Social Investment Scotland scoops top credit rating
Social Investment Scotland has become the first responsible finance provider in the UK to receive a credit rating from leading US-based ratings service Aeris.
As the first Community Development Financial Institution (CDFI) outside the US to receive a rating of any kind, SIS has achieved a AAA2 rating – the second highest rating available. SIS initiated the Aeris ratings process, with support and sponsorship from RBS.
With the aim of ‘guiding capital to good’, Aeris’ CDFI ratings tool is used to provide an indication of the strength of a CDFI, in relation to its social impact and financial performance. Ratings are used by investors in the US to help accelerate due diligence and bring more investment into the third sector. The methodology has been key to growing the US market place and attracting more social investment capital.
An Aeris rating includes two ratings. First, CDFIs are rated on impact performance, from AAA (highest) to B (lowest). The second rating is of their financial strength and performance, from 1 (highest) to 5 (lowest). CDFIs may also receive a “policy plus,” indicated by a “+”—meaning that the CDFI leads initiatives to change government policy to benefit disadvantaged people and communities. Based on this approach, the best possible rating that a CDFI could receive is AAA+1.
The Stateside CDFI movement is significantly more advanced than the UK domestic market, with 524 US Treasury-certified CDFI loan funds compared to the UK’s sixty. At present, 29 CDFIs in the US have earned an Aeris impact rating of AAA, and 47 have earned a financial strength and performance rating of 2 or better.
Alastair Davis, chief executive, Social Investment Scotland
“In line with SIS’ continued growth and ambitions for the future, we were keen to blaze a trail for the UK’s social investment sector, by becoming the first responsible finance provider to initiate a rating. The fact that we received one of the highest ratings available is a terrific achievement of which we’re extremely proud, placing SIS in the top third of CDFIs across the world. We’ll now be looking to use this report to both stakeholders and investors to demonstrate the strength of SIS, to attract more investment, and to help raise standards and transparency across the whole of the UK’s responsible finance sector.”
Paige Chapel, President and CEO of Aeris
In the US, Aeris ratings are the highest demonstration of transparency and accountability that a CDFI can make to its investors and other stakeholders. We commend SIS for becoming the first UK CDFI to complete a third-party rating, and we are hopeful that transparent ratings of CDFI financial and impact performance will take hold in the UK as they have in the US.
Eric Munro, Director of Community Finance and Social Enterprise, Royal Bank of Scotland
“This report shows that SIS continue to innovate and push the boundaries of alternative finance provision in the UK and RBS is pleased to support this important work. As an original investor and long term supporter of Social Investment Scotland, RBS is delighted to have provided the support to make this piece of work possible. We want to see the social sector thrive and grow. We look forward to continuing to work with SIS in the future to ensure Scotland’s social enterprises have the access to finance they need.”