Terms & Defninitions

“AI is now influencing every area of human life. The past decade has seen a drastic increase in the use of AI, including facial recognition software, self-driving vehicles, search engines, and translation software. These accepted uses of AI in modern society have also coincided with an increased presence of AI in modern warfare. The escalating weaponization of AI parallels the nuclear arms race of the Cold War, with nuclear weapons being replaced with automated weapons systems. However, the international community, the United Nations, and international law have been struggling to adapt to and regulate the use of automated weapons, which are rapidly changing the landscape of modern warfare.” Source

“Refers to the implementation and maintenance of a system of legalized racial segregation in which one racial group is deprived of political and civil rights. Apartheid is a crime against humanity punishable under the Rome Statute of the International Criminal Court (ICC).”

“Apartheid is a policy that is founded on the idea of separating people based on racial or ethnic criteria. Usually, the separation operated by apartheid is exercised over geographical areas, putting one part of the population in an area separated from the others, or forbidding a group to access some areas solely based on their belonging to a race or ethnicity.

Apartheid policies include, but are not limited to: banning a specific racial or ethnic group from access to certain meetings and unions, the restriction of movement, prohibiting access to certain public spaces, and the prohibition of mixed marriages.”

Source

“Crimes against Humanity are specific crimes committed in the context of a large-scale attack targeting civilians, regardless of their nationality. These crimes include the most egregious violations of human dignity, especially those directed towards civilian populations. Crimes against humanity have often been committed as part of State policies, but they can also be perpetrated by non-State armed groups or paramilitary forces.

As codified in Article 7 of the International Criminal Court (ICC) Statute, the following acts are punishable as crimes against humanity when perpetrated by a state actor as part of a systematic or widespread attack against a civilian population:

1. murder;
2. extermination;
3. deportation or forcible transfer;
4. false imprisonment;
5. torture;
6. rape, sexual slavery, or enforced sterilization;
7. ethnic persecution;
8. disappearance;
9. apartheid;
10. “Other inhumane acts of a similar character intentionally causing great suffering, or serious injury to body or to mental or physical health.”

Source

“A derivative is a financial instrument whose value derives from an underlying asset such as a stock, a bond, interest rates, a commodity, an index, or even a basket of cryptocurrencies such as spot ether ETFs. Derivatives can be complex financial instruments that subject novice users to increased risk. However, they are often used for three primary purposes: to hedge, speculate, or leverage a position. There are many derivative instruments, including options, swaps, futures and forward contracts, and collateralized debt obligations.” Source

“Divestment is a decision to refuse to invest in a company or set of companies and entails the sale of all securities associated with a company, including both direct and indirect investments, and precludes the repurchasing of those securities.” Source

“Restricted funds are any donations made and earmarked for a specific purpose by the donor. Endowments are usually permanently restricted funds – donations designated to be held in perpetuity as principal, on which only the interest is allowed to be spent. Furthermore, there are restrictions on how the interest can be spent. For example, an endowment given to a university may be restricted to funding scholarships and professorships.” Source

The ethics.vc Firms Rating is a comprehensive evaluation system that ranks VC firms from A to F based on their compliance with the Principles and Criteria for Ethical Venture Capital Investment. An A rating indicates that a firm is fully compliant, while an F rating signifies that a firm violates all ethical principles.

These ratings will be collected and stored in the ethics.vc Firms Database, a detailed repository tracking each firm’s performance. The database allows investors and stakeholders to assess firms based on their adherence to ethics.vc criteria, serving as a vital tool for informed and responsible investment decisions.

Contact us if you have a specific firm who you would like to get an expedited rating on, or if a firm would like to take steps to improve their scores. We are building software to help automate this process for researchers. Please contact us to beta test it.

A business exit strategy is an entrepreneur’s strategic plan to sell his or her ownership in a company to investors or another company. An exit strategy gives a business owner a way to reduce or liquidate his stake in a business and, if the business is successful, make a substantial profit. If the business is not successful, an exit strategy (or “exit plan”) enables the entrepreneur to limit losses. An exit strategy may also be used by an investor such as a venture capitalist in order to plan for a cash-out of an investment.

