Australia's first social impact bond delivers for families and investors
7 October 2020 at 7:48 am
“It has been an important ‘proof of concept’, but more importantly has made a lasting impact on the lives of hundreds of vulnerable children and families.”
Australia’s first social impact bond is being celebrated as a “resounding success” as it reaches maturity after seven years of operation, having restored nearly 400 children to the care of their families, and delivered a financial return of 10 per cent p.a. to investors.
The Newpin Social Benefit Bond, a financial partnership between the NSW government, Uniting and Social Ventures Australia (SVA), aimed to restore children in out-of-home care to the care of their parents by creating and supporting safe family environments.
Those behind the SIB say its success demonstrates how private capital can be used to support and share risk with service providers entering into outcomes-based contracts with government, and can help to alleviate disadvantage in Australia.
Elyse Sainty, who leads SVA’s social impact bond work and was instrumental in the development of the Newpin SBB, said it has been a success by any measure.
“It has been an important ‘proof of concept’, but more importantly has made a lasting impact on the lives of hundreds of vulnerable children and families,” Sainty said.
She told Pro Bono News that at their core, SIBs were about outcomes and trying to address some of society’s most challenging issues.
“It is just a different way of trying to get a bit of rigour around whether the work that is being done is working, and if it is working, do more of it, and if it doesn’t work, try something else. That for me is the really simple essence of what these contracts are about,” she said.
“I have met many of the mothers involved in the [Newpin] program and it’s important work. It has made a difference and it will continue to make a difference because we’ve got the evidence that says this program should continue to be funded because it works.”
Sainty said the Newpin SBB had paved the way for further outcomes-based contracting and SIB pilots across Australia – generating interest across the spectrum of government, service providers and investors.
And while she cautioned that one proof point does not mean things will work the same way every time, she said that every contract at the moment – whether it ends successfully like Newpin or in a termination – is helping to build a more nuanced and sophisticated understanding of when an outcomes contract is appropriate.
“And I think that will continue to evolve and I think it will be a very useful tool in the toolkit,” she said.
Executive director at Brightlight Group Simba Marekera (formerly of Christian Super Impact Investment, one of the investors to sign-up for the Newpin SBB), said he was captivated by the Newpin proposition back in 2013.
“The investment strongly aligns with our reason for being and allowed us to direct client capital to some of the most vulnerable members of our community, creating the opportunity to transform lives,” Marekera said.
He told Pro Bono News there were a number of things that made it an attractive proposition: the target return was above what the superfund was targeting from a CPI plus return perspective, there were limited chances of loss given the protection from NSW government, and the impact they wanted to see was directly linked to the returns themselves.
Part of their objective was also to show that the first impact bond could work, and to contribute to building the market of impact investing products.
“So we in a sense took a bit of a punt… As you know superfunds are not normally trail blazers, we want to see something that has a track record, something that works, before we put our money behind it, but we wanted to play a role in building this market, so we contributed to that,” Marekera said.
While he joked that they couldn’t take all the credit, he said being willing to invest early in investments like this sent a signal to the market.
“Having an institutional investor put their money behind this is a strong positive signal, and I suspect goes a long way in the government doing more social impact bonds, in more types of investors investing in social impact bonds, and in motivating other not for profits to look at social impact bonds, in particular, as a means to get funding. And we’ve seen that,” he said.
While he said it was great to see the success of Newpin and the growing interest in this type of funding mechanism, SIBs were not appropriate for everything.
“Sometimes you have got the right program, and the right people but you are measuring the wrong thing and it doesn’t necessarily pan out,” Marekera said.
“So I think the lesson is that we need to be selective in terms of which programs we put through a social impact bond.”
Reflecting on the success of the Newpin bond, he said one of the most significant intangible benefits was simply the way in which the NSW government, Uniting, SVA and investors were able to collaborate and work together for seven years.
SVA CEO Suzie Riddell echoed these sentiments. She said with the government’s commitment to expand funding for the Newpin program, we were witnessing the realisation of the potential of SIBs that they saw seven years ago.
“When governments, service providers, and private investors work in concert to test new social innovations, carefully measure the outcomes, and then scale successful initiatives, we can change the lives of thousands of people in Australia for the better,” Riddell said.
Although the SIB financing arrangement has now concluded, Uniting will continue to deliver the Newpin Program under an outcomes-based contract with the NSW government.