Taskforce calls for stronger government involvement in impact investment market

The global impact investing market is worth more than $500 billion

The federal government has a clear role to play in driving the nation’s impact investing market to benefit Australian communities, a new report says.

The government-appointed Social Impact Investing Taskforce released its interim report last Friday, as it looks to develop a strategy for the Commonwealth’s role in the burgeoning market.

The global market for impact investing ­­– which aims to achieve a social objective alongside a financial return – is worth an estimated $502 billion.

 Panel chair Michael Traill AM said the report followed extensive consultation and research.

“This report reflects our emerging vision on how business, government and community sectors can work together through social impact investing to reduce entrenched disadvantage,” Traill said.

“It recommends practical first steps towards what will be an ambitious final strategy – one that will support Australians experiencing disadvantage to more fully participate in the economic and social life of the nation.”

The report said while existing and prospective social impact investors had an “active appetite to invest significantly more capital”, there was a shortage of social impact investment opportunities with transparent social and financial outcomes measurement.

This, along with a lack of intermediaries to advise on and create social impact investing opportunities, was identified as a key issue holding back growth of the market.      

The taskforce recommended three initiatives to be immediately put in place. The first is to develop more integrated data to inform social impact investments.

The second is for the taskforce to develop proposals with key principles to ensure future projects are rigorously designed and set up for success, while the third is developing an information portal with resources to help grow the market.  

The report also noted the taskforce will learn from international wholesalers including Big Society Capital in the UK to develop a recommendation for an Australian wholesaler in the final report.

Impact Investing Australia (IIA) welcomed the report, particularly its support for the establishment of a wholesaler.

IIA has long called for an independent financial institution to be established, in order to mobilise greater impact investing capital.

This wholesaler would work by investing in, and supporting the growth of, intermediaries being taken to market by other groups. This could include a fund to finance affordable homes for people with disabilities, or a fund to invest in local communities to create jobs.

IIA CEO Sally McCutchan OAM, who is also a member of the Social Impact Investing Taskforce Expert Panel, said the report recognised that the government has a clear role to play in catalysing Australia’s impact investing market to help local communities.

She said the government had the unique ability to use policy levers and partner with the private sector to build the market.

“Through the establishment of a social impact investing wholesaler, the government has the immediate opportunity to drive scale by making a one-time investment in a game-changing initiative,” McCutchan said.

“Designed as a catalytic, independent institution, with impact at its core, a SII wholesaler will unlock capital and capacity to tackle social issues at scale.”

Community Council for Australia CEO David Crosbie also supported the taskforce’s recommendations.

He told Pro Bono News the report was a very informative summary of the impact investing movement in Australia.

“There is an important role for government and for all other players in building the capacity of charities to take advantage of the emerging opportunities for impact investing,” Crosbie said.

“This report sets the stage, now we need to mobilise around the recommendations to better realise the tremendous potential for new capital to support charitable activities and create new ways of working to address community needs.”