Treasury and the Department of Social Services have announced a set of social impact investment (SII) principles that will guide the government’s role in shaping and growing the SII market, according to a statement.
The announcement comes four months after treasurer Scott Morrison’s call for investors, government and other stakeholders to work together to “de-risk investment in affordable housing”.
Social impact investments are defined as “investments made with the intention of generating measurable social and/or environmental outcomes in addition to a financial return” and brings together investors, service providers, philanthropists and communities to tackle social issues using “financial intervention”, according to a discussion paper released by the government earlier in the year.
The six principles guiding social impact investment announced on Tuesday were outlined as: government as cognisant of its role as a ‘market enabler and developer’; representing value for money; using outcomes-based measurement; addressing outcomes that align with government policy; the fair sharing of risks and returns; and co-design.
More specifically, the role of government as a ‘market enabler and developer’ sees the government working with stakeholders to remove regulatory barriers, while ‘value for money’ meant social impact investments would only proceed if they demonstrated a “cost-effective delivery mechanism” for the government.
Additionally, investors and service providers had to agree upon the social or environmental outcomes, with “ongoing outcomes-based measurement” utilised to measure progress, performance, risk and return.
These outcomes would need to align with and “successfully address social and/or environmental issues” that were government priority.
Furthermore, stakeholders such as the government, investors and service providers would fairly distribute the risks and returns between each party when making investments.
Finally, social impact investments made by the government would be designed in collaboration with stakeholders, “including subject matter experts, and the communities and stakeholders who will implement them”, according to Treasury.
The federal government will also work with state and territory governments by investing $8 million into a ‘SII Readiness Fund’, which would help NGOs help welfare-dependent people seek work using an “expert intermediary to direct the funds”.
Treasury said SII would not be “suitable for funding every type of Australian government outcome”, but step in as an “alternative opportunity” where policy and service providers were not delivering “desired outcomes”.
The principles would also not be subject to limitations in terms of geography or sector, Treasury said.