The case for social impact investments

By Michael Mata | 10 Aug 2017

Social impact investments (SIIs) are an innovative and growing mechanism for funding solutions to complex social problems, including affordable housing and homelessness, according to a new report from the Australian Housing and Urban Research Institute (AHURI).

AHURI’s report, The opportunities, risks and possibilities of social impact investment for housing and homelessness, led by the Centre for Social Impact (CSI) at UNSW Sydney, reveals that social impact investment, although in its early stages in Australia, shows potential as an effective way of tackling complex social issues.

SIIs, which aim to achieve both social and financial returns, are cross-sectional collaborations that can tap new sources of capital via different types of investors. SIIs can also enhance the return on government investments.

In 2013 alone, an estimated $2bn was invested in Australian SIIs, and this is forecasted to grow by as much as $32bn in the 2020s.

AHURI’s report reveals three key areas of opportunity in terms of their potential impact and likelihood of success. Under certain conditions, SIIs have the potential to:

  • Increase the supply of affordable housing with attractive attributes
  • Boost the supply of fit-for-purpose social housing and support other positive outcomes
  • Act as an incubator for government to trial innovative and new ways of providing services that effectively deliver desired outcomes

Kristy Muir, report author and CEO of the Centre for Social Impact, said that the opportunities and benefits were exciting and needed further exploring. However, she warned that SIIs should not be treated as a “panacea” due to the numerous risks.

“The very definition of a social impact investment is one that intentionally aims to achieve social impact along with a financial return, while measuring the achievement of both,” Muir said. “It’s an appealing model. But it’s important to remember that we are dealing with people’s lives.”

“Our most vulnerable have complex needs, and we need to be careful we’re not paving the way for future harm if the investments don’t work out. This is one of the key reasons why government has an important role,” she added.

“For both social and affordable housing, there exists a significant financing gap. Government has a critical role in filling it if it wishes to engage the investment community in collaborating and contributing to solutions,” Muir said. “Where we can see that SII has a role to play, other funding solutions and policy interventions will need to run in parallel. These are safeguards that need to be in place in order to minimise that risk to our most vulnerable Australians.”

Related Stories:
Depth Of Housing Affordability Crisis Revealed
MITs Can Now Invest In Affordable Housing


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