Reflections of a giant, guest blog by Rosemary Addis

There is no question that Rosemary Addis is a giant in the impact investing sector in Australia and globally. We at OSII have been extremely fortunate to have her sit on the NSW Social Impact Investing Expert Advisory Group and have benefited greatly from her invaluable support, insights and advice. While she formally steps down as a member of the Expert Advisory Group, we will continue to draw upon her expertise as we continue to grow the impact investing market in NSW.

Here are some of her reflections and insights.

Less than seven years ago, NSW became a player in the social impact investment sector, with the development of two social benefit bonds to improve the outcomes for children and families in the complex and challenging child protection system.

At the time NSW was one of the first jurisdictions in the world to announce an impact bond. The UK had moved first, pioneering these new instruments that link financial performance to improved social outcomes.

The leadership shown by NSW, first with impact bonds then the government’s broader social impact investment strategy, has played an important role in the development of the impact investment market in Australia.

Globally there are 74 impact bonds, which have raised $278 million and touched the lives of 106,551 people, according to Social Finance’s new interactive Impact Bond Global Database

Impact bonds are one of a whole range of investment types designed to deliver positive outcomes for society and financial returns for investors.  Impact investment enables a dynamic range of approaches to deliver public and social value, from social enterprise and social business to infrastructure and amenity and improved service delivery. This is about much more than just money. These investments mobilise different financial resources to tackle issues affecting society. 

The first Australian benchmarking of market data identified over $1.2 billion in impact investments active in the Australian market in2015. This increased to $2 billion in 2016.These investments are delivering positive financial returns and impacting the lives of tens of thousands of people, through job creation, disability support, education and renewable energy generation, among other outcomes. 

And the growth story is global.  The Global Impact Investment Network found there had been 18 per cent compound annual growth between 2013 and 2015 with over US$77 billion under management in 2015.

But we’re not there yet.  These promising developments may remain just that, promising, without targeted action to drive growth of the market that can deliver more, specifically more participation of investors and service providers, and greater scale.  The focus in NSW now, as in the broader market, is how to take this to scale.

While there are no silver bullets, targeted strategic policy can develop different parts of the market.  Such policy initiatives could include support for enterprise development, catalytic capital, removing regulatory barriers, and directing capital to areas of priority need and reform.

The NSW experience has demonstrated the critical role of governments play in developing the market, signalling interest to the market, convening interested parties and providing data and information to inform action and highlight where there is appetite for investment. 

For impact investment to reach its potential, governments need to focus on enabling a dynamic ecosystem that encourages enterprising activity, innovation, talent and capital.  Other Governments can follow the lead of NSW to provide a whole of government strategic policy and clear authorising environment, including a Ministerial lead on impact investment and a centre of expertise and engagement. 

All governments can promote better results; efficacy and innovation through outcomes based commissioning, including social impact investments, and actively promote and facilitate data sharing.  And a dynamic market in Australia will need key pieces of market infrastructure that are national.  States can highlight and encourage action where the Australian Government can incentivise and accelerate commitments and actions, such as reducing regulatory barriers. 

We are well positioned to develop the opportunities for impact investing at scale, given growing investor appetite, our significant capital markets, dynamic social sector and growing social enterprise movement.  We look forward to seeing what can be achieved in the next seven years.