Glossary

Blended finance: Combination of different sources of capital (philanthropic, public, and/or private) with the purpose of mobilizing greater capital to achieve the Sustainable Development Goals.

Catalytic capital: Debt, capital, grant, or other type of investment made by a foundation, international organization, or social investor to mobilize greater investment by private investors. This capital is characterized by its patience, flexibility, and risk tolerance.

Continuum of capital: Different types of capital (human, intellectual, and financial) that range from philanthropy to traditional investment, characterized by their impact, return, and risk expectations.

Convertible bond: Short-term debt that is automatically converted into preference shares of the company once the company manages to leverage a subsequent investment round called “series A”. In other words, the social business receives a loan for its initial funding but, instead of repaying the investor with interests, the loan is repaid with preference shares of the company given specific conditions.

Crowdequity: Collective financing mechanism in which small and numerous investors provide resources for a business, in exchange for equity.

Crowdfunding: Form of financing (loans, grants, or other type of investment) achieved by numerous individuals and small contributions.

Crowdlending: Collective financing mechanism in which small and numerous investors lend their money.

Due diligence: Process performed by an investor to decide if he or she will make a donation or investment in a social purpose organization.

Endowment: A legal structure that is setup in order to manage financial resources based on a purpose, or goals set by its creator or donor.

Equity: The stock that a company’s shareholder is entitled to. It represents the amount of money that would be given back to shareholders should all the company’s assets be liquidated and all the debt repaid. Company shares are acquired at a determined value, with the expectation that they will appreciate several times to be able to get returns on investment.

Fair Trade: Certification system that guarantees with a series of socio-environmental and economic criteria by a producer or a company.

Family office: A company whose objective is to manage a family’s assets.

FinTech: The use of technology to automate or provide financial products and services.

GINI: A coefficient used by economists to measure inequality in a country or group.

Guarantee: Contract by which a person or organization commits to repaying a creditor in case a debtor fails to repay or does not achieve predefined goals.

Hybrid finance: The application of different financial instruments (loans, grants, equity) to achieve the best possible result in terms of return, impact, and risk.

Impact-first: Prioritization of social and/or environmental impact over financial return.

Impact investment: Investments made in a social purpose organization in order to generate financial return and a social or environmental impact.

International cooperation: Voluntary assistance provided by one country to another country via the national or local government, or an NGO.

Investing for impact: Investing for impact is a social investment approach that prioritizes social and environmental impact over financial return.

Lean data: Tool proposed and used by Acumen, which seeks to measure socio-environmental impact by using low-cost technologies in order to collect beneficiary data.

Mezzanine debt: Tool proposed and used by Acumen, which seeks to measure socio-environmental impact by using low-cost technologies in order to collect beneficiary data.

Mezzanine debt: Financial instrument that combines subordinated debt and shares.

Multilateral organizations: Non-for-profit organizations set up with contributions from different countries.

Non-financial support: Services provided to social purpose organizations in order to strengthen their finance, optimize their impact, and/or improve their organizational resilience.

Patient capital: Patient capital demands great risk tolerance from investors and a long-term perspective that allows to experiment and test their hypotheses and profitability expectations. It usually is provided with no expectation of return, but seeks to achieve a social or environmental impact.

Payments for environmental services: Financial incentives provided to a producer, land owner, or a community in exchange of protecting a natural resource that provides an ecological service.

Payment for performance: Financing agreements in which payments are conditional upon achieving independently verified results and/or impact.

Pipeline: Potential investment opportunities.

Private equity fund: Investment vehicle managed by a professional manager through which capital is collected from investors, and which seeks financial profitability by investing directly in unlisted companies.

Professional services firms: These include organizations that support entrepreneurs such as accelerators, incubators, ecosystem builders, consulting companies, etc.

Seed funding: Initial financing of a social business, usually in the form of equity.

Sistema B: Organization that promotes and supports triple-impact enterprises.

Social bond: Debt instrument issued to finance social programs.

Social impact bond: A type of financial mechanism that works similarly to a debt security. Its rate of return is tied to the achievement of a social or environmental objective. These bonds are part of results-based funding and innovative mechanisms to finance social programs.

Social purpose organization: Organizations set up with a social mission. They include social businesses and non-for-profit organizations

Start-up: A social purpose organization in its early stage.

Subordinated debt: Fixed income securities that are more profitable than other types of debt, but with higher risk, as they have a lower payment priority upon collection.

Sustainable Development Goals: A set of social, environmental, and economic goals proposed by the United Nations.

Tailored finance: Selection of the most appropriate financial instruments (grants, debt, equity, or hybrid finance) according to the profile of the investor for impact, and the needs of the social purpose organization.

Theory of change: Methodology that sums up how an organization seeks to achieve social and/or environmental change.

Third sector: Economic sector made up of non-for-profit entities.

Ticket: The amount of an investment. Sometimes a minimum and maximum amount is established, as well as the possibility to set several amounts in a funding round.

Venture builder: An organization that supports the construction of a new social business.

Venture capital: Financing provided to social businesses at an early stage.

Abbreviations

ANDE: Aspen Network of Development Entrepreneurs.

AVPA: African Venture Philanthropy Alliance.

AVPN: Asian Venture Philanthropy Network.

BNDES: Brazilian Development Bank.

DANE: Colombian National Administrative Department of Statistics.

DPS: Colombian Department for Social Prosperity.

ESG: Environmental, social, and corporate governance criteria used by some investors to assess an investment.

ECLAC: Economic Commission for Latin America and the Caribbean.

EVPA: European Venture Philanthropy Association.

FIIMP: Fundações e Institutos de Impacto.

GIIN: The Global Impact Investing Network.

GIIRS: Global Impact Investing Rating System.

IBGE: Brazilian Institute of Geography and Statistics.

GIIRS: Global Impact Investing Rating System

IBGE: Instituto Brasileiro de Geografía y Estadística

IDB: Inter-American Development Bank.

INAES: Mexican National Institute of Social Economy.

INEI: Peruvian National Institute of Statistics and Informatics.

IRIS+: Impact Reporting and Investing Standards.

IVPC: International Venture Philanthropy Center.

NGO: Non-governmental organization.

OECD: Organization for Economic Co-operation and Development.

PPA: Plataforma Parceiros Pela Amazônia.

PRI: Principles for Responsible Investment.

SDG: Sustainable Development Goals.

SPO: Social purpose organization.

SECO: State Secretariat for Economic Affairs (Cooperación Internacional Suiza).

SIB: Social Impact Bonds.

SIBs.CO:: Social Impact Bonds program in Colombia.

SME:: Small and medium-sized enterprise.

USAID:: United States Agency for International Development


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