Impact Investing in Practice

Key Insights

  • Impact investments can manifest across a wide range of asset classes.
  • The emergence of Social Impact Bonds offers a way for private investors to finance socially beneficial public services.
  • Blended finance combines philanthropy with traditional investment capital.
  • Australian impact market currently at ‘inflection point’.

The three main areas where impact investments are used are:

  1. To scale a business or social enterprise
  2. To access real assets (eg. property or infrastructure)
  3. To finance program delivery1


Impact investing is an investment philosophy that can be applied across a broad range of existing asset classes. The figure below shows the range of asset classes in which impact investments can be made:

Figure 2.1Adapted from World Economic Forum: An introduction to the mainstreaming impact investing initiative 2013

In practice, impact investors fund many asset classes using a  range of instruments, and blend various types of capital in innovative hybrid funding instruments and structured deals to drive impact across the sector.2

Figure 2.2Source: GIIN

The GIIN 2017 Investor Report revealed the range of instruments that respondents use to deploy capital to impact investments. Private equity is used by over 75% of respondents, and over half of respondents use private debt. Excluding outliers, roughly 41% of assets were allocated through private debt, 27% through private equity, and 14% through real assets.

Figure 2.3Adapted from the GIIN’s 2017 Annual Impact Investor Survey


Below are examples of recent direct impact investment deals in Australia.



Impact focus: Recycling, Environment, Food Wastage

Description: 9.5 million tonnes of food is discarded each year of which 400,000 and 600,000 tonnes are accessible, edible and quality food.

Yume is a revolutionary food rescue platform designed to reduce the amount of commercial food waste heading to landfills each year. Yume is Australia's first surplus food online marketplace where wholesale and retail suppliers and primary producers can post surplus edible and quality food for sale. Yume also facilitates the donation of unsold products to food charities.

Structure: $2.6m Equity Raising

Financial Return: Undisclosed

Impact created: Diverted 176,241kg from landfill and donated 23,209kg to food rescue organisations.

Hire Up

Impact focus: Disability services, Employment

Description: Online platform linking support workers and people with disability looking for support, allows people with disability and their families to manage relationships with support workers whose tax and super payments, insurance, payroll and workplace health and safety requirements are taken care of by Hire up.

Structure: $2.4m Equity Raising

Financial Return: Undisclosed

Impact created: Have currently made 8,500+ support connections, provided 600,000+ hours of support and saved $5.3m by Hire up users from their packages to be used for extra hours of support.


Vanguard Laundry Services

Impact focus: Mental Health, Employment

Description: Vanguard Laundry Services (VLS) is a social enterprise commercial laundry creating employment opportunities for people previously excluded from the workforce, predominantly due to mental health conditions.

Structure: A loan of over $2.1 million. Grants worth $3.2 million and over $770,000 in pro bono assistance.

Financial Return: Undisclosed

Impact created: In the first year of operations, Vanguard Laundry Services reduced the number of participants reliant on Centrelink payments from 90.5% to 76.2%, and increased the median fortnightly income of participants by $392. This represented a 38.9% reduction in housing affordability stress.


Impact focus: Specialist aged care

Description: The Korongee Dementia Village is the first of its kind in Australia, piloting an innovative model of care for dementia (the second leading cause of death in Australia). The care model is based on un-institutionalising dementia care by enabling residents to keep their independence.

Structure: $18.97m senior debt

Financial Return: Undisclosed

Impact created: 90 new beds dedicated to specialist dementia care, with a number of beds to be allocated to individuals at risk of homelessness



Impact focus: Sustainability

Description: IIG acquired the TAC building in Geelong in December 2014 for $95.8 million on a net passing yield of 7.5% per annum. It is an eight level A-Grade office building, built new for the TAC in 2008, who were the anchor tenant on a long lease. IIG sold the property in March 2018 for $115.25m on a passing yield of 6.83%.

Structure: Unlisted unit trust with $41.175 million equity from unitholders and $62.27 million loan facility from NAB.

Financial Return: 10% average cash yield. Overall IRR to unitholders of 14.9% (post fees).

Impact created:
Climate: IIG installed 39.9 kW of additional rooftop solar generation capacity abating over 47.8 tCO2e to June 2017. NABERS energy rating improved to 5.5 Stars from 5.0 Stars at acquisition.
Water: Connected toilet flushing to an existing 20,000 litre rainwater harvesting tank and installed an additional 5,000 litre tank, avoiding over 257,000 litres of municipal water.
Place & Vitality: IIG created the ‘Impact Workshop’ in April 2017, a 40 desk co-working and innovation space for social purpose projects and organisations in the Geelong area. 20 desks were leased to TAC and Sprout Ventures manages the other 20 desks.

