Commonwealth to Fund Social Impact Investing

The federal government will partner with the states and territories and other stakeholders to trial social impact investing (SII) to determine the effectiveness of outcomes-focused investing in improving housing and welfare for young people.

The government announced in the budget that it would invest in social impact projects to support innovative approaches to reducing youth homelessness.

From 2017/18, the government will invest $10.2 million over 10 years to trial the use of social impact investments aimed at improving housing and welfare outcomes for young people at risk of homelessness.

This additional funding includes $8 million over four years to establish an SII Readiness Fund to help organisations build their skills and capabilities to develop projects and business plans for SII opportunities.

The funding also includes $12.2 million for additional trials of investments in partnership with the states and territories, and to facilitate data sharing and improved outcomes measurement.

The announcement is in line with a recommendation to the federal government by peak body Philanthropy Australia in a submission responding to Treasury’s Discussion Paper on Social Impact Investing.

Philanthropy Australia CEO Sarah Davies said that impact investing was a powerful tool for social change.

“There’s growing demand for impact investment opportunities within the philanthropic sector and beyond, but there aren’t enough investment ready deals available,” Davies said.

“The announcement of funding for a Social Impact Investment Readiness Fund is exactly what we recommended and so we’re very pleased.

“It’s great to see the Australian government is moving on impact investment and it’s a testament to the effective advocacy of a broad coalition of stakeholders.”

The government said the SII trials would be undertaken in partnership with states and territories and target priority groups, including those supported by specialist homelessness services exiting the out-of-home care system or institutions such as juvenile detention.

It is anticipated that the first investment for youth homelessness would be ready for implementation in 2018/19.

The government said it would also consult with states and territories to design a process to identify partner governments.

This project complements broader SII funding where the government is providing $20.2 million over 10 years (from 2017-18) to encourage the continued development of the SII market in areas other than homelessness.

Beneficiaries of these investments would include young people aged under 25 and experiencing one or more risk factors around homelessness. These would include state and territory government priority groups such as young people exiting the out-of-home care system or institutions such as juvenile detention.

Social Ventures Australia CEO Rob Koczkar said the sector was encouraged by the government’s funding announcement and willingness to work with the states.

“We look forward to seeing the details.The quantum seems a little modest but it’s a good start,”  Koczkar said.

“It’s $30 million over quite a long period. So $8 million in four years for readiness . It’s probably not enough to drive a wholesale change but it is certainly encouraging that they recognise the importance of this as a policy mechanism for delivering better outcomes for vulnerable people.”

Nazia Ahmed, economist and director of The Social Outcomes Lab said greater investment into such approaches sent a signal that the government was heading in the right direction in solving complex social challenges.

“A greater emphasis on such initiatives rather than the punitive measures is what will ultimately lead to improvements in the lives of those that are caught in the cycle of disadvantage,” Ahmed said.