Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
GLOSSARY
Angel Investors
An angel investor is an individual investor (qualified as defined by some national regulations) that
invests directly (or through their personal holding) their own money predominantly in seed or start-up
companies with no family relationships. Angel investors make their own (final) investment decisions and
are financially independent, i.e. a possible total loss of their investments will not significantly change the
economic situation of their assets. Angel investors invest with a medium to long term set time-frame and
are ready to provide, on top of their individual investment, follow-up strategic support to entrepreneurs
from investment to exit. (OECD, 2012)
Asset Lock
The Asset Lock is a restriction on the transfer of assets. Asset Lock is designed to ensure that the
assets of companies (including any profits or other surpluses generated by its activities) are used for
the benefit of the community. (adapted from BIS, 2013)
Catalytic (first-loss) capital
Catalytic (first-loss) capital (CFLC) entails a capital provider that will bear first losses (the amount of
loss covered is typically set and agreed upon upfront). By improving the recipient’s risk-return profile,
CFLC catalyses the participation of investors that otherwise would not have participated. CFLC aims to
channel commercial capital towards the achievement of certain social and/or environmental outcomes. In
addition, the purpose can also be to demonstrate the commercial viability of investing into a new market.
CFLC is a tool that can be incorporated into a capital structure via a range of financial instruments.
(authors based on GIIN, 2013)
Community investing
Community investing refers to the provision of financial services to underserved communities and
includes banks, credit unions, loan funds, and venture capital funds. (Freireich and Fulton 2009)
Corporate Social Responsibility (CSR)
CSR is defined as the integration of business operations and values, where the interests of all
stakeholders—including investors, customers, employees, the community, and the environment—are
reflected in the company’s policies and actions. Special attention is given to corporate practices as they
relate to environmental, social, and governance (ESG) performance. (Source: Adapted from Freireich and
Fulton, 2009)
Cost-Benefit Analysis (CBA)
Cost-benefit analysis is a technique used to compare the total costs of a programme/project with its
benefits, using a common metric (most commonly monetary units). This enables the calculation of the net
cost or benefit associated with the programme. (Better Evaluation, 2014a)
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