IIG K1 Property Trust

Impact focus: Environmental

Description: The IIG K1 Property Trust owns Kingsgate, a new Lendlease-developed office building, awarded the highest available NABERS energy rating: 6 stars. It is a 10 level commercial building at the gateway to the Kingsgate commercial precinct within the Brisbane Showgrounds urban regeneration precinct. It is tenanted to Lendlease, Medtronic and SMEC. IIG acquired the building for $141.2m in July 2015.

Structure: $63m of equity from unitholders, $78m of senior secured debt from NAB

Financial Return: 9.95% at end of FY17

Impact created: An Environmental Steering Group was established, with representatives from all major tenants. IIG works closely with tenants to monitor environmental performance and implement tuning and upgrade measures as identified, achieving a NABERS Energy Rating of 6 Stars. IIG allocates a portion of the management fees to the IIG Catalyst Fund, with the aim of directing funds into high impact opportunities.


Sydney Renewable Power Company

Impact focus: Renewable Energy

Description: Sydney Renewable Power Company (SRPC) provided funding for Australia's largest CBD Solar Array, on the roofs of the Sydney International Convention Centre Sydney (ICC Sydney).
The installation is 520kW, and all of the energy generated by the solar array is purchased and used by the ICC Sydney based on a 25-year power purchase agreement. A secondary revenue source is through marketing renewable energy offsets or certificates.

Structure: $1.55m loan in 2016 as initial bridge, $1.43m follow-up equity raising in 2017 to repay loan & fund working capital. 1 share was $2,750.

Financial Return: ~4% (expected)

Impact created: Financed a 520kW solar photovoltaic installation on the rooftop of ICC Sydney, which will generate enough energy to power more than 100 houses. Following installation in mid-2016, first power was generated in December 2016, which enabled the first invoice to be issued in January 2017.

Kurrawang Indigenous Community Solar Project

Impact focus: Climate Change, Renewable Energy, Indigenous

Description: The 36-kilowatt solar power system was installed on the roof of a workshop and machinery shed in the Kurrawang Aboriginal Christian Community near Kalgoorlie as a joint initiative of the Not for Profit Alternative Technology Association (ATA) and the Kurrawang Community Board in 2016. Believed to be an Australian first, a $52,500 impact investment loan was provided by the McKinnon Family Foundation and the CAGES Foundation. The loan will be paid off by the community in 5 years, with savings on electricity bill exceeding monthly loan repayments.

Structure: $52,500 impact investment loan

Financial Return: ~8% over 6 years

Impact created: Expected to displace 20% of the community’s electricity use and to offset about 60 tonnes of carbon dioxide each year, equivalent to removing about 17 cars from the roads.

Social Impact Bond

Aspire SIB

Impact focus: Homelessness, Employment

Description: The Aspire Social Impact Bond (Aspire SIB), Australia’s first homelessness focused SIB, raised private capital to fund the innovative Aspire Program, which is designed to make a lasting difference to the lives of people experiencing homelessness in Adelaide.

Hutt St Centre, an Adelaide based homeless services specialist, delivers the program. The program is also supported by housing partners including Common Ground Adelaide and Unity Housing. The $9 million Aspire SIB funds the program to work with up to 600 homeless individuals over four years.

Structure: $9m bond

Financial Return: ~8.5% target return over 7.75 years

Impact created: Funds the Aspire program for ~600 homeless persons in Adelaide for 4 years.

Resolve SBB

Impact focus: Mental Health, Community Services

Description: The Resolve Program is a recovery-orientated community support program in the Western NSW and Nepean Blue Mountains Local Health Districts. The Program offers a combination of a residential service for periodic crisis care, integrated psychosocial, medical and mental health support, and a warm line for after-hours peer support. Social Ventures Australia raised and manages the $7m Social Benefit Bond which supports the Resolve Program.

The Resolve SBB aims to improve the mental health and wellbeing of participants, while generating significant savings for the State through a reduction in participants’ utilisation of health and other services, by reducing the number of days spent in hospital. These savings will be shared with the mental health service provider, Flourish, to fund the delivery of the Resolve Program, and with investors to provide a financial return on their investment. Approximately 530 adults will be enrolled in the Resolve Program over five years.

Structure: $7m bond

Financial Return: IRR of 7.5% p.a. forecast over the 7.75 year note term.