Common types of exit strategies include initial public offerings (IPO), strategic acquisitions, and management buyouts (MBO). Source

Primary Fiduciary Responsibilities to Limited Partners (LPs):

Although LPs have limited power to control investments after contribution, all PEs have what’s called a fiduciary responsibility to protect the interests of their LPs, which are legally binding and enforceable

Fiduciary responsibilities of GPs to LPs include many things, such as:

1. Investor’s Interests: every single investment choice made by a PE firm must be made with the primary goal of maximizing the LPs returns
   • This means that VCs if an investment strategy does not shield investors from unnecessary risks, they can be legally liable for damages to the LP
2. Disclosure: GPs are obligated to provide certain information about their investments to LPs, including about potential conflicts of interest and investment performance updates
   • This means VCs must not hide secondary factors influencing their investments and are also obligated to report on investment success–so LPs can challenge certain investment decisions and also demand updated information on their investments
3. Prudent Decisions: GPs must conduct due diligence on their investments to protect LPs
   • This means VCs have an obligation to investigate the companies in their portfolio through due diligence–and can be held liable for misrepresenting PortCo investments to their LPs

Secondary fiduciary responsibilities to PortCos:

• GPs often get Board of Director roles on their PortCos–when this happens–GPs are obligated to balance sometimes competing fiduciary duties 1) provide the LP with an ROI from the company and 2) ensure the financial success of the company
• While these two interests are often aligned–sometimes a potential ROI for a LP does not represent the best decision for the overall success of the PortCo
• When this happens, GPs navigate conflicting fiduciary responsibilities exposing them to liability

“FDI is a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy. Ownership of 10% or more of the voting power in an enterprise in one economy by an investor in another economy is evidence of such a relationship. The threshold for an FDI that establishes a controlling interest, per guidelines established by the Organization for Economic Co-operation and Development (OECD), is a minimum 10% ownership stake in a foreign-based company.” Source

“A GP is a manager of a venture fund. Like fund managers in other arenas (stocks, mutual funds, crypto, etc.), they analyze potential deals and make the final call on what to do with the money they manage.

GPs of venture funds generally have “skin in the game.” They invest their own money into their fund.

GPs also have a lot of responsibilities. Two main responsibilities are raising money from investors (called limited partners or “LPs”) and finding quality deals.” Source

“Refers to the deliberate and systematic destruction of a group of people because of their ethnicity, nationality, religion, or race. Any of the following acts committed with intent to destroy, in whole or in part, a national, ethnical, racial or religious group, as such: (a) Killing members of the group; (b) Causing serious bodily or mental harm to members of the group; (c) Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part; (d) Imposing measures intended to prevent births within the group; (e) Forcibly transferring children of the group to another group.” Source

“A hedge fund is a limited partnership of private investors whose money is pooled and managed by professional fund managers. These managers use a wide range of strategies, including leverage (borrowed money) and the trading of nontraditional assets, to earn above-average investment returns.

A hedge fund investment is often considered a risky, alternative investment choice and usually requires a high minimum investment or net worth. Hedge funds typically target wealthy investors.” Source

“Human rights are rights inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion, or any other status. Human rights include the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, the right to work and education, and many more.  Everyone is entitled to these rights, without discrimination.” Source

“A human rights abuse is anything that harms someone’s human rights. They include harm to people, communities, and the environment. A human rights abuse happens when someone’s human rights are harmed. It is not necessary to show that someone did something on purpose or intended the harm. What matters is the harmful effect. These are 6 examples of harm that come from human rights abuse:

1. Physical harm
2. Harm to relationships
3. Economic harm
4. Environmental harm
5. Harm to mental health
6. Harm to a person’s identity”

Source

“This asset class includes funds invested in equity and debt securities and financial instruments such as options, swaps, futures, and other derivatives.” Source

“Indirect investment refers to a type of investment in which the investor does not directly own the asset but rather invests in it through an intermediary, such as a fund or a financial institution, which in turn invests in the desired asset or security. Indirect investment is accomplished through vehicles such as mutual funds, ETFs, REITs, hedge funds, and private equity funds [including venture capital].” Source

In all Principles and Criteria, “institutions” includes, but is not limited to:

1. University Endowment
2. Pension Fund

“The IRS is part of the U.S. Department of the Treasury and is responsible for enforcing and administering federal tax laws, processing tax returns, performing audits, and offering assistance for American taxpayers.” Source

“Form 990: Return of Organization Exempt from Income Tax, is a form that some tax-exempt organizations are required to submit to the Internal Revenue Service (IRS) as a part of their annual reporting. Unlike federal income tax returns that are private, Form 990 is open to public inspection.”

