13 November 2015

Innovations in Not for Profit Investing: examining social benefit bonds.

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For governments and not for profit organisations raising the necessary capital to undertake community work has always been a problem. With Not for Profit organisations, depending on the area you specialise in, there are limited Government grants available and the ways to ensure the financial viability of your organisation are pretty limited.

The New South Wales Government began an Australian first trial in 2010 when it commissioned the Centre for Social Impact (CSI) to undertake research into the viability of social benefit bonds in NSW. After extensive research into the issue the CSI determined juvenile justice and parenting skills for at-risk families were suitable policy areas to pilot the programme in NSW.

Social benefit bonds invite private investors to invest in a bond dedicated to a social outcome. The first social benefit bond in NSW was awarded to UnitingCare Burnside, The Newpin Bond, and was designed to provide intensive assistance to at-risk families, reducing the risk of out of home care and returning children to the family home.

By providing training to improve a parents parenting skils, The Newpin Bond has been a massive success, restoring 66 children to their families and supporting another 35 families to prevent their children from entering out-of-home care, a cumulative restoration rate of 61.6 percent.

Investors are paid a return on their investment based on clearly defined key performance indicators. In the case of The Newpin Bond, investors received a 7.5 percent return in the first year, and an 8.9 per cent return in the programmes second year of operation. The bond raised a total of $7 million from investors and the bond will run for a period of 7 years.

By utilising a social benefit bond, The Newpin Bond was able to secure long-term, secure funding free of the risk associated to changing governments and policy positions. Rather than depend on the pool of funds remaining available from the Government, social benefit bonds allow the not for profit the opportunity to make long-term financially secure plans in tackling the areas of entrenched disadvantage.

The main difference here is the social benefit bond is based on funding outcomes such as reducing reoffending. By leveraging private capital and cross-sector partnerships, it is possible to achieve positive social outcomes.

As a Not for Profit sourcing funding can be a time consuming job, that doesn’t always pay dividends. Social Impact Investing is an alternative to traditional methods of financing social programmes. Social benefit bonds are emerging as  a new model to addressing disadvantage and allowing the community to play a role in helping those in trouble.


Mike Cullen has recently returned to Akolade after a period as the conference producer for one of Australia's leading economic think tanks. Mike began working in the conference industry in 2007 after looking for a career change from the high pressured world of inbound customer service. Mike has worked for some of the most well known conference and media companies in the B2B space and in his spare time is working on his first novel in a planned Epic Fantasy trilogy.


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