There is a growing enthusiasm for social investment in Australia and they are learning from the UK's methods
Social investment is big in Australia or, at least, it soon will be. The state government of New South Wales (NSW) is currently in the process of piloting Australia's first Social Benefit Bonds (SBB), the equivalent of Social Impact Bonds (SIBs) in the UK.
SIBs, which involve investors funding that aim to improve a particular social outcome and receiving a return (or not) based on the outcomes achieved, are seen by the UK government as an important new method of funding charities and social enterprise to deliver social change in a cost effective way.
The first SIB, launched in 2010, funds services aimed at reducing re-offending amongst prisoners released from Peterborough and there are now 14 SIBs in operation in the UK.
Australian politicians are just as enthusiastic. Launching the first SBB, NSW treasurer, Mike Baird told the Sydney Morning Herald: "Not only are we tapping into a new source of funding by partnering with social investors, but we have the potential to create better social results, while providing cost savings for the NSW government and delivering for investors.''
In the UK, one of the key aims of both social impact bonds and social investment is to enable charities and social enterprises to deliver more and bigger public contracts. The situation in Australia is different. A bigger proportion of Australia's large charities and other not-for-profit organisations already deliver public services and receive nearly 60% of their income from the government, compared to 37% in the UK.
Emma Tomkinson, who advised the NSW government on the development of social benefit bonds and also worked for the UK government's centre for social impact bonds, explains the NSW approach: "In looking at social impact bonds, it wasn't so much 'can we get our VCSEs winning government contracts', we didn't have a problem with that, what we did have a problem with, was complacency – both on the part of the service provider and government. Where contracts and services were renewed automatically every time and we weren't seeing a lot of innovation. Or innovative services were arising but the contracts were held by others."
The NSW government put out a request for proposals in November 2011 and, in March 2012, it chose three organisations to work with to develop pilot SBBs.
The first of these, The Newpin Social Benefit Bond, was launched in March this year. The Newpin bond will pay for services delivered by the charity UnitingCare Burnside aimed at increasing the number of children in care who are returned to their families by the courts.
Unlike some of the organisations delivering services funded by SIBs in the UK, UnitingCare are a massive service provider - with the state branch having a 2011/12 turnover of $587m (£353m), higher than any public service delivery charity in the UK.
The $7million Bond, raised by Social Ventures Australia was oversubscribed. While, as with SIBs in the UK, investors included philanthropists and charitable funders, they also included the super (pension) fund, NGS Super, who made an investment of $500,000.
Under the terms of the bond, if the percentage of children returned to their families – the restoration rate is higher than 70% then investors receive returns of 15% per annum over seven years. Given that the bond is paying for an expansion of existing programme that had a restoration rate of 74% in 2012, this looks like a good investment.
Even if it proves not to be, another key difference between the New South Wales SBBs and existing social impact bonds in the UK is that– while a key part of the aim of SIBs is to transfer risk from the government to investors - the New South Wales government is that providing investors with a guarantee that they will get at least 50% money back, whatever happens.
Emma Tomkinson, explains: "Sometimes a guarantee is a free way of offering confidence. So if the government's really done their due diligence- they've got the past results, they've worked really closely with this organisation – perhaps they're confident that they're not going to have to pay out on that guarantee but by providing it they get to create a market."
The second New South Wales SBB launched in June 2013, which will fund charity service provider The Benevolent Society to provide services to reduce the number of children needing to enter foster care, offers investors a choice between an investment where 100% of their capital is guaranteed but returns are lower (up to 10%) or an investment where all their capital is at risk but potential returns are higher (up to 30%).
According to Tomkinson, there is growing enthusiasm for social investment in Australia and there are several service delivery organisations in the not-for-profit sector who are willing and able to develop SBBs if they can find government agencies to pay for the outcomes delivered. She explains: "Their position is, we're ready for a social impact bond: how do we get government to do ours? Wouldn't it be good if the government had a process where we could all propose our social impact bonds now because we've got them ready to go?"
David Floyd is managing director of Social Spider CIC. He writes the blog Beanbags and Bullsh!t.
*This content is brought to you by **Guardian Professional**. To join the **social enterprise network**, click **here.* Reported by guardian.co.uk 22 hours ago.
