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Introduction

The company and investors agree that the investment serves a defined social or environmental purpose and earmarks proceeds, in whole or in part, for that purpose.

Specifying the use of proceeds is particularly important for PRI investors, as they are responsible under US tax law for understanding how PRI funds are being spent. See Sample term sheet: loan with impact-triggered default for an example of terms that specify the use of proceeds.

Sample proceeds language - general version

Proceeds of the investment shall be used for [operations designed to achieve impact goals] OR [the impact goals described in Exhibit X].

Sample proceeds language - PRI version

The purpose of the investment is to provide working capital for [the defined charitable goals] and operations designed to achieve them. The investment is intended to qualify as a Program-Related Investment under section 4944(c) of the US Internal Revenue Code of 1986, as amended (a “PRI”).

Proceeds of the investment shall be used exclusively for the purposes described in the preceding paragraph. None of the proceeds may be used to influence legislation or elections, or in any other manner which would disqualify the investment as a PRI. The investment documents will include terms reasonably required to qualify the investment as a PRI (the “PRI Requirements”).

Sample language for specifying use for a portion of the investment

[$X] of the investment proceeds shall be used for [operations designed to achieve impact goals] OR [the impact goals described in Exhibit X].

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