“Form 990 is intended to provide the government and interested members of the public with a snapshot of the organization’s activities for that year. It’s possible that some donors may base their gifting decisions on what they can discern from Form 990.” Source

“Schedule R is used by an organization that files a Form 990 to provide information on related organizations, on certain transactions with related organizations, and on certain unrelated partnerships through which the organization conducts significant activities.” Source

“The ICC is a permanent and independent criminal court established to prosecute offenders of serious crimes in the international community. Specifically, the ICC is intended to prosecute the following crimes:

1. Genocide
2. Crimes against humanity
3. War crimes
4. The crime of aggression

The ICC is meant to serve as a last resort when the courts of sovereign states are unwilling to prosecute. Therefore, the ICC is complementary to national criminal jurisdiction and does not supersede it. Additionally, the ICC serves a different purpose than the International Court of Justice, which resolves conflicts between nations.

The ICC was created by the Rome Statute, which came into force on July 1, 2002. As of July 2023, there are 123 countries that are parties to the Rome Statute of the ICC. The ICC is headquartered in The Hague, Netherlands and has other offices around the world, including one in New York City. Some of the ICC’s most significant indictments include those of Joseph Kony, Muammar Gaddafi, and most recently, Vladimir Putin.” Source

“International human rights law lays down the obligations of Governments to act in certain ways or to refrain from certain acts, in order to promote and protect human rights and fundamental freedoms of individuals or groups.” Source

“A business exit strategy is an entrepreneur’s strategic plan to sell his or her ownership in a company to investors or another company. An exit strategy gives a business owner a way to reduce or liquidate his stake in a business and, if the business is successful, make a substantial profit. If the business is not successful, an exit strategy (or “exit plan”) enables the entrepreneur to limit losses. An exit strategy may also be used by an investor such as a venture capitalist in order to plan for a cash-out of an investment.

Common types of exit strategies include initial public offerings (IPO), strategic acquisitions, and management buyouts (MBO). ”

Source

Investment refers to the various holdings in Venture Capital, Private Equity, and other Alternative Assets where your institution has allocated capital.

“”Kill” Web Technologies are a network of integrated capabilities that combine intelligence and warfare across multiple domains, including land, air, sea, space, and cyberspace. The goal is to enable a more flexible and effective response to threats, rather than relying solely on pre-defined kill chains. The development and deployment of kill web technologies raise important ethical and legal considerations, particularly regarding accountability and the potential for unintended consequences in conflict scenarios.” Source

“Capital flows into private equity and venture capital funds from pension funds, university endowments, foundations, finance companies, and high-net-worth individuals.  Such investors in venture funds are called limited partners (LPs). The word “limited” asserts their passive role with ‘limited’ say in a fund’s operational activities.

LPs  include institutional investors (e.g., pension funds, foundations, endowments, banks and insurance companies) and family offices and high-net-worth individuals (HNWIs). The bulk of capital for venture funds comes from pension funds.  While considering an investment in a venture capital fund, each LP assesses the fund based upon:

• Institution’s asset allocation strategy: Fancy term of how they invest their capital. Such a strategy includes a set of investment principles and portfolio construction guidelines designed to generate an overall target rate of return for the LPs. VC is treated as a sub-asset class of private equity that falls under “Alternative Assets.”
• Investment criteria: The factors that help LPs choose target investments within each of the asset classes. In VC, this may translate to fund stage (seed /early, late stage or multi-stage), fund sector (technology, health care) and geography (US, Europe, Japan, Global).
• Investment process: Time lines and steps each LP needs to follow to make an investment decision within each asset class”

