What is social impact investing?
Social impact investment seeks to generate social impact alongside financial return.
This investment often brings together capital and expertise from the public, private and not-for-profit sectors to achieve a social objective. Investments can be made into companies, organisations or funds, whether they be not-for-profit or for-profit.
Social impact investments can also be used to finance social services and social infrastructure. In these types of arrangements, payments are normally made based on achieving agreed social outcomes rather than on inputs or activities.
Where investors are involved, they will usually expect their investment to be repaid and, potentially, to earn a return. This return is likely to depend on the level of social outcomes achieved.
Features of social impact investment
Distinct features of social impact investments include:
Measuring and paying for outcomes
Setting incentives and removing input controls on services
Sharing risks and benefits across sectors
Shifting spend away from high cost acute services to prevention
Types of social impact investment
Social impact investments come in different forms, including (but not limited to):
Social benefit bond
A financial instrument that pays a return based on achieving agreed social outcomes.
Combines different types of capital in non-traditional ways.
Payment-by-results (PBR) contract
A service provider is paid on the results they achieve. A social benefit bond is a special type of PBR contract.
Non-repayable grant funding provided on the basis of measuring outcomes. May also be used as a guarantee.
Where can I get help?
Expert Advice Exchange
A platform to connect not-for-profits with pro bono expert advice from leading legal, professional services, and financial firms in NSW. Find out more >>
Introductory advice packages on governance, legal structure and intellectual property issues for not-for-profits in NSW. Find out more >>
Social impact investment intermediaries can help develop ideas and business cases, build investment readiness and capability, attract and broker investment, and may provide finance themselves. Australian intermediaries include:
- Blue River Capital
- Foresters Community Finance
- Koda Capital
- National Australia Bank (NAB)
- School for Social Entrepreneurs
- Social Enterprise Finance Australia (SEFA)
- Social innovation in Western Australia
- Social Outcomes
- Social Traders
- Social Ventures Australia (SVA)
- The Difference Incubator
- Third Sector Capital Partners, Inc
There are also other intermediaries. For example, the Commonwealth Bank of Australia and Westpac acted as intermediaries in Australia’s second social benefit bond, the Benevolent Society bond. Many professional services firms may offer similar services.
The NSW Government does not endorse or recommend any of these organisations as intermediaries for social impact investments.
Other tools and resources
Where can I learn more?
- Global Impact Investing Network
- Global Social Impact Investment Steering Group
- Impact Investing Australia
- The Potential and Limitations of Impact Bonds: Lessons from the first five years of experience worldwide
- Impact Investment: The Invisible Heart of Markets
- Delivering on Impact: The Australian Advisory Board Breakthrough Strategy to Catalyse Impact Investment
- Impact Investments: Perspectives for Australian Charitable Trusts and Foundations
- Impact Investments: Perspectives for Australian Superannuation Funds
- Impact-Australia: Investment for social and economic benefit
- Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry