Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
— e.g. within a SIB structure, the government contractor will have specific payment terms that will depend
on achieved outcomes, thus requiring a legally binding social intent. Accordingly, investor intent will
range from incidental outcome (which is not included in SII) to legally binding constraints (which are
included).
4.51 In between these two extremes, varying levels of intent can be observed (see Table 4.7 below).
For example, social intent may be expressed in a statement or other document regarding the investment
made or investor profile. Citizen Capital is an investment fund that clearly states its intent to invest in
social businesses and labels itself as an impact investing fund. The attainment of social goals is expressed
in the vision as well as in a set of investment criteria that go beyond financial aspects (e.g., “investing in
disadvantaged areas”; “addressing the needs of vulnerable populations”). 16
Table 4.7. List of attributes for Investor Intent
CHARACTERISTICS Attributes of the Characteristic Eligibility *
Incidental Social outcome
OUT
6. Investor intent
Social intent expressed in statement
OUT
Compulsory reporting
IN
Legally binding constraints
IN
* Eligibility used in the OECD definition for the purpose of this report.
Source: OECD.
4.52 Foundations also have a clearly defined social mission both in statutes, as well as by legal
requirements related to legal status. Some foundations have increasingly focused on SII approaches as a
way to tackle social issues (Rangan et al, 2011). For example, as discussed earlier, the Gates Foundation
makes Program Related Investments (PRI) in a wide variety of social areas such as education (e.g. Civic
Builders), health (Global Health Fund, BiologicalE Vaccines). 17 PRI investments, which can involve a mix
of instruments including debt and equity, aim to tackle social issues targeted by foundations while
potentially generating some financial return.
4.2.7. Return expectation
4.53 Return expectations for investors are an important characteristic for defining the scope of SII.
This characteristic is considered in most definitions being used in the SII market. In particular, there has
been considerable debate regarding the risk-return profiles of SII (see WGAA, 2014). It is still unclear
where the lower and upper bound of returns should stand in terms of considering an investment as SII. The
last column of Table 4.8 below depicts the OECD approach to this issue. Donations stand at one of the
extremes, in the sense that there is no expectation of getting part of the money back. As noted earlier, this
is philanthropy and clearly cannot be considered as “investment”.
16. Information on Citizen Capital can be found at: http://www.citizencapital.fr/
17 . Further information available at: www.gatesfoundation.org/how-we-work/quick-links/program-relatedinvestments.
54 © OECD 2015