In Australia, the combination of a long-standing commitment to the ‘Aussie fair go,’ along with an increasing strain on government resources, creates a fertile environment for various forms of blended social and financial value to thrive. A number of businesses, social sector organisations, private foundations, and government agencies across Australia, are spearheading innovative models that create social value for our communities, but are structured or funded in ways that we would normally consign to the private sector. This article is the first article in a series where we explore innovative activity underway in Australia.
Many large banks and super funds are embracing more responsible forms of business and investment in Australia. For example, in April last year, the World Bank partnered with Westpac to launch the Kangaroo Green Bond, worth $300 million. Later in 2014, National Australia Bank (NAB) also launched a $300 million Climate Bond, investing in Australian renewable energy assets. That launch was followed by NAB announcing on 23 March this year, that it had successfully raised $205 million from US investors to finance the Hallett Hill wind farm in South Australia. The wind farm is expected to save up to 190,000 tonnes of greenhouse gas emissions. NAB has also supported the development of domestic microfinance group, Good Shepherd Youth & Family Service, pledging $130 million to the No Interest Loan Scheme, which provides loans without interest to low income earning families.
Commonwealth Bank (CBA) has created the Community Business Finance initiative, which caters to excluded customers facing social or cultural marginalisation. By offering financial solutions and business partnerships to these consumers, CBA has been able to tap into large, and previously under-catered markets.
Almost two decades after the creation of their community bank model, The Bendigo and Adelaide Bank continues to empower local communities to run their own bank branches as franchisees. This came in response to the closure of thousands of rural branches of major banks. Today, Bendigo has 300 community-led branches, servicing nearly one million customers. As a result, the company has experienced an average growth rate of 18% over the last five years, generated $25.4 billion in business, and reinvested $120 million in Australian communities.
ING Direct has pioneered a unique crowdfunding platform called Dreamstarter, which empowers social entrepreneurs to raise seed funding for their projects, dollar matching up to 50% of a project’s tipping point. In its pilot year, 2013, the program raised over $168,000 for 15 projects.
In September 2014, QBE pledged to commit US$100 million to Social Impact Bonds over the next three years. Gary Brader, Chief Investment Officer of QBE, believes the investment is a strategic move in asset diversification in the portfolio, which has previously been driven by government and corporate bonds.
Among Australian superannuation funds there is a steady progression towards responsible investing and impact investment. One of the major leaders in this sector is Christian Super, who first introduced ethical investment options in 2001, then moved to a 100% ethical investment structure in 2006. Other super funds introducing ethical investment include Australian Ethical Super, Good Super, and Future Super. HESTA, the industry super provider for the health and community sectors, has created an Eco Pool option for funds, which exclusively invests in companies that are considered responsible in their financial, environmental, social and governance performance. On top of Eco Pool, HESTA was also the first major Australian superannuation fund to place a restriction on its thermal coal investments across all investment options, citing interest in long-term outcomes for customers as their reasoning. Two of Australia’s largest superannuation funds, Australian Super and Colonial First State, have adopted a responsible investment approach. Australian Super has three options for socially responsible investments, including one domestic and one international option. Colonial First State has partnered with the University of Cambridge to report on Responsible Investment and Stewardship practices.
Australia has also seen a growth in the number and scope of funds providing capital and other forms of assistance to social enterprises. Social Enterprise Finance Australia (SEFA) helps to launch and grow the work of social enterprises that achieve community, Indigenous, and environmental outcomes. Similarly, operating for almost 20 years, Foresters Community Finance delivers social finance and investment opportunities with the objective of “connecting individuals, organisations and communities to help each other”. They are joined by Social Ventures Australia (SVA), who have a wide-reaching portfolio of social enterprises and impact investments addressing Indigenous employment, education, vulnerable families, and social disadvantage. SVA also pioneered Goodstart, one of Australia’s first impact investment partnerships between mainstream finance and not-for-profits, to provide 641 childcare centres across the country, financed primarily by NAB and the government. SEFA, Foresters Community Finance, and SVA have all been enabled by the Australian Government’s commitment of funding for social enterprises, through the Social Enterprise and Development Investment Funds (SEDIF).
In February 2017, NAB along with Impact Investing Australia, launched a $1 million Impact Investment Readiness Fund, which will provide grants to mission-driven organisations to help them build capacity, and prepare for investments or contracts.
Australian-based LeapFrog Investments represents over $500 million in investments under management, targeted to high-growth businesses in emerging markets. By doing so, they not only provide finance solutions to businesses that might otherwise be excluded from accessing capital on mainstream markets, they also tap into an emerging consumer base of up to two billion people.
Many philanthropists are also beginning to move away from more traditional, conservative models in Australia. For instance, some Private Ancillary Funds (PAFs) are adopting social impact investing so that they can continue to achieve social impact, but also look to innovative structures to leverage and recycle more of their funding. As the Trawalla Foundation states: “we are not afraid to take intelligent risks alongside our partners for the benefit of Australia’s future”. Trawalla Foundation is invested in the arts, scholarship and innovation. Donkey Wheel, originally set up for philanthropic giving, is now a key leader in the social impact investing sector, investing in various products including ethical property, the Newpin Social Benefit Bond, and social enterprises for homeless or at-risk youth. The Wise Foundation is providing funding to innovative business-based solutions to poverty, such as the shoe and leather cleaning service, Buffed, Australia’s first social franchise. Small Giants is another diverse impact investor, whose investments cover ethical farming, green living apartments, sustainable housing, renewable energy, childcare services, and homeless youth, amongst others. The Ian Potter Foundation is also supporting a number of initiatives to facilitate impact investing among philanthropists, including co-sponsoring two reports on the potential of impact investing for charitable trusts and superannuation funds. The Westpac Foundation has been been supporting social enterprises since 2006, when it launched the Seed grant fund, designed to provide enterprises with grants of up to $100,000.
Corporate foundations are also moving towards new ways of using funds, as demonstrated in the partnership between Westpac, CBA, and The Benevolent Society to close a $10 million Social Benefit Bond. The Bond, which has now been completed, established the Resilient Families service to decrease family breakdown, and keep children out of foster care. The Benevolent Society and Newpin Social Benefit Bonds in NSW are groundbreaking programs, which clearly demonstrate Australia’s global leadership in the sector. Having successfully piloted two bonds in 2013, the NSW Government has put to tender more opportunities for similar partnerships. Having established the NSW Office for Social Impact Investment, NSW has released their policy on impact investing, calling for proposals that focus on managing chronic health conditions, reducing levels of prisoner re-offence, managing mental health hospitalisations, and reducing youth homelessness. After selection, these transactions are expected to commence in early 2016.
As part of it’s strategic focus on combating mental health, the MLC Foundation has committed some of its funding to social enterprises. One example is MadCap, which supports people diagnosed with mental illness through the provision of training and employment.
Through a wide variety of initiatives, the nation that topped the 2012 World Giving Index is demonstrating keen interest in generating positive social impact, in ways that go beyond traditional non-profit models, and towards the core of business. As businesses, organisations, private foundations and governments innovate, social impact is moving to the core, we are seeing new, innovative models progress in Australia, creating tangible financial, social, and environmental value.