A principle describing the added value generated by an investment—specifically, outcomes that would not have materialised without it. Additionality may be financial (mobilising capital that would not otherwise be invested) or social/environmental (creating impact beyond the status quo).

The strategic combination of philanthropic, public, and private capital within a unified financial structure, designed to address market failures and support investment in areas that do not attract sufficient private capital on their own. Blended finance enables risk mitigation, enhances investment attractiveness, and generates additional social or environmental value alongside financial return.

Equity or debt provided on below-market terms (e.g., lower return or higher risk) with the aim of mobilising additional capital from other investors. Its primary role is to “open the door” to transactions that would not otherwise take place. Unlike concessional funding, which focuses on the favourable terms received by investees, catalytic capital focuses on the role of the capital provider—specifically, its ability to unlock further investment.

Equity or debt provided to investees on terms more favourable than those available in the market—for example, reduced interest rates, grace periods, longer repayment horizons, or lower return expectations. Its purpose is to provide access to capital that would otherwise be unavailable and to incentivise high-impact projects. Unlike catalytic capital, the emphasis here is on the favourable terms offered to funding recipients.

A legal structure through which assets are managed for financing purposes—for example, a partnership, holding company, or SPV (Special Purpose Vehicle).

A tranche within a financial structure that absorbs losses first in the event of default. It is typically funded by philanthropy or government and serves to protect other investors and reduce perceived risk.

An economic system in which impact considerations are an integral part of decision-making by businesses, investors, governments, and consumers. Economic success is thus measured not only by profit but also by contribution to society and the environment—a true paradigm shift.

Investments made with the intention of generating both a financial return and a measurable social or environmental outcome. They differ from philanthropy in seeking financial return, and from standard responsible investment in that impact is a deliberate and central element of both the investment intention and the way outcomes are measured.

A core principle of impact investing: a clear and explicit intention to generate social or environmental impact as an integral part of the investment objectives, rather than as a by-product.

An asset, company, or project that meets minimum requirements for financial stability, corporate governance, and management capacity, enabling investors to allocate capital. In some cases, additional support—such as guidance, capacity-building, or professional support services—is needed to move a project from “non-investable” to “investable”.

Capital provided by the private sector—such as institutional investors (pension funds, insurance companies), private investment funds, banks, family offices, or high-net-worth individuals. In some contexts, it is necessary to distinguish between institutional capital and private capital to ensure full representation of all investor types.

An investment strategy that integrates financial analysis with a systematic assessment of environmental, social, and governance (ESG) risks and opportunities. Responsible investments ensure that investment decisions are not based solely on financial return but also incorporate long-term risk management and safeguard value for both investors and society.

A mechanism in which a third party (such as a government or philanthropic entity) commits to covering part of the risk or ensuring a minimum return for investors. This provides risk mitigation that encourages private or institutional investors to participate in transactions they would not otherwise enter under standard market conditions.

A commitment by the state to cover part of the risk or repay debt in the event of default. This is a key instrument in blended finance, enabling private investors to participate in high-impact projects with significant perceived risk.

A debt or equity instrument that has lower repayment priority than other creditors in the event of loss. This is a common instrument in blended finance, as it absorbs first losses and thereby creates a protective layer that helps attract senior investors.

An investment approach that focuses not only on risk mitigation but also on driving positive change. Sustainable investments channel capital towards companies, projects, or funds that advance defined environmental and social objectives—such as renewable energy, social equity, or health—while also generating financial return.

Grants used to provide a support package of complementary services to beneficiaries or conveners. This support may include professional training, regulatory advice, strengthening managerial capabilities, or specialist services. Its purpose is to increase the likelihood of success and reduce risk, particularly for entrepreneurs or small and medium-sized enterprises.

A layer within the financing structure of a transaction or fund. Each tranche is characterised by a distinct risk–return profile (e.g., senior debt, subordinated debt, equity). Tranching enables investment to be matched to different investor profiles.

A mechanism whereby a proportional share of excess returns is allocated to stakeholders when a project outperforms expectations. This may enable philanthropic actors to share in the returns when performance is significantly above expectations, provide private-sector investors with enhanced returns in successful scenarios, or serve as a reward mechanism for fund managers.

A strategic philanthropic approach that adopts venture-capital principles—such as focusing on results, promoting organisational development, and providing long-term support—for social objectives. Venture philanthropy combines financial support with management guidance, mentoring, and capacity-building, while closely monitoring impact performance. It is not designed for financial gain, but rather for creating sustained and effective social change.

A large-scale fund that aggregates capital from multiple sources (private, institutional, philanthropic, and public) and allocates it to dedicated, regional, or sector-specific funds. Its strength lies in building knowledge infrastructure, managing risk, and leveraging investment at a scale that individual funds cannot achieve.