Impact created: Approximately 530 people enrolled in the Program can benefit from the service in the Western NSW and Nepean Blue Mountains LHDs over a five-year enrolment period:
- Program participants will collectively spend an estimated 13,300 days at Resolve centres over a seven-year service delivery period, diverting them from hospitalisation
- Target 25% reduction in the use of the health services compared to the Control Group
- $30 million in savings to the State through reduced consumption of health and other services

Fixed Income

Australian Catholic University Sustainability Bond

Impact focus: Sustainability, Environment

Description: Australian Catholic University (ACU) issued a $200 million sustainability bond in July 2017. The bond raised funds for a combination of social projects and green buildings that deliver positive social and environmental outcomes in line with the International Capital Markets Association's sustainability bond guidelines. ACU is the first university in the world to issue a Sustainability Bond. The debt is rated Aa2 (Stable) by Moody’s Investors Service and was arranged by National Australia Bank.

Structure: $200m Fixed Rate medium term note (MTN)

Financial Return: ~3.7%, paid semi-annually over 10 years

Impact created: Supporting the construction of green buildings as well as research and development programs with social impact.

CBA Climate Bond

Impact focus: Climate Change, Renewable Energy

Description: CBA issued a 5-year Climate Bond in 2017. The proceeds will fund eligible projects in renewable generation, energy efficient buildings and low carbon transport. Eligible projects which comply with the Climate Bond Standards and eligible for certification have been nominated for this climate bond. Eligible projects that meet the eligibility criteria of the Climate Bond Standards could be Nominated Projects including (but not limited to) solar, wind, hydro power, transport and energy efficient buildings.

Structure: $650m bond: $450m through a fixed income issue, $200m through a floating rate note

Financial Return: 92 basis points above relevant reference rate, 5 years

Impact created: Through supporting low carbon and climate resilient projects and assets, transition to a low carbon economy is enhanced.


Bank Australia

Impact focus: Environment

Description: Bank Australia is a customer owned responsible bank. Without shareholders, the bank’s profits are returned to its customers through better rates and fees. The funds are invested to create positive social and environmental change. It currently has 140,000 people and community sector organisations as customers.

Impact created: Profits are reinvested back into the bank to provide all customers with fairer feeds and better interest rates. They also invest 4% of the bank's after tax profit in a community investment program.


In Australia, most products offered by intermediaries have been private equity, bonds, and property or loan funds.

Fund Managers

Social Ventures Australia (SVA) Impact Investing

Description: The Social Impact Investment Trust and the Diversified Impact Fund invest capital to help solve entrenched social problems. Investments include debt and equity into social enterprises, housing solutions and social impact bonds.

Example Funds:

  • Social Impact Investment Trust
  • Diversified Impact Fund

Social Enterprise Finance Australia (SEFA)

Description: SEFA connects investor funding with social enterprises and mission led organisations. SEFA offers loan finance and capacity building support to enable community, environmental and indigenous enterprises to thrive and grow sustainably. It offers investors both social impacts and financial returns.

Example Funds:

  • SEFA Loan Fund

Impact Investment Group

Description: Impact Investment Group sources and develops investments that generate social and environmental value throughout the investment’s life, as well as delivering excellent financial returns for investors.

Example Funds:

  • IIG Solar Income Fund
  • IIR Solar Asset Fund
  • IIG Wind Trust
  • IIG Giant Leap Fund

Indigenous Business Australia

Description: Indigenous Business Australia is a progressive, commercially focused organisation that promotes and encourages self-management, and sufficiency, as well as economic independence for Aboriginal and Torres Strait Islander peoples.

Example Funds:

  • Indigenous Prosperity Funds
  • Indigenous Real Estate Investment Trust

Impact Investment Fund

Description: Impact Investment Fund is a specialised Impact Advisory and Fund Manager that aims to empower social innovators through connecting them to investors and offering a range of investments.

Example Funds:

  • Affordable Housing Impact Fund
  • Impact Investment Fund
  • Early Stage Venture Capital Limited Partnership Fund (ESVCLP)
  • Private Equity Impact Fund

Foresters Group

Description: Foresters is a non-profit organisation that delivers community finance and social investment products.

Example Funds:

  • Social Enterprise Finance Fund
  • Arts Business Innovation Fund
  • Social Impact Investment for Sustainability Fund


Murray-Darling Basin Balanced Water Fund

Kilter Investments Pty Ltd

Impact focus: Environment, Agriculture

Investor Type: Sophisticated Only

Investment Type: Equity (has closed debt funding)

Description: The Murray-Darling Basin Balanced Water Fund is the first water investment fund in Australia to allow investors to achieve the multiple objectives of securing water for agriculture, realising a financial return and restoring threatened wetlands through a single investment. The Fund invests through Water Entitlements which can be bought, sold or leased. They are a perpetual or ongoing entitlement to exclusive access to a share of water from a consumptive pool.

