More than money can buy: social benefit bonds investing in social change

Social Benefit Bonds (SBB) double down on the goodness that investment can bring, delivering – when successful – returns to the investor, outcomes for society and NGOs, and savings for government; but they remain misunderstood.

There is a need to alter the typical characterisation of social issues as lacking the potential for financial return. SBBs offer a real chance to deliver life-improving solutions as well as a healthy balance sheet.

SBBs are contractual arrangements that balance non government organisations’ innovative program funding requirements, government’s need to direct money towards the best solutions, and investors desire to see robust returns on their investment. When done well, the outcome is one of substantial benefit to all involved.

Victoria’s recent adoption of its first SBB trial this year is very encouraging. To date, NSW has led the way in Australia by legislating an investment space where a growing pool of investors are seeking to make a real difference in society. Trials with the Newpin Bond and the Benevolent Society bond focused on similar areas, mainly in preventing children from having to enter out-of-home care. Both have been successful and we should look to them as case studies of success in our attempts to drive more solutions in kind.

It would be careless however to assume that SBBs, along with the good they can achieve and the enthusiasm they generate, are easily developed and implemented.

There are ingrained misconceptions about the nature of social bonds. Their implementation often attracts negative media attention. The schemes are written off as privatisation of government services or monetisation of important social issues. And the apprehension that accompanies such press is a large barrier to their wider implementation.

But the difficulties associated with SBBs should not be allowed to diminish their capacity for good. Strong proposals are characterised by a genuine social need, met with a well thought out response. Both must be paired with a hopeful but realistic outlook. The best will deliver scalable solutions that are attractive to major investors because they will enable bolder solutions to be delivered.

It is crucial we press forward in our attempts to demystify social benefit investment to ensure robust proposals continue to be brought forward for consideration. Efforts to scope social solutions as attractive investments cannot be understated. This is an opportunity for government to step in and accelerate the potential of a unique approach to social change.

More information on social bonds is found here.

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One thought on “More than money can buy: social benefit bonds investing in social change

  1. Great introduction to SBBs – I agree that this area has huge potential, both for the NFP sector, and investors in an environment where governments are tightening belts and looking for innovative and cost-effective ways to deliver more with less. Thanks for sharing!

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