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Victoria's first social impact bond

Latitude Network was the advisor to Sacred Heart Mission in the negotiation for Victoria's first social impact bond announced in December 2017. The article below first appeared in Pro Bono News.

Journey to Social Inclusion social impact bond launch

Sacred Heart Mission (SHM) will deliver the state’s first SIB with the Victorian government, expanding the welfare not for profit’s successful Journey To Social Inclusion Program (J2SI).The Victorian government allocated $1.2 million for a targeted program in March to end long-term homelessness following a pilot of J2SI, agreeing to contribute a third of the overall $3.69 million cost of the three year program.

A SIB is a partnership with government, the social services sector and investors to create positive change for communities and individuals and has been used worldwide to address complex social issues. SHM said unlike traditional SIB capital raising, a portion of the funds would be sought from philanthropy. SHM general manager of business, Catherine Harris told Pro Bono News that the SIB was “departing from the standard capital raising process”.

“So we are going out to philanthropists over the next three months to see what we can do to raise guarantees,” Harris said. "Whatever we don’t raise from guarantees, we will look to a traditional bond raise [to meet the shortfall]. The focus for us for the next three months after Christmas is going to be seeking guarantees.” She said the partners went down the non-traditional path because SHM had “a real commitment to ensuring that we can invest back into homelessness, so we are looking to seek guarantees to keep the cost of the transactions as reasonable as possible… We want to put as much money as we can into the intervention”.

A recent SHM study showed 75 per cent of J2SI participants remained in stable housing after four years, 80 per cent had seen a decline in the need for health services and the study offered savings to government of up to $32,080 per participant. “We ran the pilot and we had great social outcomes from that and we are running a second version of it now and we are seeing really good results and really promising results coming out of it. There is a significant amount of demand for an approach to addressing chronic homelessness and J2SI seems to be working the second time round,” Harris said.

“We are quite confident it will continue to work. It just unlocks a kind of innovative approach to resolving social issues. If it wasn’t for the social impact bond we wouldn’t be able to run this program again.” SHM CEO Cathy Humphrey said confirming the next stage of the J2SI vision, would “increase the mission’s capacity to make a real impact by significantly contributing to ending chronic homelessness in Melbourne”. “SHM has been developing, piloting, modifying, evaluating and scaling J2SI for over 10 years,” Humphrey said.

“This has been achieved through extensive research by SHM and others on the causes and consequences of long-term homelessness, and the rigorous testing of the J2SI intervention though randomised control trials to ensure people can escape the cycle of chronic homelessness.”

SHM said it expected service delivery to commence in August 2018 for 180 participants (60 per year for three years), who will each receive support for three years. Under the SIB structure SHM and investors would receive payments from government if specific outcomes were achieved, which were evaluated throughout the intervention. Humphrey said the project was “delivered using a trauma-informed model with intensive support including helping to build skills for pathways to employment, training, education and volunteering, and ultimately fostering independence”. “Housing has been negotiated as part of the service delivery and will be provided through head leasing arrangements with housing providers,” she said.

Minister for Housing and Disability Martin Foley said: “Sacred Heart Mission has been working on an innovative way to tackle homelessness in St Kilda and we look forward to helping them expand this project.”

A lead external advisor to SHM, Russ Wood from Latitude Network told Pro Bono News: “One of the interesting things about Sacred Heart’s approach here is that they haven’t gone with a full suite of service consultancy. “They have used advisors for the key strategic negotiations, realising some internal resources for the financial modelling and then some external [advice] for the capital raising,” Wood said.

“This could be a future direction that SIBs might be taking, where service providers start to build capacity in-house around some or all of the skills and capabilities that are needed. My personal view is hopefully they do because I think we will need more of these ‘outcomes’ approaches.The more service providers can take these things on and require less external involvement the better.”

Wood said the process was reasonably intense. “My perspective, as an intermediary here, is that the fact that they were negotiating based on an intervention, the J2SI model that they had developed over 10 years, [and] because they were very clear about their own mission, they were able then to be in negotiations [and be] very clear about what they could and couldn’t do, and would and wouldn’t do,” Wood said.

“Having researched SIBs overseas, my sense is that service providers that are negotiating based on existing interventions are going to have a head start against those organisations that start with an idea or a concept. It makes intuitive sense really.”

Australia’s first social impact bond, the Uniting Newpin Social Benefit Bond (SBB), recorded positive growth for the fourth year in a row in 2017, with more than 200 children returned to family care, while 55 families were prevented from having their children enter the out-of-home care system. The Newpin SBB was a financial partnership between the NSW government, Uniting, and Social Ventures Australia (SVA), which “works with parents to create safe and nurturing family environments so children can be restored from out-of-home care, or prevented from entering care in the first place”.  

SVA raised $7 million of capital to first fund the SBB in 2013, which allowed for the maintenance and expansion of Uniting’s Newpin Program.

In March 2017, South Australia’s first social impact bond, also targeting homelessness, raised $9 million in less than a month from its launch. The Aspire bond, a partnership between SVA, the South Australian government, and not-for-profit organisations Hutt St Centre and Common Ground Adelaide, supports up to 600 people experiencing homelessness

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