NSW releases new social impact investment priority areas

By David Donaldson

Tuesday April 19, 2016

New South Wales continues to lead in the development of social impact investment practice in Australia with the release of its second statement aimed at guiding the market.

Increasing stability for children in out-of-home care, improving Aboriginal educational outcomes and increasing participation in early childhood education are the three areas highlighted as priorities in the government’s statement of opportunities this year.

The statement is an annual document published to help the social impact investing market understand where there may be opportunities for future transactions with the NSW government.

It builds on NSW’s two social benefit bond trials — a form of outcome-focused public private partnership — started in 2013. Under the social benefit bond model, trialled by UnitingCare Burnside and the Benevolent Society in NSW, private investors provide funds to service providers to deliver improved social outcomes. If agreed goals are reached — for example, reduced recidivism or fewer children going into out-of-home care — the government pays back a return on top of the amount invested.

The first statement of opportunities, released last year, pointed to four priorities: managing chronic health conditions, supporting offenders on parole to reduce levels of re-offending as priorities, managing mental health hospitalisations and preventing or reducing homelessness among young people.

NSW plans to conduct consultations with the community before proceeding to formal requests for proposals later in 2016 on social impact investment solutions to:

  • Increasing permanency for children in out-of-home care, particularly through open adoption;
  • Establishing an Aboriginal Centre for Excellence in Western Sydney; and
  • Increasing access to early childhood education.

In the past, permanency planning for children in out-of-home care has been limited, adoption processes are “often lengthy and complicated” and “evidence shows placement instability negatively affects children’s current and long term wellbeing, leading to a reduced capacity to form stable relationships, poorer school performance, and more emotional and behavioural problems”, the statement argues.

The significant long-term costs of poor out-of-home care outcomes make what is an otherwise expensive approach — social impact investment — feasible, though work still needs to be done on quantifying those figures. The average annual cost of out-of-home care is between $30,000 and $45,000 per child, the document notes:

“The long term or indirect financial cost associated with poor lifetime outcomes for children in out-of-home care is also substantial. The NSW government is establishing these costs to the state and will make them available in due course.”

An Aboriginal Centre of Excellence

The government has earmarked $20 million for the establishment of an Aboriginal Centre of Excellence in Western Sydney, which holds the largest Aboriginal population in NSW. It is hoped social impact investment will help secure and engage a high quality of teachers for the centre. The key objective of the facility, says the statement, will be to:

“… deliver programs and services that support more Aboriginal young people to successfully transition from school to further education and sustainable employment. The facility may also deliver initiatives that build and enhance the community’s capacity in health and wellbeing, employment and training, cultural development and resilience, and business, enterprise and economic development.”

Outcomes would be measured on indicators such as the number of participants transitioning to further education and employment.

As part of its national partnership agreement with the Commonwealth, NSW has also committed to supporting all children in the year before school with access to an early childhood education program delivered by a qualified teacher for 600 hours a year. Despite more targeted funding and increased capital investment in resources, there continue to be children, particularly those from Aboriginal and low socio-economic backgrounds, who miss out.

The ultimate goal is to increase the number of hours kids are in preschool, develop more integrated service models that improve links between education and programs like after-school care, and improve educational outcomes, in particular for vulnerable children. The government also noted a range of other areas being explored, including:

  • Homelessness among veterans;
  • Improving waste management;
  • Road safety; and
  • Domestic and family violence.

NSW launched its 10-part plan on social impact investment early last year. It aims to deliver more social impact investment transaction, grow the market and remove barriers to investment and build the capacity of market participants.

The plan commits the government to bringing to market two transactions per year. This will not be limited to social benefit bonds, and can also include “other investment models that involve risk sharing among participants”.

For those interested in being involved, a series of market-sounding events will be held in coming months to learn more and provide feedback on the identified opportunities. The first will be an industry and stakeholder forum for an Aboriginal Centre for Excellence in Western Sydney, hosted by Aboriginal Affairs NSW on April 21.

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