States and territories sign onto social impact investing agreement

Australia’s market for investments which solve complex social issues is set to grow with states and territories pledging to work with the Morrison Government on new initiatives.

Minister for Families and Social Services Anne Ruston thanked South Australia, New South Wales, the Northern Territory, Tasmania, Victoria and Western Australia for signing the Commonwealth-State Project Agreement.

“Social impact investing brings together some of the sharpest minds in investment with the best and brightest in social services to find new ways of tackling social problems where existing policy interventions and service delivery are not getting the desired outcomes,” Minister Ruston said.

“This is an exciting sector because it keeps everyone accountable to the ultimate goal which is changing the lives of the most vulnerable in our community in a very real way.

“The Agreement sets out how the Commonwealth will work with the states and territories now and into the future. We look forward to seeing projects with real and tangible benefits for the community come to life.”

The Morrison Government has committed a total of $22.3 million to support the agreement which includes $8.5 million for outcome payment for projects that support people at risk of homelessness and a further $8.5 million for outcome payments for projects that support other vulnerable groups.

Social impact investing is an innovative approach to financing social service programs, often using bonds designed to raise private capital for intensive support and preventative programs to address issues affecting vulnerable and at risk groups.

Investors provide upfront capital to non-government organisations to provide services to achieve specific improved social outcomes and reduce future costs to government. The Government pays dividends only when performance targets are met.

Appetite for this type of investment has rapidly accelerated over recent years with the value of the Australian market hitting $19.9 billion last year up from an estimated $1.2 billion at 30 June 2015.