Answers to the frequently asked questions on social impact investment

FAQ imageThe NSW Government has been building the social impact investment (SII) market in the state since 2013.  Over that time, interest in SII has continued to grow, and so have questions about how SII works.  This blog post answers some of our most frequently asked questions.

Are grants and social impact investments different?

Yes. With grants proponents submit a proposal to deliver services and typically receive funding based on their inputs and outputs, for example providing counselling services to 1,000 at-risk young people.  While all stakeholders anticipate some outcomes will be achieved, funding is not dependent on those outcomes.

The types of social impact investments delivered by governments are different. Social impact investments have a portion of funding dependent on the achievement of outcomes. Outcomes are therefore very carefully measured and evaluated, as they determine the level of payment delivered to service providers and/or investors.

Therefore, with social impact investments, some risk is shared with the private sector. The benefit to service delivery partners is that because they are paid for outcomes performance they are encouraged to continually improve their programs, and evolve their service delivery models.

Are all social impact investments social impact bonds or social benefit bonds?

No. Not all SII are social impact bonds or social benefits bonds (social impact bonds and social benefit bonds are the same type of investment, just different names). There are lots of different types of social impact investment, including:

  • Investments into social enterprises

  • social impact investment funds

  • outcome-focused or payment-by results contracts

  • layered impact investments

  • pooled impact investments.

The NSW Government is focused on payment by results contracts, some of which are social benefit bonds. We have three investments at the moment, the Newpin and Benevolent Society Social Benefit Bonds and OnTracc.

Why is the NSW Government interested in SII?

The NSW Government is interested in SII because it has the capacity to deliver:

  • Better services and results – an opportunity to identify and test new and innovative ways to address social challenges, with a focus on measurement and delivery of outcomes.

  • Better partnerships between the government and non-government sectors - an opportunity for governments to play an enabling role by creating the conditions for the non-government sector to do what it does best.

  • Better value for money for the people of NSW - by driving greater contestability and innovation in service delivery, and paying for results delivered.