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A glossary of key terms and working definitions

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The definitions provided below draw from a number of sources, most notably: the HM Treasury Magenta Book, the National Audit Office, the World Bank Group Impact Evaluation in Practice guidance and the Centre for Social Impact Bonds Knowledge Hub

Chapter 1

Glossary A - G

2 mins read



The extent to which changes in the relevant outcomes can be attributed to a particular intervention


The drop out of participants from the treatment group during the intervention 



The state before the intervention, against which progress can be assessed or comparisons made. Baseline data is collected before a programme or policy is implemented to assess the before state. The availability of baseline data is important to document balance in pre-programme characteristics between treatment and comparison groups. Baseline data is required for some quasi-experimental designs


A formal contract to repay borrowed money with interest at fixed intervals



The extent to which a change in an outcome or output (e.g. fewer children in care) will result in a reduction in spending, such that the expenditure released from that change can be reallocated elsewhere

Collective impact bond

This is a term coined by the West London Zone project to describe their innovative funding model, which brings together multiple delivery agencies (charities and other social sector partners), multiple commissioners (mostly public sector budget-holders who pay for positive outcomes for children and young people), and multiple investors (individuals, foundations and corporate institutions who want to combine commercial investment with social value, and carry some of the risk on behalf of the charities). In a collective impact bond, funding comes from multiple sources, including - but not limited to - social investment

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The cyclical process by which public bodies assess the needs of people in an area, determine priorities, design and source appropriate services, and monitor and evaluate their performance


A public organisation or official responsible for commissioning public services 

Cost benefit analysis

A method to estimate the total expected benefits of a programme, compared with its total expected costs. It seeks to quantify all the costs and benefits of a programme in monetary terms and assesses whether benefits outweigh costs


A measure of what the outcome would have been for programme participants if they had not participated in the programme



Outcomes which would have occurred without a policy, programme or interevention

Development impact bond (DIB)

This is a term used for a social impact bond that is implemented in low- and middle-income countries where a donor agency or a foundation pays for the desired outcomes as opposed to the government (although some combination of government with third party is also possible)

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Due diligence

The process whereby an organisation or company’s strengths and weaknesses are assessed in detail by a potential investor with a view to investment 



A periodic, objective assessment of a planned, ongoing, or completed project, programme, or policy. Evaluations are used to answer specific questions, often related to design, implementation, or results

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Fiduciary duty

A legal or ethical relationship of trust, specifically in relation to taking care of someone else’s money

Chapter 2

Glossary H - M

2 mins read


Hawthorne effect

Occurs when the mere fact that units are being observed makes them behave differently



In the context of impact evaluations, an impact is a change in outcomes that is directly attributable to a programme; also known as causal effect

Impact evaluation

An evaluation that makes a causal link between a programme or intervention and a set of outcomes. An impact evaluation answers the question: what is the impact (or causal effect) of a programme on a desired outcome

Impact investing

Impact investing is generally accepted to describe investing that intentionally seeks measurable social and environmental benefits. It differs from socially responsible investing which traditionally avoids investments that are inconsistent with the values of the investors, such tobaccco and arms, or investments that might be associated with poor labour rights.

Impact investment is described (and differentiated from other forms of investment) by three guiding principles:

  1. The expectation of a financial return: impact investors expect to earn a financial return on the capital invested, below the prevailing market rate, at the market rate or even above it.
  2. The intention to tackle social or environmental challenges (i.e. the impact or intentionality): in addition to a financial return, impact investors aim to achieve a positive impact on society and/or the environment.
  3. A commitment to measuring and reporting against the intended social and environmental impact: impact investors commit to measure performance using standardized metrics.

Impact investment is not limited to a specific asset class or sector: it includes, for example, fixed income, venture capital, private equity and social and development impact bonds

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The financial, human, and material resources used for the intervention


Social impact bonds are sometimes supported by experts that provide specific advice. Confusingly these are typically all referred to as “intermediaries”, but encompass at least four quite different roles.  

  • A consultant who supports the commissioner to develop a business case for the project that secures internal and external approval to proceed to procure and implement the new service
  • A social investment fund manager who manages a fund on behalf of social investors and manage the project with commissioners.
  • A performance management expert, who reports on the performance of the SIB providing an independent source of information and scrutiny to investors and the commissioner.  This might be required if there is a perceived conflict of interest in the provider measuring and reporting on their own performance, or if the provider lacks the skill to deliver the standard of reporting required by stakeholders
  • A special purpose management company who brings together other parties in a contractual relationship and holds the contract directly with the commissioner.  

