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Assets: Holdings of economic value by a foundation or charity – such as cash, stocks, bonds, buildings or other property, and accounts receivable.

Capacity building: Investing in the core costs of an organisation, such as its operational capacity and long-term sustainability, rather than supporting specific projects.

Capital: All tangible assets that cannot easily be converted into cash. These are usually held for a long period, such as real estate, equipment and other physical property.

Charity: A voluntary organisation that benefits the public in a way the law says is charitable.

Charitable trust: An arrangement whereby a person or persons (the trustees) is/are made the nominal owner/s of property for the benefit of another person or group of people (the beneficiaries).

Charitable Incorporated Organisation (CIO): A corporate form of business designed for (and only available to) charities. The main benefits are that a CIO has a legal identity, its members have limited liability and it only has to submit accounts to the Charity Commission and not Companies House.

Community Foundation: A grantmaking charity established to strengthen local communities, creating opportunities and tackling issues of disadvantage and exclusion.

Community Interest Company (CIC): A limited company, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage (CIC regulator definition). CIC is a legal form used by many social enterprises.

Core costs: The overhead costs of an organisation, as opposed to those specific to a project.

Donor-Advised Fund: A philanthropic fund established under an umbrella charity that administers the fund on behalf of the donor.

Effectiveness: The ability of an organisation to produce its desired result. See Impact.

Environmental, Social and Governance (ESG): refers to the three central factors in measuring the sustainability and social impact of an investment in a company or business.

ESG Integration: The systematic and explicit inclusion by investment managers of ESG factors into financial analysis.

Expendable Endowment Fund: A fund that must be invested to produce income.

Foundation: The terms ‘trust’ and ‘foundation’ are often used interchangeably.

Full cost recovery (FCR) organisations: Funders ensure that the price of contracts and grants reflects the full costs of delivery, including the legitimate portion of overhead costs.

Gift Aid: A scheme of tax relief for single outright cash gifts made to charities by individuals and companies.

Impact: Broader or longer-term effects of a project’s or organisation’s outputs, outcomes and activities.

Impact (ESG) Investments: Often used synonymously with sustainable investing, socially responsible investing or mission-related investing – can be defined as the consideration of ESG factors alongside performance factors in the investment decision-making process. Investments made in companies, organisations and funds with the intention to generate social and environmental impact alongside a financial return; (GIIN, Impact Investing seeks to create positive social or environmental change while also generating a financial return. That typically means investing in businesses, organisations and fund managers that are contributing to solutions to societal challenges as part of their core strategy (UK NAB).

Inputs: All the resources a group needs to carry out its activities, such as money, people, facilities and equipment.

Microfinance: A term for financial services aimed at micro-enterprises, sole traders and individuals, usually in under-invested communities, including small loans and savings facilities with no (or a very low) minimum deposit.

Mission-related investment (MRI): Marketrate investments that support the mission of the foundation by generating a positive social or environmental impact, while generating reasonably competitive rates of financial return (CoF, US). Making investments from either endowment or income directly in pursuit of an organisation’s charitable objectives.

Non-profit: An organisation that uses all money earned or donated to pursue its objectives and does not distribute profits to owners. In the UK the term not-for-profit is more commonly used with the same meaning. Most non-profits operate with a social purpose.

Objects: The term used by the Charity Commission to describe and identify the purpose for the which the charity has been set up. The objects do not specify what the organisation will do on a daily basis.

Outcomes: The changes, benefits, learning or other effects that result from what a project or organisation makes, offers or provides: for example, a new job, increased income or improved self- esteem.

Outputs: The direct and tangible products from an activity: for example, the number of people trained.

Permanent endowment: Property of a charity (including land, buildings, cash or investments) which the trustees may not spend as if it were income.

Programme Related Investments (PRI): Investments that are made primarily to achieve a programme objective, rather than a significant financial return. PRIs are expected to be repaid, not necessarily to the full amount (CoF, US). Could be seen as a form of social investment.

Reserves: That portion of a charity’s income funds set aside for essential, but as yet unidentified, future expenditure.

Restricted funds: Assets or income which are restricted for a particular use, such as a donation made to a charity specifically for a bursary or a named project run by the charity. See Unrestricted funds.

Social business: A business that integrates commercial objectives (growth, profits) with a social, ethical or environmental mission.

Social enterprise: A business with primarily social objectives where surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit.

Social entrepreneur: Someone who uses skills commonly associated with private enterprise to create and develop a business designed to achieve a social purpose.

Socially responsible investment: Ethical or socially responsible investment (as well as responsible and sustainable investment) are terms used to describe any area of the financial sector where the social, environmental and ethical principles of the investor (whether an individual or institution) influence which organisation or venture they choose to place their money with.

Spending out: The term for where a time-limited foundation spends all or part of its capital assets in furtherance of its charitable objectives. Known as ‘spending down’ in the US.

Sustainable and Responsible Investment (SRI): A long-term oriented investment approach, which integrates ESG factors in the research, analysis and selection process of securities within an investment portfolio. It combines fundamental analysis and engagement with an evaluation of ESG factors in order to better capture long-term returns for investors, and to benefit society by influencing the behaviour of companies (Eurosif,

The Third Sector: The collective name for charities, voluntary, non-government and campaigning organisations. Also known as the voluntary and community sector (VCS).

Unrestricted funds: Funds that can be used for the general purposes of a charity. See Restricted funds.

Venture philanthropy: An adventurous approach to funding unpopular social causes, preliminary performed by foundations, this is a term which is still in evolution; (John, 2006, based on Rockefeller 1967). The process of adapting strategic investment management practices to the non-profit sector to build organisations able to generate high social rates of return on their investments is an approach modelled on the high end of venture capital investment (Morino Instiitute, 2001). Venture philanthropy for development is an entrepreneurial approach to philanthropy that combines a variety of financial and non-financial resources to identify, analyse, co-ordinate and support self-sustaining, systemic and scalable (for and not-for profit) solutions to development challenges aimed at achieving the greatest impact (OECD, 2014).


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