The benefits of social finance
and social benefit bonds
Associate Secretary, NSW Treasury
Social Finance, including social investment, is a rapidly developing area in
which both financial and social returns are sought by stakeholders.
The benefits of social finance are varied however the underlying fundamental
benefit is that social finance contributes to creating sustainable solutions to
significant social, environmental and cultural issues.
There are many examples, of which Social Benefit Bonds are just one.
The NSW social benefit bond
pilots and the expected benefits
What is a Social Benefit Bond (SBB)?
3. Payment based
4. Returns paid
A SBB is a financial instrument that pays a return based on the achievement of
agreed social outcomes. Savings generated from these improved outcomes
enable Government to repay the upfront investment and provide a reward
payment commensurate with the outcomes achieved.
NSW Social Benefit Bonds Trial
February 2011 – the Centre for Social Impact (CSI) feasibility report
September 2011 – SBB trial announced
November 2011 – a Request for Proposals closed
March 2012 –Joint Development Phase commenced
March 2013 –Contracts signed for Australia’s first SBB (Newpin SBB)
June 2013 –Contracts signed for Australia’s second SBB
May 2013 –$7 million raised for the Newpin SBB
Benefits of Social Benefit Bonds
A focus on outcomes rather than outputs
Additional resources towards early intervention programs and services
Improving the evidence base
Accountability and transparency
Benefits of the NSW SBB Trial
From the NSW SBB Trial we aim to better understand:
how to strengthen families and hence reduce the number of children in
how to reduce recidivism;
the appetite for social finance products in the market;
the potential for contestable outcomes-based contracting in social services;
how to realise the benefits of prevention and early intervention services;
how government can better define and measure outcomes.
The NSW SBB Trial – Joint
The NSW SBB Trial included a Joint Development Phase where the three
successful proponents worked with Government on:
Analysing the cohort and likely improvements to the targeted social
Designing the financial model;
Defining the outcomes to be targeted and measured;
Developing the measurement framework.
The Newpin SBB
The Bond: $7 million over a 7 year period.
Investor returns: The Newpin SBB targets a financial return of 10 to 12
percent per annum . This is dependent on the successful performance of the
service and the outcomes it achieves.
Service: Intensive support to over 700 families to improve parenting styles,
behaviour and practices, the program helps parents to build positive parent-
Outcomes: The service aims to safely restore more than 400 children in foster
care to their families and to prevent at-risk children entering care.
Performance indicator: The key indicator will be the restoration rate of
children who enter the program.
The Newpin SBB
The Newpin SBB funds an outcomes-based agreement between the Government
and UnitingCare Burnside (UCB).
The Benevolent Society(TBS) SBB
The Bond: $10 million with a Term of 5 years.
Investor returns: The TBS SBB has two tranches of investment. Returns are
dependent on the successful performance of the service and the tranche of
investment, and are paid at the end of year five.
Service: Intensive work with up to 400 families and their children in the
Resilient Families Service (RFS).
Outcomes: The service aims to keep children safely with their families and
out of foster care.
Performance indicator: A range of NSW Government data will be used to
measure success including entries into foster care, reports to the Child
Protection Helpline and safety assessments by Family and Community
Services exhibited by children in the treatment group when compared to a
The TBS SBB
A Special Purpose Vehicle (SPV) issues the SBB to fund operating expenses of a
service provider subcontracted to achieve outcomes. The Government contracts
with the SPV and pays a return based on the achievement of outcomes.
The Mission Australia SBB
The Government is working with Mission Australia on the development of a third
SBB pilot. The SBB will aim to reduce adult reoffending in the criminal justice
The structure of the SBB arrangement is likely to be similar to the TBS SBB.
The development of this SBB requires significant collaborative work that is ongoing.
If a viable model can be designed for the benefit of the community, investors and
Government, this pilot will also be implemented in 2013-14.
Benefits of the NSW SBB Trial
The Joint Development Phase for the pilot SBBs has provided:
A better understanding of how to define and measure outcomes;
Enhanced knowledge of payment by results contract management
Increased accountability for staff involved in the implementation of the
Insights into the government’s data gathering and reporting capabilities;
A greater emphasis on the benefits of data sharing with NGO partners;
Better targeting of resources to maximise outcomes.
Creating a mutually beneficial
environment for socially-
motivated investors, government
and social institutions
SBBs aim to provide benefits to all parties, including
the community, investors and government.
Service providers can tap into new sources of
outcomes-based funding to expand and improve
services for vulnerable members of the community.
Investors (institutional, retail and private) have access
to a new financial instrument offering a mix of
economic and societal returns. Government can
reorient spending from acute services to other areas of
Mutually Beneficial Environment
Essential Building Blocks