NSW Trials Social Impact Bonds

NSW is set to become the first Australian State to trial Social Impact Bonds – a social investment pilot to deliver non-government community programs.

NSW will be the second jurisdiction to examine Social Impact Bonds – after the United Kingdom – appointing the Centre for Social Impact to formally advise on the program which will start early next year.

The Centre for Social Impact is based at the University of NSW and operates in collaboration with the University of Melbourne and Swinburne University of Technology.

Social Impact Bonds are similar to a public-private partnership. They provide a mechanism for the private sector to invest in non-government community programs.

Premier Kristina Keneally says if the services meet agreed targets and make a tangible social difference, then investors receive a return on their payments.

The Social Impact Bonds would apply to early intervention programs such as rehabilitation programs for young offenders or services assisting young families at risk.

For example, investors could develop a social bond with a juvenile reoffending program, with a target to decrease reoffending rates by an agreed percentage. If this target is met, and recidivism drops, then a success fee would be paid to the investors by State Government.

The NSW Premier says this is about unlocking funds to tackle social issues in NSW through community, financial and government sectors to search for new solutions.

She says as a former Not for Profit sector worker, she was particularly conscious that NSW does not have the right structures in place to take advantage of the tremendous goodwill and serious investment potential that sits outside of government.

The Premier says she's been taking a keen interest in the development of what the UK is calling the Fourth Sector – the pursuit of social aims through private investment and market structures.

A trial underway in the United Kingdom is based on prisoner rehabilitation targets that would see the UK Government save an estimated £10 per participant for each pound invested in the resettlement scheme.

Keneally says the Centre for Social Impact is leading the way in research and education in the social enterprise field and she is delighted to have the expertise of Professor Peter Shergold on board.

Professor Shergold says the Centre for Social Impact is pleased to be part of trialling new innovations in the social enterprise sector.

He says it's important to find new ways of harnessing capital to find social innovation and community benefit and the emergence of social impact bonds is one of the most exciting new developments in this area.

Premier Keneally says the entry of the NSW Government into the Social Investment Bonds market will provide a significant incentive for growth in the Social Finance and Social Business sector.

She says the Bonds are an opportunity to increase funding for social programs, not a substitute for Government support of community services.

The Social Impact Bond is a means to raise funds from non-government investors to pay for the provision of services. The programs are managed on-the-ground by service providers and rather than focussing on the ‘cost of service’ or outputs, government and providers can instead focus on rewarding demonstrated outcomes. If the services make a difference and social outcomes improve, investors receive success payments from Government. The NSW Government currently spends $2.3 billion per annum on social service delivery through NGOs.