Investors Scored A 7.5% Return On Bonds To Create Better Parents, Now The NSW Government Wants To Expand The Plan

NSW Community Services Minister Gabrielle Upton. Photo: Supplied

The NSW Government is planning to issue more social benefit bonds soon, following a successful trial last year.

The Newpin bond, created to improve parenting skills, delivered a 7.5% return to investors in its first year, according to Community Services Minister Gabrielle Upton.

With $7 million in working capital tipped in by investors, the returns from the bond allowed UnitingCare Burnside to run intensive parenting courses to restore 28 children to the families from out-of-home care.

The success of the trial has got Upton thinking about where else a similar framework could be applied.

“It was our opportunity as a state to get innovative,” she told Business Insider, adding investors are remunerated when social outcomes are met.

The bonds save government money while taking advantage of a strengthening social investment and corporate social responsibility movement in Australia.

Upton told Business Insider she thinks there is great opportunity to use the bonds to improve housing outcomes for people.

She said it doesn’t have to all be about building more dwellings, bonds could be used to up-skill and educate people so they can move away from being reliant on the state government.

The government is considering more social benefit bonds, Upton said adding, “We haven’t come to a landing point.”

Part of the hesitation to roll out more bonds is that the idea is still new in the Australian market and it hasn’t been fully tested.

“Having returned to investors in the first year gives us a great sense of optimism,” Upton said.

“There is a market of capital out there willing to invest in these projects and demonstrating return which is critical to this.

“The structures are quite complex around this and they are still a bit untested in Australia but we know now there is an appetite on the investment.”

Public housing in Australia runs at a large structural deficit so it makes sense to use this type of program, not only to shorten the wait-list but also move people onto independent living situations.

“Just spending the money doesn’t mean you get good social outcomes,” she said.

You need to be innovative.

And while Upton said a new social benefit bond has not been tabled, another around social housing is an idea in its “early days”.

“We’ve had some success with the social bond around child protection. I’m very interested in seeing what we could do in the social housing space,” she said.

“The idea of a social bond resonates with me having had my experience before [as a lawyer and investment banker], thinking we should be innovative around how we’re going to help vulnerable people, there are other ways than government writing cheques and there’s an opportunity for the community to step up and investors who want good social outcomes as well.

“I see it can be good for everyone, it can be good for government, it can save government money, it can provide investment opportunities that are competitive and also have a feel good element.”

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