Size: $22m (Equity) $5m (Debt); Target (Equity $80m Debt $20m)

Minimum Investment & Term: $100,000 & Open-ended

Financial Return: 2.3% Net Operating Profit and Distributions (since inception, after fees)

Social Return: Increased irrigation in the Southern Murray-Darling Basin is projected to drive water use bycotton and fruit/nut growers by 65% and 18% respectively, while water use by dairy, rice and Scale of impact grapes will decline by between 8% and 16%. This ongoing transfer of water to higher value crops will support the continued appreciation of high security/reliability water entitlements with demand underpinned by growers looking to increase water security.

8IP Australian Equity Impact Fund

Eight Investment Partners

Impact focus: General

Investor Type: Wholesale investors only

Investment Type: Equity

Description: In February 2017 8IP launched Australia's first Australian Equity impact investment fund focused on investing in ASX listed companies achieving positive and measurable social and environmental impact as well as positive financial returns. The industries in which these companies operate tend to have structural growth tailwinds which, when combined with active stock selection, provides the opportunity to generate superior investment returns. 8IP is 100% owned by its executives.

Size: Undisclosed (8IP as a whole manages ~$200m)

Minimum Investment & Term: $10,000 & Open-ended

Financial Return: 24.69% in 2017

Social Return: Impact is measured on a company by company basis. The fund invests in companies delivering positive and measurable outcomes across 10 impact focus areas: Renewable energy, Energy Storage and efficiency, Land and Resource Management, Wellbeing: Pharmaceuticals, Medical Devices, Health Care, Care and Support, Affordable Housing, Education, Lifestyle and Healthy Eating.

SVA Diversified Impact Fund

Social Ventures Australia

Impact focus: Employment, Health

Investor Type: Sophisticated investors

Investment Type: Debt (50%), Equity (35%), Social Impact Bonds (15%)

Description: SVA is a leader of impact investing in Australia with approximately $115 million funds under management. The Fund is the successor of the SVA Social Impact Fund, which has achieved a 6.7% IRR and created more than 160 jobs for people living in disadvantage over its five year term. The Diversified Impact Fund is a social impact investment fund which offers investors an opportunity to generate financial returns, while making a meaningful impact on the lives of people in need in Australia.

Size: $15 million

Minimum Investment & Term: $50,000 & 10 years

Financial Return: The target IRR is 7% net of fees based on the following target composition: 50% Debt, 7% target gross return 35% Equity, 15% target gross return 15% Social impact bonds, 7.5% target gross return

Social Return: The Fund invests in projects that provide jobs, homes and opportunities for people living in disadvantage in Australia. The Fund will focus on impact areas where SVA has deep expertise.

Giant leap Fund

Impact Investment Group

Impact focus: Health, Education, Sustainability, Environment

Investor Type: Wholesale Investors

Investment Type: Equity

Description: The Giant Leap Fund is Australia's first venture capital fund, which is 100% dedicated to investing in rapidly scalable, impact businesses. The Giant Leap Fund has three iImpact themes: 1) Empowering people 2) Sustainable living 3) Health and wellbeing.

Size: $10 - 15 million

Minimum Investment & Term: $100,000 & 10 years + 2x1 year extension options

Financial Return: Target IRR 20%

Social Return: Giant Leap is sector agnostic with a bias towards health, education, sustainable food, waste and businesses addressing climate change. The fund has a 3 stage test for impact: 1) Founder intent to have a positive impact 2) Impact being embedded in the business model 3) Agreement to measure and report on impact publically

Solar Income Fund

Impact Investment Group

Impact focus: Climate Change, Renewable Energy

Investor Type: Wholesale Investors

Investment Type: Equity, Infrastructure

Description: The IIG Solar Income Fund seeks to provide wholesale investors the opportunity to co-invest with IIG in an unlisted $100m portfolio of operational Australian solar infrastructure assets.

Size: $100 million

Minimum Investment & Term: $100,000 & N/A

Financial Return: ~ 10% IRR pre-tax and post fees

Social Return: Solar assets estimated to power the equivalent of 9,000 homes. 48,000 tonnes of carbon dioxide emissions p.a. to be abated. 16,000 Australians saved from pollution-related diseases.

Blue Sky Argiculture Fund III

Blue Sky Private Equity Limited

Impact focus: Agriculture

Investor Type: Wholesale Investors

Investment Type: Alternatives

Description: The Blue Sky Agriculture Fund IV offers investors a unique private equity opportunity to invest in agricultural and irrigated land and water entitlements in central New South Wales which will be expanded and re-developed into a higher and better returning irrigated farming system by an experienced, well regarded and industry-leading agribusiness team.

