The Social Impact Accelerator (SIA) - terms of reference

1. SIA’s definition of social enterprise

SIA defines social enterprises as entities with an economic activity which:

(i) qualify as SME under the criteria set forth in the Commission Recommendation of 6 May 2003 (2003/361/EC)

(ii) have business models and structures which enable them to fund themselves on a non-grant basis with a view to self-sustainability, and to allow investors to hold and sell an interest in them in market-standard terms;

(iii) have the purpose to achieve social impact by providing entrepreneurial solutions to a societal issue based on a scalable approach, and expressly state such purpose in their articles of association or similar corporate documents;

(iv) in the frame of their social purpose, define ex-ante their social impact objectives within their business plans and specify associated metrics for directing operations and monitoring their impact ex-post;

(v) are organised with a view to being self-sustainable;

(vi) intend to use their own business growth to advance their pre-defined social targets; and

(vii) are managed in an accountable and transparent way, taking into account the interests of employees, customers and other stakeholders affected by their business activities.

2. SIA Social impact performance methodology

SIA Social impact performance methodology entails that the fund manager commits to a number of specific tasks to measure and report on the impact achieved by its underlying portfolio companies. First, portfolio companies, in coordination with the fund manager, are asked to define from 1 to 5 social impact indicators and set pre-investment target value for each of these social impact indicators. Fund managers shall disclose social impact indicators and pre-investment target value to their investors and calculate on a regular basis (at least once a year) the impact multiple, defined as the comparison between pre-investment target and realised value. Impact multiples shall be reported at least once a year. The financial performance incentive of the fund manager (carried interest) will be subject to the social impact performance of the fund.

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