Source

“A phrase originally coined in 1922 by the American journalist Walter Lippmann (1889–1974) to refer to the management of public opinion, which he felt was necessary for democracy to flourish, since he felt that public opinion was an irrational force. For Herman and Chomsky, the acceptance of government policies by people in the USA on the basis of the partial picture of issues offered by the mass media, denying them access to alternative views which would lead them to oppose such policies. They present this as a propaganda model in which the mass media select material in relation to the values of those in power.” Source

“A non-marketable security is an asset that is difficult to buy or sell due to the fact that they are not traded on any major secondary market exchanges. Limited partnership investments are an example of a private security that may be non-marketable due to the difficulty of reselling. Another example is private shares held by an owner of a company that is not publicly traded.” Source

As defined in Article 42 of the Fourth Hague Convention: “Territory is considered occupied when it is actually placed under the authority of the hostile army. The occupation extends only to the territory where such authority has been established and can be exercised.” Source

“The OECD is an international organization that works closely with policy makers, stakeholders and citizens to establish evidence-based international standards and to find solutions to social, economic and environmental challenges – build better policies for better lives.” Source

“A portfolio company is a company (public or private) that a venture capital firm, buyout firm, or holding company owns equity. In other words, companies that private equity firms hold an interest in are considered portfolio companies. Investing in a portfolio company aims to increase its value and earn a return on investment through a sale.” Source

PE firms seek opportunities to earn returns better than what can be achieved in public equity markets. Private equity is ownership or interest in entities that aren’t publicly listed or traded.

PE funds are investment vehicles that pool money from investors to purchase and overhaul companies in order to generate a profit. The funds are managed by PE firms or fund managers, also known as General Partners (GPs), who use the money to make investments on behalf of the investors, or limited partners (LPs). PE firms often focus on long-term investments in assets that take time to sell, with a typical investment horizon of 10 years or more.

“There are plenty of PE investment strategies. Two of the most common are LBOs and VC investments.

• Leveraged Buyouts (LBOs): company is bought out by a PE firm, and the purchase is financed through debt, which is collateralized by the target’s operations and assets. In an LBO, PE firms can assume control of companies while only putting up a fraction of the purchase price. By leveraging the investment, PE firms aim to maximize their potential return.
• Venture Capital (VC): VC is a more general term for an equity investment in a young company in a less mature industry. PE firms will often see potential in the industry and, more importantly, in the target firm itself, thinking a lack of revenue, cash flow, or debt financing is holding it back. PE firms can take significant stakes in such companies, hoping that the target will evolve into a powerhouse in its growing industry.”

Here’s how PE funds work:

1. PE firms buy shares in private companies or struggling public companies, and then work with management to restructure operations and cut costs. PE firms sell the companies they’ve acquired, either individually or as a whole, to earn a profit.
2. PE can be a way for investors to diversify their portfolios and potentially earn higher returns than investing in public companies, but it also involves taking on more risk.

Source 1 and Source 2

“This asset class includes funds primarily invested in real estate and natural resources. Generally, investments in this asset class are not redeemable. More broadly, distributions from investee funds are received as the underlying investments of the funds are liquidated.” Source

“Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. Key factors influencing ROI include the initial investment amount, ongoing maintenance costs, and the cash flow generated by the investment.

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.” Source

“The U.S. Securities and Exchange Commission is an independent federal agency tasked with protecting investors and maintaining fair and efficient markets in the U.S.

Congress created the SEC in 1934 as the first federal regulator of the securities markets. The SEC’s efforts are meant to protect shareholders (especially retail investors) against fraudulent and manipulative practices in the market and ensure that companies provide accurate and complete disclosures about significant financial events, including corporate takeovers. It also approves registration statements for bookrunners among underwriting firms.

