Tackling Entrenched Disadvantage With Impact Investing

Australia’s growing impact investment market can help deliver better results in areas such as disability services and homelessness, but proactive leadership is needed for the industry to reach its potential, according to a new blueprint for collective action.     

The Australian Advisory Board on Impact Investing (AABII) launched its Scaling Impact blueprint last Thursday at the Impact Investment Summit Asia Pacific.

In the past four years, impact investments – designed to deliver financial returns alongside measurable social or environmental benefits – have grown fourfold in Australia.

The blueprint outlines concrete opportunities for individuals, banks, governments, community organisations and others to use impact investing to drive social progress, environmental sustainability and economic growth in Australia.  

AABII chair Rosemary Addis said the blueprint adapted global trends for the local context to highlight how Australia could attract new businesses into the market.

“What we’ve done here for the first time is really outline the role different actors play and also looked closely at the potential for impact investment in Australia,” Addis told Pro Bono News.

It is estimated that by 2020 impact investments globally will have improved the lives of more than one billion people, but the report said advocates needed to take charge so the market continued to grow.

“Without ongoing focus on what is needed next and proactive leadership to ensure the infrastructure and enablers are being put in place to grow participation and make it more effective, impact investment could remain an interesting niche and fail to reach its potential as a driver of transformative change,” the report said.   

The impact investing blueprint looks at how entrenched issues could be tackled from an Australian perspective, with a focus on delivering better results for people with a disability, those in the cycle of disadvantage and people experiencing homelessness or living in poverty.

The report said this could be achieved by taking a solution-led approach, which required re-imagining the models for delivery and operating.

“Limitations of current models are evident in constraints on flow of government funding, crises in aged care, poor outcomes for children in care and many aboriginal Australians,” the report said.

“A solution-led approach can enable new thinking to come to be trialled, interventions to be targeted earlier in a cycle, and positive disruptions to gain traction where existing models are in crisis or no longer capable of delivering outcomes.”

In Canada, a solution-led approach to Aboriginal housing in Canada emerged from a partnership between the JW McConnell Family Foundation and the Aboriginal Savings Corporation of Canada (ABSCAN).

With 60 per cent of houses on reserves in need of repair and a projected shortfall of 80,000 units over the coming decade, a solution was found that enabled residents to build and own their own houses.

The foundation provided a mix of grants and investments to create a revolving loan fund operated by ABSCAN, which enabled related capacity building.

“Designed for scale from the outset, a broader partnership is set to extend the program towards the 80,000 units needed across Canada having established a track record and market readiness with minimal default,” the report said.

Addis said solution-led approaches offered the chance to diversify financing for the community sector in Australia at a time when community organisations were facing significant disruption and were actively seeking options that served their clients more sustainably.  

“It’s also a way to look at new service models,” she said.

“We can think differently about how services are delivered, particularly in areas that are undergoing massive transformation in the relationship between clients and services, like disability.”

“Government have a critical role to play in this. Smart impact investing can make sure that we’re getting better value for public spending, and it benefits the government because it brings more private capital to the table for public goods.”

Also last Thursday, Impact Investing Australia (IIA) was announced as the selected administrator of the $7 million Australian government Sector Readiness Fund (SRF).

Funded by the Department of Social Services, the SRF offers grants of up to $140,000 to eligible for-purpose businesses seeking funds to expand their contribution to the Australian community.

The director of social enterprise development at IIA, Sabina Curatolo, said raising capital to grow for-purpose businesses often required new skills and advice that entrepreneurs didn’t have access to.

She said grants from this new fund would allow successful applicants to seek specialist advice from intermediaries, helping to grow their businesses and strengthen the impact investment ecosystem.

Applications for the SRF open on Monday 20 November.