Accredited Investor The U.S. federal securities laws define the term "accredited investor" in Rule 501 of Regulation D. One category of accredited investor is "a charitable organization, corporation, or partnership with assets exceeding $5 million." Fore more information, visit the U.S. Securities and Exchange Commission website on Accredited Investors.
Angel Investor An individual with financial resources who provides investment capital for a start-up, often in exchange for a stake in company equity.
B Corporation A B-Corporation is a for-profit entity that has been certified by B Lab, a private certifying organization. B Lab started certifying social enterprises (mission-driven, for-profit companies) as “B Corps.” To become a B Corp, a business must achieve a score of 80 or above (out of a possible 200) on the B Impact Assessment and change its governing documents to allow directors to consider other stakeholders besides shareholders when making decisions on behalf of the company.
Benefit Corporation A benefit corporation has a corporate purpose to create a material positive impact on society and the environment; to consider the impact of its decisions, not only on shareholders, but also on workers, community and the environment; and to report annually on its overall social and enviromental performance against a third party standard. Benefit corporation language has been passed in at least 22 states.
Blended Value The idea that an organization's value is financial, social and environmental, qualities which are indistinguishable from one another, and must be given weight when assessing value created through investment.
CDFI A Community Development Financial Institution (CDFI) is a financial institution such as a community development corporation, bank, credit union, or loan or venture capital fund, that has as its primary mission to provide credit and financial services to underserved markets and economically disadvantaged populations.
CSR Corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups.
Direct Investment An investment, typically an equity investment, made directly into a singular company.
DFI: Development Finance Instituition Publicly controlled instituitions which seek to private sector investments with the dual goal of financial return on investment and social/environmental impact.
ESG Investment ESG refers to three common areas of concern that SRI investors focus on when looking at the ethical impact of a company. These can include: Environmental, Climate change, Hazardous waste, Nuclear energy, Sustainability, Social, Diversity, Human Rights, Consumer Protection, Sin stocks (alcohol, tobacco, pornography, gambling, nuclear weapons, arms), Consumer protection, Animal welfare, Corporate Governance, Management structure, Employee relations, Executive compensation
Financial First Investors Seek to optimize financial returns with a floor for social/environmental impact. This group tends to consist of commercial investors who search for investment vehicles that offer market-rate returns while yielding some social/environmental good.
Guarantee A guarantee is an enforceable assurance making one party responsible for the payment or debt of another. Guarantees are binding, however, only if made on top of legally valid contracts.
Green Bonds A green bond is a type of tax-exempt bond issued to promote environmental sustainability and the development of brownfield sites (areas of land that are unused and under-developed and may contain low levels of industrial pollution). Green bonds are generally issued by federal, state or local municipalities. Additionally, the World Bank has issued green bonds in order to support large scale projects that address climate change. The proceeds from the purchase of green bonds either fund 'green' projects directly or are earmarked for green projects. The bonds are generally backed by renewable energy assets and carry the same credit rating as normal municiple bonds.
Impact First Investors Seek to optimize social or environmental returns with a financial floor. These investors use social/environmental good as a primary objective and may accept a range of returns, from return of principal to market rate. This group of investors is willing to accept a lower than market rate of return in investments that may be perceived as higher risk in order to help reach social/environmental goals that cannot be achieved in combination with market rates of financial return.
L3C An L3C (Low-profit Limited Liability Company) is a legal form of business entity created to bridge the gap between non-profit and for profit investing by providing a structure that allows for investments in philanthropic ventures designed to provide a social benefit. Unlike a standard LLC, an L3C has an explicit primary charitable mission and only a secondary profit concern. But unlike a charity, the L3C is free to distribute the profits, after taxes, to owners and investors.
Microfinance The provision of financial services to micro-entrepreneurs and small business owners, who lack access to banking and related services due to the high transaction costs associated with serving these client categories. The two main mechanisms for the delivery of financial services to such clients are (1) relationship- based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group. Funds that specialize in microfinance are a popular investment vehicle for impact investors because it gives low-income individuals or groups access to capital that they would otherwise be denied, which can support them in becoming more self-sufficient.
Mission-Related Investing (MRI) Mission-Related Investing is the practice of aligning a philanthropic organization's management of assets with its charitable purposes while sustaining long-term financial return.
Screening Screening is a term used by the SRI (Socially Responsible Investing) community to refer to the practice of removing publically traded stocks from an individual or fund’s portfolio when the stock does not meet the environmental, social or governance (ESG) goals of the client or fund. For example, an investor may choose to have their account screened for gun manufacturing companies, and therefore would have any company that derives income from the manufacturing of guns removed from their portfolio.
Social Business A term coined by Nobel prize winner Mohammad Yunus, social business refers to a company that, unlike a traditional business, focuses on addressing a social problem rather than maximizing profit. A social business is financially self-sustaining and reinvests all its profits either into the business itself or to start other social businesses.
Social Impact Bond (SIB) A Social Impact Bond, also known as a Pay for Success Bond or a Social Benefit Bond, is a contract with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings.
Sources: Annie E. Casey Foundation, Aspiriant ,B Lab, Global Impact Forum, Investopedia, IRS, Re Capital Partners, Threshold Group, Wikipedia, Confluence Philanthropy