Securities offered in the U.S. must be registered with the SEC before being sold to investors. Financial services firms such as broker-dealers, advisory firms, asset managers, and their professional representatives must also register with the SEC to do business” Source

“The Securities and Exchange Commission’s (SEC) Form 13F is a quarterly report that is required to be filed by all institutional investment managers with at least $100 million in assets under management. It discloses their equity holdings.” Source

“Comprehensive report of financial performance that must be submitted quarterly by all public companies to the SEC. It stands in contrast to SEC Form 10-K, which is required to be filed annually and is audited. In the 10-Q, firms are required to disclose relevant information regarding their finances related to their business operations. A 10-Q must be filed for each of the first three quarters of the company’s fiscal year.” Source

“Comprehensive report filed annually by a publicly-traded company about its financial performance and is required by the U.S. Securities and Exchange Commission (SEC). Some of the information a company is required to document in the 10-K includes its history, organizational structure, financial statements, earnings per share, subsidiaries, executive compensation, and any other relevant data.” Source

1. All US companies are comprised of “shares” or “stock,” units of ownership in companies that include financial rights (most importantly, the right to sell shares for money after an IPO or M&A transaction) and certain governance rights, including voting on certain business decisions
2. Equity is often initially split between 1-3 founders, but through VC fundraising early-stage companies sell some of their shares in return for money to develop their company, after which VCs own a substantial stake portion of equity
3. This enables private companies without revenue to access cash without directly owing anything to the other party–as opposed to debt transactions like a bank loan that require future repayment–if a VC investments fails, PortCos aren’t obligated to compensate VCs for the failed investment or necessarily return their initial investment either

“The term “startup” refers to a company in the early stages of its operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand.

These companies generally launch with high costs and limited revenue, which is why they look for capital from a variety of sources such as angel investors and venture capitalists.

Startups typically require several years to make a profit, so significant, high-risk investments typically are needed to get one off the ground.” Source

Support: In all Principles and Criteria, “support” includes

1. investing in companies which are involved in, complicit in, support, or profit from the listed activities or areas
2. having employees, partners, or representatives who invest in, represent, support, or advise, on an individual basis, companies which are involved in, complicit in, support, or profit from the listed activities or areas
3. any support provided by the firm directly or indirectly for institutions which are involved in, complicit in, support, or profit from the listed activities or areas
4. any support provided by the firm’s employees, partners, or representatives, directly or indirectly for institutions which are involved in, complicit in, support, or profit from the listed activities or areas
5. any of the firm’s employees, partners, or representatives, being involved in, complicit in, support, or profit from the listed activities or areas

Unmanned military systems or rapid-deployment defense systems, including autonomous vehicles such as unmanned aerial and ground vehicles for various defense applications.

VC firms are a subset of the private equity industry. They provide equity financing for early and growth stage companies (commonly referred to as “start-ups” or “ventures”). VC firms play a critical gatekeeper role, deciding which new technologies and technology companies will receive early-stage funding, and which will not. This, in turn, helps determine which start-ups today will develop the new platforms and technologies that will shape our lives tomorrow. Venture capitalists help shape the future of technology, and with it the future of our economies, politics, societies and fundamentally, our human rights. VC firms fund start-ups in sectors as disparate as advertising, education, energy, finance, health, the media, transportation and others. The stakes are enormous. If we want to understand, much less influence, the future of technology, we need to understand how VC firms decide which start-ups and new technologies to support.

Venture capital is a form of private equity and a type of financing for startup companies and small businesses with long-term growth potential. VC funds are typically structured as limited partnerships, with general partners (GPs) managing the fund and limited partners (LPs) providing financing. The partnership structure offers tax benefits and allows the GP to share in the fund’s profitability, which aligns their interests with those of the investors.

A VC fund invests in a portfolio of companies, often expecting that some will fail but hoping that others will experience large exits. VC firms typically look to get a 10–20% stake in an early-stage startup, and then wait for an opportunity to sell their shares at a much higher price.

When a fund distributes returns, it usually follows an 80-20 arrangement, with LPs splitting 80% of the returns based on their ownership stake and the GP taking 20%. VC returns follow a power law distribution, which means that one successful investment in a portfolio of many companies can generate outsized returns for the entire fund.

Source 1

Source 2

“Means the development or production of nuclear, radiological, biological or chemical weapons or the facilitation of that development or production. Weapons design and development aims at (successfully) designing new or improved types of weapons, including everything that is involved in making weapons work and using them, and so designing command and control systems, delivery platforms, soldier’s body armor, wheels for chariots, and so on, counts as weapons research.”

Source