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:

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Outcomes

Measuring and paying for outcomes

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Innovation

Setting incentives and removing input controls on services

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Partnerships

Sharing risks and benefits across sectors

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Investment

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.

Layered investment

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.

Outcomes-focused grant

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 >>

Information Packages

Introductory advice packages on governance, legal structure and intellectual property issues for not-for-profits in NSW. Find out more >>

Intermediaries

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:

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?

Websites

Landmark reports