In the 2023-24 budget, the Albanese government committed $199.8 million in funding over 6 years for a series of social impact initiatives to target entrenched community disadvantage.

The $199.8 million package supports a range of initiatives including Australia's largest outcomes fund, enhanced data-gathering and analysis capabilities to better direct funding, capacity building support for social enterprises and funding commitments for place-based programs. The initiatives will see the Commonwealth government partnering with local and state governments, philanthropic organisations, the private sector and communities.

These initiatives are welcomed, but the sector continues its wait and see approach on the Social Impact Investing Taskforce Expert Panel's recommendations regarding the establishment of the impact investment and financing wholesaler (co-funded in partnership with the major banks) and the Foundation for Social Investment (FSI) (co-funded with philanthropic support) which would provide much need financial capital towards driving sector outcomes and capacity building.

Overview

The social impact initiatives announced in the recent budget are a welcome measure for the sector in increasing collaboration with the government to scale, accessing impact investment, measuring outcomes and maximising impact in tackling social issues. The initiatives are focused on alleviating systemic disadvantage, improving the wellbeing of children and families, empowering communities to drive community-based outcomes and supporting cross-sector collaboration between the government, communities, the private sector and philanthropic organisations.

A cornerstone of the social impact initiatives is the $100 million Commonwealth commitment to establish an Outcomes Fund. The Outcomes Fund will make outcomes-based payments to states, territories and for-purpose service providers delivering programs in local communities achieving agreed, measurable outcomes. This will support data‑driven and evidence‑based solutions, improving outcomes in a range of policy areas.

Other key social impact initiatives announced include:

• extending the Stronger Places, Stronger People initiative to deliver place-based initiatives in partnership with communities and state and territory governments, to ensure local needs are responded to and services are appropriately directed to maximise impact;
• improving data collection and sharing capabilities on how communities experience disadvantage to enable the government to target funding where it is needed most;
• a $7.8 million commitment over 2 years to partner with leading philanthropic organisations to develop a whole-of-government framework to identify strategic objectives that will guide how the government partners with communities to address disadvantage; and
• an $11.6 million commitment over 3 years for a Social Enterprise Development Initiative to provide capacity building grants, online education and mentoring, enabling social enterprises to better participate in the social impact investing market and support improved social outcomes.

The structural shifts shaping the budget include a government trend towards outcomes-based budgeting and impact investing as a mechanism for alleviating community disadvantage. The establishment of an Evaluator General in the 2019-20 budget, tasked with evaluating the effectiveness of government programs, highlights the increasing emphasis on measuring impact. The investment in social impact initiatives is emerging as a consistent feature in government funding, enlivened by the Morrison government's establishment of the Social Impact Investing Taskforce Expert Panel (the Taskforce or the SIIT) in the 2019-20 budget. The Taskforce's budget recommendations were designed to support the impact investment market and galvanise the government to play a key leadership role in leveraging capital and reducing risk in the impact market.

Missing from the budget was any support for the Taskforce's recommendation of a $200 million impact capital wholesaler to direct private capital into funding social services. The wholesaler's key objective would be to invest in social impact funds that allocate resources to social enterprises delivering social outcomes and meeting a minimum standard of financial performance. The wholesaler would be supported by the major banks who have indicated a commitment to the concept (it is expected that all major banks would contribute equally to the fund) and function as a blended finance intermediary support vehicle, following the UK model such as Big Society Capital and the associated Access Foundation (the FSI would be the Australian equivalent of the Access Foundation).

We understand that there is commitment from the banks and major philanthropic foundations to support these initiatives, so are hopeful that these come to fruition sooner, rather than later.

The Taskforce's other recommendations included a call for outcomes-based funding (reflected in the announcement of the Outcomes Fund), a central impact investment policy unit within the government, and the establishment of an early stage foundation (the FSI) to assist entrepreneurs in securing early-stage capital such as flexible loans or grant funding. This approach aims to ensure that public funds are effectively allocated, with a focus on tangible social progress. These initiatives would work in conjunction with the larger impact wholesaler to foster connections between social service providers and potential sources of capital.

