In 2016, PCV began moving from our efforts at laying the groundwork for impact investing, to creating the tools and frameworks that investors would need to create real, measureable social and environmental good. Our early efforts at this involved partnering with Northern California Community Loan Fund (NCCLF), to develop a tool called the Social Impact Rating System (SIR). The tool assesses the expected positive impact of NCCLF’s potential loans and the extent to which they align with its mission. The SIR translates each loan’s impact objectives into several dimensions corresponding to key indicators within each dimension. The tool’s four dimensions of impact are:
- Impact on Community. Does the community where the borrower or client population is located face barriers to opportunities?
- Impact on Borrower. Will the loan improve the borrower’s effectiveness or capacity to serve its target population?
- Impact on Beneficiaries. What are the direct impacts of the borrower’s services on beneficiaries supported by NCCLF’s loan?
- Impact of Financing. Is there potential to increase the impact of the borrower (and similar organizations) as a result of working with NCCLF specifically, and not another lender?
The system relies on a sophisticated formula, which places different weights on a range of factors. For example, rather than each of the factors above accounting for 25% of the Impact Rating, the Impact on Beneficiaries comprises 50%. NCCLF’s loan officers have now utilized the SIR for two years to inform the deployment of over $70M in loans. Because of the SIR, senior leadership at NCCLF have revisited and scrutinized organizational mission and priorities, enhancing staff’s understanding of the organization’s impact.