Social investment is big in Australia or, at least, it soon will be. The state government of New South Wales (NSW) is currently in the process of piloting Australia's first Social Benefit Bonds (SBB), the equivalent of Social Impact Bonds (SIBs) in the UK.
SIBs, which involve investors funding that aim to improve a particular social outcome and receiving a return (or not) based on the outcomes achieved, are seen by the UK government as an important new method of funding charities and social enterprise to deliver social change in a cost effective way.
The first SIB, launched in 2010, funds services aimed at reducing re-offending amongst prisoners released from Peterborough and there are now 14 SIBs in operation in the UK.
Australian politicians are just as enthusiastic. Launching the first SBB, NSW treasurer, Mike Baird told the Sydney Morning Herald: "Not only are we tapping into a new source of funding by partnering with social investors, but we have the potential to create better social results, while providing cost savings for the NSW government and delivering for investors.''
In the UK, one of the key aims of both social impact bonds and social investment is to enable charities and social enterprises to deliver more and bigger public contracts. The situation in Australia is different. A bigger proportion of Australia's large charities and other not-for-profit organisations already deliver public services and receive nearly 60% of their income from the government, compared to 37% in the UK.
Emma Tomkinson, who advised the NSW government on the development of social benefit bonds and also worked for the UK government's centre for social impact bonds, explains the NSW approach: "In looking at social impact bonds, it wasn't so much 'can we get our VCSEs winning government contracts', we didn't have a problem with that, what we did have a problem with, was complacency – both on the part of the service provider and government. Where contracts and services were renewed automatically every time and we weren't seeing a lot of innovation. Or innovative services were arising but the contracts were held by others."
The NSW government put out a request for proposals in November 2011 and, in March 2012, it chose three organisations to work with to develop pilot SBBs.
The first of these, The Newpin Social Benefit Bond, was launched in March this year. The Newpin bond will pay for services delivered by the charity UnitingCare Burnside aimed at increasing the number of children in care who are returned to their families by the courts.
Unlike some of the organisations delivering services funded by SIBs in the UK, UnitingCare are a massive service provider - with the state branch having a 2011/12 turnover of $587m (£353m), higher than any public service delivery charity in the UK.
The $7million Bond, raised by Social Ventures Australia was oversubscribed. While, as with SIBs in the UK, investors included philanthropists and charitable funders, they also included the super (pension) fund, NGS Super, who made an investment of $500,000.
Under the terms of the bond, if the percentage of children returned to their families – the restoration rate is higher than 70% then investors receive returns of 15% per annum over seven years. Given that the bond is paying for an expansion of existing programme that had a restoration rate of 74% in 2012, this looks like a good investment.
Even if it proves not to be, another key difference between the New South Wales SBBs and existing social impact bonds in the UK is that– while a key part of the aim of SIBs is to transfer risk from the government to investors - the New South Wales government is that providing investors with a guarantee that they will get at least 50% money back, whatever happens.
Emma Tomkinson, explains: "Sometimes a guarantee is a free way of offering confidence. So if the government's really done their due diligence- they've got the past results, they've worked really closely with this organisation – perhaps they're confident that they're not going to have to pay out on that guarantee but by providing it they get to create a market."
The second New South Wales SBB launched in June 2013, which will fund charity service provider The Benevolent Society to provide services to reduce the number of children needing to enter foster care, offers investors a choice between an investment where 100% of their capital is guaranteed but returns are lower (up to 10%) or an investment where all their capital is at risk but potential returns are higher (up to 30%).
According to Tomkinson, there is growing enthusiasm for social investment in Australia and there are several service delivery organisations in the not-for-profit sector who are willing and able to develop SBBs if they can find government agencies to pay for the outcomes delivered. She explains: "Their position is, we're ready for a social impact bond: how do we get government to do ours? Wouldn't it be good if the government had a process where we could all propose our social impact bonds now because we've got them ready to go?"
David Floyd is managing director of Social Spider CIC. He writes the blog Beanbags and Bullsh!t.
*This content is brought to you by **Guardian Professional**. To join the **social enterprise network**, click **here.* Reported by guardian.co.uk 22 hours ago.