Murray submission urges impact investing focus

Social Ventures Australia (SVA) is urging the government to look at new ways to promote social investment in Australia. In a submission to the Murray Inquiry, SVA highlighted the barriers currently preventing easy access to capital for social sector organisations and projects, alongside a range of innovations and approaches that could help broaden the funding base for social enterprise and the community sector.

Chair of SVA Paul Robertson commented, ‘Over the last twelve years SVA has worked with over 100 social enterprises with proven track records in tackling the issues behind social disadvantage, and we’ve seen firsthand that traditional avenues for capital raising are not available to them.’

He continued, ‘We believe a new social capital market needs to thrive alongside traditional financial markets and we are keen to develop a new asset class of social impact investment. Through applying commercial thinking and developing innovative social capital models, the Australian finance and community sector can fund initiatives which provide innovative and cost effective solutions to social challenges.’

The submission points to successful models and initiatives in other countries that Australia could learn from, as well as a number that have already been successfully implemented here such as social benefit bonds and crowd funding.

SVA suggests that there are six main areas and opportunities for reform – access to capital, a dedicated social investment bank, tax concessions and incentives, a corporate bond market, financial intermediaries, structural barriers and regulatory requirements.

These are:

1. Access to capital – increasing access to capital (both debt and equity) for the social sector, including the growth of social enterprises as well as capital for the construction of social and affordable housing. Leveraging private capital should be a key tenet of such an initiative

2. The enquiry should consider the establishment of a dedicated social ‘investment bank’ like the UK’s Big Society Capital which could be supported by the ‘Big 4’ and funded by unclaimed superannuation and/or bank accounts. This organisation would also look to build effective methods to measure social impact so a standard can be adopted by the mainstream financial investor community

3. Consideration of tax concessions and incentives for social impact investment to increase access to finance and reduce its cost over the longer term in the sector (as recently seen in the UK)

4. Ensure a renewed corporate bond market is sufficiently flexible to accommodate funding for social infrastructure (including social and affordable housing) and facilitating joint “for profit” and “for purpose” projects

5. Strengthen the role of financial intermediaries in the social investment marketplace and the infrastructure to develop and support such new markets; This is a critical role in the ‘for profit’ sector, but relatively unknown in the ‘for purpose’ sector where expertise and institutional capability to bring together funders and organisations in need of innovative forms of capital is much needed, and

6. Review the structural barriers to appropriate investment including regulations, corporate entity legislation and standard definitions that restrict new investment.