Impact Glossary


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Alternative Investments

Investments that are not publicly traded stocks, bonds, or cash.Most alternative investments are only available to accredited or institutional investors. Common examples include hedge funds, commodities, venture capital, and infrastructure projects.

Angel Investor

An investor who provides capital for startups at very early stages (seed financing round). Angel investors typically help entrepreneurs with advice and contacts.

Benefit Corporation

A new class of corporation that voluntarily meets different standards of corporate purpose, accountability, and transparency. Benefit Corporations: 1) have a corporate purpose to create a material positive impact on society and the environment; 2) are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and 3) are required to make available to the public, except in Delaware, an annual benefit report that assesses their overall social and environmental performance against a third-party standard.

B Corp

Certification provided to companies by the nonprofit B Lab that shows that the company meets rigorous standards of social and environmental performance, accountability, and transparency.

Capital Stack

The combination of every type of funding invested in a company, fund, or project. Typically, a capital stack is composed of layers of equity and debt funding—each layer characterized by a different risk-return profile and priority of payment or liability.

Carried Interest

The share of fund profits that managers (GPs) of a private investment fund receive as compensation additional to their management fee. In a typical compensation structure, managers are entitled to carried interest after fund investors (LPs) receive back the total value of their contributed capital plus a minimum annual return or “hurdle rate.”

Community Development Financial Institutions (CDFIs)

Financial institutions 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.

Due Diligence

A process of investigation of a potential investment (a company or a fund manager) before committing capital.

Environmental, Social And Governance (ESG)

Environmental, Social and Governance (ESG) factors are those which social investors may consider as part of their investment analysis as a way to evaluate whether their investments promote sustainable, fair and effective practices and mitigate potential risks. ESG may be referred to as "ESG investments" or "Responsible investing."


Liquidation of holdings by an investor, usually by selling an asset to convert it into cash.


General Partner (GP)

In the context of private investment funds, GPs are investment professionals that raise and manage the investment activities of a private equity or venture capital fund. GPs have responsibility for use of fund assets and are usually legally liable for the actions of a fund. GPs are typically compensated with regular management fees (most often a fixed percentage of assets committed to the fund) and a fixed percentage of the fund’s profits (carried interest).


An agreement to perform the obligations of a third party if that party defaults. When a third party guarantees a loan, it promises to pay in the event of default by the borrower.

L3C or Low-Profit Limited Liability Company

A legal form of business entity in certain USA states for businesses whose primary purpose is the creation of social benefit and not the generation of profit. The L3C structure is specifically designed to facilitate investment in for-profit companies by private foundations.

Limited Partner (LP)

In the context of private investment funds, LPs are investors in a fund who do not have active responsibility for management of the funds assets. LPs receive income and capital gains from the fund but have no legal or financial liability beyond their contribution to the fund.


The measure that shows how quickly an investment can be bought or sold with little or no impact on price. Cash is the most liquid asset, followed by publicly traded stocks and bonds. Private investments are less liquid than publicly traded assets because they are harder to sell.

Program-Related Investment (PRIs)

A term of art from Internal Revenue Code Section 4944 that refers to foundation investments (i) the primary purpose of which is to accomplish one or more of the foundation's exempt purposes, (ii) in which production of income or appreciation of property is not a significant purpose, and (iii) influencing legislation or taking part in political campaigns on behalf of candidates is not a purpose. A program-related investment (PRI) can take the form of equity, debt, guarantees, linked deposits, etc., and must be charitable in nature. PRIs are counted toward part of a private foundation’s annual distribution requirement (a 5% minimum). In the event repaid, investment returns are treated as PRIs, but the corpus is added back to the qualifying distribution requirement. Because PRIs are generally expected to be repaid, they can then be recycled into new charitable investments, increasing the leverage of the foundation's distributions.


The chance that an investment’s financial return will be different than what was expected. Risk includes the possibility of losing some or all of the value of the original investment.

Venture Capital

Money provided by investors to startups and small businesses with expected long- term growth potential.