Budget initiatives

• Social Enterprise Development Initiative - $11.6 million over 3 years for a Social Enterprise Development Initiative to provide grants, online education and mentoring for eligible social enterprises to build capability to access capital, better participation in the social impact investing market and support improved social outcomes. The specific details of the full package are yet to be finalised.
• Outcomes Fund - $100 million over 5 years to establish a social impact investment Outcomes Fund, as recommended by the Taskforce. The Outcomes Fund will enter into outcome-based contracts with social enterprises and not-for-profits, and will make contractual payments on achievement of agreed, measurable outcomes. The Outcomes Fund is consistent with a government trend towards outcome-based payments, underpinned by a focus on evidence-based solutions in a range of policy areas.
• Stronger Places, Stronger People - $64 million over 6 years to extend the Stronger Places, Stronger People initiative, supporting the delivery of place-based projects in 10 local government areas to empower local communities to drive outcomes for disadvantaged children and their families in the community.
• Measuring outcomes - $16.4 million over 4 years to the Australian Bureau of Statistics to capture insights on how communities experience disadvantage, enabling the government to better direct funding.
• Investor Roundtable - In response to recommendations by the Taskforce, the Government will convene an Investor Roundtable to discuss how to unlock private capital to support for-purpose organisations.
• Whole-of-government Framework for addressing community disadvantage - $7.8 million over 2 years to develop a whole-of-government framework, in consultation with community organisations, to identify strategic objectives and key principles that will guide how the government works in partnership with communities to address cycles of disadvantage. This represents a significant collaboration between government and the philanthropic sector to generate social impact.
• Investment Dialogue for Australia's Children – The government plans to partner with leading philanthropic bodies to alleviate intergenerational disadvantage and improve the wellbeing of children and their families. Government and philanthropy will co-design and implement investment dialogue processes in consultation with sector and community leaders, constituting a significant cross-sector collaboration to enable the government to coordinate efforts and direct funding to maximise outcomes.

What this means for the sector

In his speech announcing the budget, Treasurer Jim Chalmers acknowledged that alongside financial support for Australians in need, the budget sought to invest in community-based programs aimed at breaking cycles of intergenerational disadvantage. The over $60 million commitment to extending the Stronger Places, Stronger People initiative highlights the government's focus on bottom-up, rather than top-down, policies and empowering local communities to drive initiatives in their community supported by targeted government funding.

The $11.6 million funding commitment for the Social Enterprise Fund is a welcome step in addressing challenges faced by social enterprises in scaling and accessing early stage capital and support.

The Outcomes Fund was a central tenet of the social impact initiatives announced in the budget, and demonstrates the trend towards outcomes-based funding. The Fund, along with a number of other recent initiatives including the establishment of the Evaluator General in the 2019-20 budget, highlights the emphasis on measuring impact. The increased focus on impact-measurement supports the identification of successful programs, enabling such programs to be funded and scaled to maximise impact. For example, MinterEllison has worked with social enterprise incubator White Box Enterprises on its 3.5 year Payment by Outcomes trial with the Department of Social Services. The trial, which commenced in July 2022, has been designed to prove that work integrated social enterprises are effective in delivering long-term employment outcomes for the most vulnerable and excluded jobseekers, and resulted in cost savings to government by reducing reliance on government financial support. Up to 170 people living with a disability will be supported into award wage employment with one of 15 jobs-focused social enterprises participating in the trial. Payments will be made to White Box Enterprises, which is separately contracting with a range of work integrated social enterprises, when it delivers particular employment outcomes and enables excluded jobseekers to transition to the open labour market. The trial also includes private capital from three investors, aiming to demonstrate the benefits of private and public partnerships on outcomes-based initiatives. MinterEllison has recently worked on a number of social impact bond and PBO programs and with Government agencies, sponsors and issuers.

While the Outcomes Fund is a slightly smaller and more targeted initiative than the Taskforce's recommended social impact investing wholesaler, which was missing from the budget and it is expected will take some time to be agreed to, hope remains for the more expansive model. The wholesale fund could help social organisations in accessing private impact investment capital to scale and increase impact. In its absence, MinterEllison has been working with social enterprise incubator White Box Enterprises to launch a Social Enterprise Loan Fund (SELF). The SELF aligns with the Taskforce's recommendation to grow the intermediary market.

How we can assist

With experience advising on all sides of outcomes-based contracting and social impacting investing, MinterEllison can assist by providing strategic advice on the co-design and implementation of outcomes-based contracting.

MinterEllison also provides broader sector support in terms of capacity building, supporting social enterprise peak bodies (including the national peak body Social Enterprise Australia, which we assisted to establish last year, and state and territory bodies), certifying bodies (including Social Traders and Supply Nation), funds (including Social Enterprise Finance Australia (SEFA) and First Australians Capital) and intermediaries (such as Social Ventures Australia, Social Impact Hub and White Box Enterprises). MinterEllison also works alongside government and corporate clients to amplify social impact through shared values partnering (including our longstanding relationship with the Westpac Foundation, in which we offer legal support to social enterprise grant recipients and social change fellows).

MinterEllison has also worked with a number of organisations on place-based initiatives (funded in the budget through the expansion of the Stronger Places, Stronger People initiative).

MinterEllison can also advise foundations, private capital providers and financial institutions on social impact investing and establishment of impact funds.

Please reach out to us if you have any questions regarding social enterprise, outcomes-based contracting, social impact investing or establishing impact funds.