The Big Lottery Fund have developed a directory of organisations that can provide support on developing a social impact bond, which can be accessed here

Chapter 3

Glossary N - S

2 mins read


Outcome based commissioning

Outcome based commissioning describes a way to deliver services where all or part of the payment is contingent on achieving specified outcomes. The nature of the payment mechanism in an outcome based contract can vary, and many schemes include a proportion of upfront payment that is not contingent on the achievement of a specified outcome

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The tangible products, goods, and services that are produced (supplied) directly by a programme’s activities. The use of outputs by beneficiaries contributes to changes in outcomes


Payment by results (PbR)

The practice of paying providers for delivering public services based wholly or partly on the results that are achieved

Perverse incentive

An incentive to act in manner that goes against the desired outcome or aims of a service or programme


Acquisition of goods and services from third party suppliers under legally binding contractual terms. Such acquisitions are for the direct benefit of the contracting authority, necessary for the delivery of the services it provides or the running of its own business. Public sector procurement is normally achieved through competition, and is conducted in line with the government’s policy of value for money and in line with the Public Contracts Regulations 2006


Rate card

In the context of payment-by-results, a rate card is a schedule of payments for specific outcomes a commissioner is willing to make for each beneficiary/ service user that verifiably achieves each outcome 

Rate of return

The profit on an investment, normally expressed as an annual percentage. This is typically the ratio of the income from the investment over the cost of the investment


Social impact bond (SIB)

A type of outcome based contract that incorporates the use of private funding from social investors to cover the upfront capital required for a provider to set up and deliver a service. The service is set out to achieve measurable outcomes established by the commissioning authority and the investor is repaid only if these outcomes are achieved. In the United States, social impact bonds are often referred to as pay-for-success projects, while in Australia they are called social benefit bonds.

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Social investment

The use of repayable finance to achieve a social as well as a financial return. According to Big Society Capital social investment requires both the investor and the user/investee to explicitly intend to create a positive social impact. For investors, social investment is part of the spectrum of impact investment

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Social investor

An investor seeking social impact in addition to financial return. Social investors can be individuals, institutional investors, dedicated social investment funds and philanthropic foundations, who invest through their endowment. A list of UK social investors can be found on the Good Finance website

Social value

The Social Value Act requires public authorities to have regard to economic, social and environmental well-being in connection with public services contracts and for connected purposes. While the Act does not provide a definition of 'social value', the term is used to describe the additional value created in delivery of a service contract which has a wider community or public benefit. This extends beyond the social value delivered as part of the primary contract

Special purpose vehicle (SPV)

A legal entity (usually a limited company) that is created solely for a particular financial transaction or to fulfil a specific contractual objective

Chapter 4

Glossary T - Z

1 min read


Theory of change

Explains the channels through which programmes can influence final outcomes. It describes the causal logic of how and why a particular programme, programme modality, or design innovation will reach its intended outcomes. A theory of change is a key underpinning of any impact evaluation, given the cause-and-effect focus of the research



The National Audit Office (NAO) uses three criteria to assess the value for money of government spending (i.e. the optimal use of resources to achieve the intended outcomes):

  • Economy: minimising the cost of resources used or required (inputs) – spending less;
  • Efficiency: the relationship between the output from goods or services and the resources to produce them – spending well; and
  • Effectiveness: the relationship between the intended and actual results of public spending (outcomes) – spending wisely

Value for money

Good value for money is the optimal use of resources to achieve the intended outcomes. ‘Optimal’ means ‘the most desirable possible given expressed or implied restrictions or constraints’. HM Treasury advises that value for money is not about achieving the lowest initial price: it is defined as the optimum combination of whole life costs and quality.

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Venture capital

Money provided by investors to start-up firms and small businesses with perceived long-term growth potential. It typically entails high risk for the investor, but has the potential for above-average returns. As well as funding, investors usually provide management assistance and other services

Venture philanthropy

Venture philanthropy (VP) takes concepts and techniques from venture capital and applies them to achieving a social, rather than a financial, return. VP takes a high-engagement approach and is characterised by the investee receiving management support and specialist expertise, as well as financial resources

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