Impact Capital Australia – Scaling Positive Social Change

Impact Capital Australia has been designed as this flagship institution for Australia, to be the game changer that unlocks the potential of impact investment, writes Rosemary Addis, Chair of Impact Investing Australia.

Recently leaders spanning Australia’s finance, Not for Profit, business and public sectors came together to launch a Blueprint for Impact Capital Australia (ICA), an independent financial institution with a mandate clearly linked to our future productivity and prosperity.Translated into a market reality, ICA would be something new and powerful for Australia, a flagship institution driving impact investing to scale for the benefit of Australian communities.

The need and opportunity for more and different resources to tackle the issues we face as a society has never been greater. This is reflected locally and globally in the news, in policy debate and in the experience of people and communities.

In Australia, our social services expenditure is currently $154 billion, projected to rise to around $227 billion over the next decade. To meet this rising demand for services, increased government borrowing and spending is unlikely to be the answer. Philanthropic contributions have been growing; however, the 2012–13 total of $2.3 billion in tax-deductible gifts relative to the very much larger size of the sector, underscores the extent of the need and opportunity to consider alternatives.

Delivering greater value for public money and unlocking other sources of funding and finance?is critical to meeting demand. Pressing issues such as homelessness, long term unemployment and poor outcomes for Aboriginal communities affect not just those experiencing disadvantage, but ultimately the prosperity of all Australians.

There is a groundswell across the world of new and different approaches to tackling social issues, and Australia is no exception. This marks some real departures from business as usual, in particular bringing together non-traditional partners to work together and making possible different combinations of resources.

The emerging field of impact investing holds enormous potential for capitalizing on these shifts, as part of an expanding toolbox for achieving positive change. While impact investing is defined as investments that deliver measurable social or environmental impact in addition to a financial return, it extends beyond merely unlocking private capital for tackling social issues and resourcing greater activity.

The intention is to expand the total pool of social and economic value through prevention, innovation, and scaling what works. The Financial System Inquiry agreed that we need finance that encourages more innovative and effective solutions to social issues.  Other recent policy contributions including the McClure report on welfare reform also identified impact investing as a key tool for achieving change.

Impact investing is growing in Australia and globally. It has gained interest from governments, Not for Profit organisations, philanthropists, communities as well as from investors, ranging from households to institutions. But despite some terrific success stories locally, the Australian market lacks scale. And without scale, take-up of impact investing will remain fragmented and progress will remain incremental and niche. This will limit the social and economic impact that could be delivered, to the detriment of our communities.

Locally and globally, an independent ‘flagship institution’ has been identified as a lynchpin for getting the impact investing market to take off.  In Australia, various social sector stakeholders have championed the need for such an institution, and it is singled out as a key action in the strategy by the Australian Advisory Board on Impact Investing to catalyse the market in and from Australia.  A wholesale financial institution for each market was a key recommendation of the G8 Social Impact Investment Taskforce.  The UK has led with Big Society Capital, and similar initiatives are being considered in countries including Japan, Portugal, Canada and Israel.

Impact Capital Australia (ICA) has been designed as this flagship institution for Australia, to be the game changer that unlocks the potential of impact investment in our country and accelerates the pace and scale of development.

ICA would play two key roles: investor and market champion. The focus of ICA’s impact investment activity would predominantly be wholesale, investing in vehicles being taken to the market by others and supporting the growth of these intermediaries. Examples could include a fund to finance affordable accommodation for people with disabilities, a fund to invest in local communities and business to create jobs, or a social impact bond fund investing in innovations and prevention that improve social outcomes in areas such as early childhood development; type 2 diabetes; and training and employment outcomes for young people.

Beyond its investments, ICA would be a market champion, targeting barriers to growth, actively developing and openly sharing expertise, knowledge and tools. It would build meaningful engagement with communities, sector experts and with regulators and governments.

In the words of David Crosbie, CEO of the Community Council for Australia, ICA is about changing the way we address social issues in Australia.  ICA would bring together the best minds in the finance sector with innovative community organisations to make a real difference to the kind of society we live in.  It is about achieving real change by challenging old school approaches and delivering real outcomes.

ICA would need sufficient capital to send a strong signal to the market and to operate self-sufficiently, taking commitments from Government, financial institutions and other leaders as founding partners. Their relatively modest investment in creating ICA would have a multiplier effect delivering greater value from public investment, unlocking private capital and talent, and expanding the potential for impact.

The Blueprint is the product of a positive collaboration between senior leaders from some of Australia’s largest financial institutions, Not for Profit organisations and impact investing practitioners, all focused on how we can act collectively to change how we deal with issues affecting society.

There is strong momentum to realise the vision for ICA, and the leaders who developed the Blueprint are already focused on implementation. Enough has been trialled elsewhere to know what is needed and to act with confidence. The time to act is now. We invite Government, major financial institutions and the community to join with us and take ICA from a Blueprint to a reality that benefits all Australians.

About the author: Rosemary Addis is the Chair of Impact Investing Australia, the Chair of the Australian Advisory Board on Impact Investing and Australia’s representative on the Global Social Impact Investment Steering Group.

Impact Investing Australia is a Not for Profit organisation established to develop the market for impact investing in Australia and deliver better outcomes for society.It has a clear focus on enabling more participants to enter the market, and achieving more investments. Established in 2014, it is the first organisation of its kind in Australia.