Beyond Compliance 2024

Beyond Compliance: Embedding Impact through Innovative Finance31Name Description  Impact-linked guarantee A risk-mitigation instrument where the guarantee’s terms are adjusted based on the performance against predefined impact targets, offering varied levels of protection based on the impact outcome. Impact-linked loans A debt instrument that incorporates rewards in the form of reduced interest rates or reduced repayments depending on the achievement of predefined impact outcomes. Impact-Linked Long-term Incentive Plan A company policy that rewards the management team or employees for achieving certain long-term goals. It can be linked to impact by incorporating impact objectives. In a typical LTIP , the employee, usually an executive, participates in dividends or a n increasing company valuation through (virtual) shares. Impact-linked matching fund Repayable funding made available to an enterprise that is (partially) forgiveable depending on the level of achievement of predefined impact outcomes, i.e. partial repayment is required only if the impact outcomes are not achieved. The enterprise is required to match the funding amount with a repayable investment. Impact-linked redeemable equity Redeemable shares where a portion of the shares can be redeemed at a predefined or discounted price dependent on the achievement of predefined impact outcomes. Impact-linked reimbursable equity A financial instrument where an investor provides equity financing with a reimbursement mechanism linked to the achievement of predefined social or environmental impact targets. Impact-linked revenue share agreementA financing instrument (also called revenue-based loan) where periodic repayments are based on a percentage of the revenues up to a predetermined return on the investment (“cap” or “multiple”). Impact-linked rewards are provided by reducing the multiple/cap or the revenue share dependent on the achievement of predefined impact outcomes. Impact-linked short-term incentive planA company policy that rewards the management team or employees for achieving certain short-term goals. It can be linked to impact by incorporating impact objectives. Impact-linked simple agreement for future equity (SAFE)Similar to an impact-linked convertible note, the discount or cap on conversion of an impact-linked SAFE depends on the achievement of predetermined impact outcomes. A SAFE is a simplified form of a convertible note and typically does not include regular interest payments. Impact-ready matching funds Non-repayable funding that rewards enterprises for building a robust impact measurement and management (IMM) system and elevating their IMM capacity. An Impact-Linked Matching Fund (IRMF) is a hybrid financial instrument with elements of impact-linked finance and capacity building, where the enterprise is required to match the maximum amount of funding with a repayable investment. International impact bond A type of impact bond where at least one of the outcome funders is based in a different country than the service delivery location, facilitating cross-border investment for social impact. Loan with impact-linked sidecar A zero-interest loan with a separate repayment agreement for the interest, offering flexibility on timing and amount of reward based on social outcomes achieved during the loan term.