Newpin success paves way for social impact bond expansion

By David Donaldson

Monday August 24, 2015

Several state governments and the Commonwealth have taken the strong returns of the Newpin social impact bonds as the way forward for achieving outcomes within a constrained budget and risk appetite.

Australia’s first social benefit bond has helped return 66 children in care to their families, resulting in a 8.9% per annum return to investors, according to second year financial results.

The Newpin bond, created in 2013, is a seven-year, $7 million pilot program run by UnitingCare to test the use of social impact bonds in Australia, aims to restore children to their families from out-of-home care, or prevent them from entering care in the first place, through creating safe family environments.

It does this by funding an intensive 12- to 18-month course for parents of children aged five years or under, with strong outcome targets and performance measures guiding returns to investors in the program. As with other social impact bonds — known as social benefit bonds in NSW — investors are paid based on results.

This year’s 8.9% Newpin result builds on a first-year financial return to investors of 7.5%.

A total of 113 families were referred to Newpin this year, up from 86 in Year 1. A total of 42 children were restored to their families during Year 2 (and were still with their parents at 30 June 2015). This is up from 28 restorations in Year 1, giving a cumulative restoration rate for the first two years of the bond is 61.6%.

The program has also supported an additional 35 at-risk families in preventing their children entering into out-of-home care.

Decisions to return children to their parents as part of the program have, however, been reversed in a few cases. Five mothers with eight children in total had their restorations reversed this year, representing an overall reversal rate of 10.8%. Four of the restorations had occurred in Year 1 and four in Year 2.

The investor report states:

“An analysis has been carried out of the families for whom reversals have taken place so far, and at this point there does not seem to be any particular pattern leading to reversals. Additional staff support and training is being put in place to ensure that Newpin continues to develop knowledge and skills around post restoration support.”

The number of “unsuccessful exits” — when a family leaves the Newpin program before a restoration occurs — fell during the second year of the program, from 26 to 16 children.

NSW Treasurer was positive about the result. In a financial report, Gladys Berejiklian says:

“Social Benefit Bonds allow government, NGOs and private investors to collaborate to tackle some of the biggest challenges that face our community.

“The NSW government is pleased to see that its innovative Social Benefit Bond — an Australian first — has continued to deliver positive outcomes for the most vulnerable in the community while providing a return to investors.”

The NSW government announced earlier this year that it intended to take two new social impact bonds to market per year and make more information available to encourage the uptake of social investing.

UnitingCare’s Children, Young People and Families Director Claerwen Little welcomed the result.

“These positive results show that many families, given the right type of support, can provide safe and loving homes for their children.

“Just last week we launched the Wyong-based Newpin program funded entirely through this bond. The success of our partnership with the NSW government and SVA [Social Ventures Australia] has enabled us to expand the program so we can work with more families to create impactful social change,” Little stated.

Ian Learmonth, Executive Director of impact investing at SVA commented:

“The positive social and financial returns from the Newpin SBB, for a second year in a row, are a promising sign for this new approach to social services funding. As a result of this social impact bond, UnitingCare has security of funding for the Newpin program for years to come, and rigorous data on outcomes to inform program improvements. At the same time, the NSW government is benefitting from a stronger society,” he said.

“We are pleased that the NSW government have committed to developing new bonds across important social issue areas, and that the NSW example is inspiring similar commitments from governments in other states.”

Expansion of social impact bonds

As results from pilot programs around the world build up, governments around Australia are demonstrating increasing interest in social impact bonds, though as yet only the two NSW programs, started in 2013, are in place.

The world’s first SIB was implemented in the United Kingdom in 2010, and there are now 44 in place across several developed countries and one in India.

Newpin’s good results come as NSW is working on two new SIBs, which aim to help vulnerable people, particularly care leavers, to transition to independence, and support offenders on parole to reduce reoffending and re-incarceration. The Department of Premier and Cabinet told The Mandarin: “Proposals are currently being assessed and the government hopes to enter into joint development with any successful proponents later this year.”

A second request for proposals is planned for the end of the year or early 2016 and is likely to target chronic health conditions and mental health hospitalisations.

The federal government has signalled interest in social impact investing. Minister for Social Services Scott Morrison told ACOSS National Conference in June that SIBs “have great potential for helping improve people’s lives while increasing public sector accountability”.

In July, Queensland Treasurer Curtis Pitt announced $2 million for a two year pilot, plus $1 million for a ‘Social Benefit Bonds Readiness Fund’ “to assist shortlisted service providers in the co-design phase of the initiative.”

Other states are looking at social impact bonds, but are still a long way behind NSW.

As SIBs have to date been relatively expensive to develop — requiring analysis of costs and benefits, rigorous measurement of outputs, the negotiation of multi-year contracts and new forms of collaboration and work — they tend to target expensive, difficult-to-solve social problems with long-lasting effects, such as recidivism, homelessness or family breakdown.

A recent report by the Brookings Institution studying 38 bonds argued that four factors “came out as key to getting a deal together: measurable outcomes; evidence of intervention impact; government support; and dedication and collaboration of the stakeholders.”

Although currently SIB programs are not targeting large numbers of people, the report’s authors argue “impact bond funds can achieve greater scale”.

The Brookings authors argue that, consistent with common wisdom, SIBs do “lead to a shift in focus to outcomes”:

“We find that the existing SIBs have truly transformed the conversation among participating government stakeholders about procurement of social services and the transparency and accountability that go along with that. In essence, instead of paying for services, government pays for outcomes. At the same time, SIBs push service providers to deliver on these outcomes.

Likewise, SIBs bring a “private sector mentality into the provision of services”, driving more efficient and effective services through better performance management, and in the cases examined has stimulated collaboration.

The report continues:

“if larger systematic change, such as development of strong monitoring and evaluation systems, continues to happen with impact bond deals, that in itself would be an enormous contribution toward improving many people’s lives.

“Finally, impact bonds can shift the focus of government away from curative or remedial services and toward preventive services. This could have huge economic implications for government and society.”

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Nicholas Gruen
Nicholas Gruen
6 years ago

The post says it has 1 comment on it – but I seem to be the first. Can anyone let us know what’s going on in this regard?

The Mandarin
6 years ago
Reply to  Nicholas Gruen

Hi Nicholas,

Sorry, I can’t explain what’s happening. When I had a look at the article, ‘Newpin success paves way…’ it said there were no comments. We would welcome yours any time however!

Stephen Easton (journalist)

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