social needs. While returns on
investment are continuous, social needs are discrete and can be thought of in terms of “buckets”. Social Target Areas may overlap,
but are considered here as discrete for the sake of simplicity.
Source: OECD.
4.11 While all of the characteristics are necessary, none of them are sufficient to define SII on their
own. A transaction can be considered SII only if it meets the suggested eligibility boundaries for each of
the seven characteristics. Accordingly, an investment can be classified as SII if, for every characteristic, it
pertains to an eligible class for those characteristics which are discrete in nature, and passes the threshold
for those characteristics which can be quantified or ranked.. Most importantly, these eligibility boundaries
can be adjusted according to context and perspectives. For example, researchers may use a set of eligibility
boundaries for data collection purposes, while a policymaker may find another set more useful for policy
instrument design purposes. In addition, OECD countries may use one set of boundaries for thinking about
SII while developing countries might use another. As a result, this approach allows for variation in the
boundaries of SII that accommodate different purposes for defining SII. It is also important to note that
some characteristics will be more relevant depending on the context and objectives of defining SII.
4.12 As an example, if a country decides that it should introduce a tax break for social impact
investments, the practical question is to decide who is eligible for such tax break. In the UK, with the
recent introduction of the Social Investment Tax Relief, the boundaries were set by legal structure and size
(based on employees and assets): “Charities, community interest companies or community benefit societies
carrying out a qualifying trade, with fewer than 500 employees and gross assets of no more than
GBP 15 million may be eligible” (HMT, 2014).
4.13 Different views exist in terms of where the boundaries lie for SII. This approach helps to explain
these differences, while operationalising definitions for practical purposes such as data collection or policy
implementation. Bringing all characteristics together, it is possible to devise a framework for setting clear
boundaries according to the different perspectives and definitional purposes. The following sections
discuss each defining characteristic in further detail.
© OECD 2015 45