Size: N/A

Minimum Investment & Term: $50,000 & N/A

Financial Return: Undisclosed

Social Return: The Fund provides exposure to an asset-backed, integrated agrifood supply chain that includes water rights, irrigated farmland, agricultural infrastructure and premium brands.

GENESIS Impact Fund

Impact focus: Environment

Investor Type: Wholesale Investors only

Investment Type: Equity

Description: The Genesis Impact Fund invests in organisations that have been supported through the Pacific RISE catalytic granting process. This sees them receive assistance from an intermediary through both a scoping round and an investment readiness round. This fund is established with a geographical focus on the Pacific and impact themes focused on improved livelihoods, increased value-add in country, and responsible environmental management.

Size: $5 million

Minimum Investment & Term: N/A & 5-7 years + 2 year extension (open-ended)

Financial Return: IRR target of 15%

Social Return: Genesis Impact Fund will assess and invest in small to medium enterprises that seek to deliver positive social or environmental outcomes across three impact themes: Improvements in people’s livelihoods, Increased value add in country and responsible environmental management.

Infradebt Ethical Investment Fund 1

Issuing Organisation: Infradebt

Impact focus: Infrastructure, Renewable Energy, Employment

Investor Type: Sophisticated/Wholesale Investors only

Investment Type: Debt

Description: Infradebt is a specialist fund manager providing clients with direct access to the infrastructure private debt markets. Infradebt has an experienced team with decades of global infrastructure investment experience. We have invested across the capital structure and through market cycles. As an independent manager owned by its senior staff, our interests are aligned with the long-term returns we deliver for our investors. Infradebt's ethical funds lend to renewable energy, social infrastructure and property projects with a significant environmental/social impact element.

Size: $10 - 20 million

Term: Approx. 4 years

Minimum Investment & Term: $100,000 & Investors must apply via the information memorandum (available on request).

Financial Return: Benchmark + 1.5% before fees. The Fund's benchmark is 50% Bloomberg Ausbond Composite Index and 50% Bloomberg Bank Bill Index.

Social Return: The fund will provide debt finance to renewable energy and social infrastructure projects. These projects will provide renewable energy (emissions abatement), positive economic impacts (construction phase jobs for construction projects) as well as positive social impacts (for the social infrastructure projects).

MiHaven Social Impact Property Fund

Issuing Organisation: MiHaven Property Fund Pty Ltd

Impact focus: Employment, Housing, Disability, Indigenous

Investor Type: Sophisticated/Wholesale Investors only

Investment Type: Equity

Description: MiHaven is a social enterprise that supports chronically unemployed Indigenous Australians to enter long-term sustainable employment in construction and related industries. The purpose of the fund is to start a pilot project in Parramatta Park, Cairns, including sub-division, renovation and construction of a new home and renovation of an existing Queenslander home.

Size: $500k to $1m

Term: 8 years

Minimum Investment: $200,000

Financial Return: 6% net yield per annum and 6% annual capital growth.

Social Return: Construction training and employment supporting 20 disadvantaged unemployed people; accommodation for people with disability; student accommodation targeting indigenous remote students studying in Cairns.


Social benefit bonds or social impact bonds (SIBs) are a relatively new type of financial instrument, and a form of social impact investment3 that have become increasingly popular – particularly in OECD countries – in recent years.

Combining in a single tool three core elements: entrepreneurship, innovation and investment, SIBs enable private investors to provide up-front funding to service providers to deliver improved social outcomes and address public concerns. If these outcomes are delivered, resulting government savings pay back the original investment plus a return.4

As pressures on public budgets increase, a financing mechanism for social initiatives that promises to mitigate public sector risk, increase effectiveness, and pay for services now while requiring public contributions later, is likely to attract support.5 Since the first SIB was launched in 2010, 108 further SIBs have been established in 24 countries representing an investment of over $392M in capital to reach up to 738,000 people. Globally, SiBs are mobiling investments towards programs that are tackling complex social issues such as refugee employment support, loneliness among the elderly, rehousing and reskilling homeless youth, and diabetes prevention.

Social benefit bonds provide a mechanism to share risk across investors, service providers and government. They offer their investors a blended return combining both financial and social outcomes.6

Figure 2.4How a SIB works

There are several social impact bonds already in the market in Australia, with eight bonds issued, and a handful more under development. At present, four State governments (New South Wales, Queensland, South Australia, and Victoria) are active in the Social Benefit Bonds market.7 Figure 2.5 shows the use of SIBs in Australia.

Figure 2.5Adapted from Emma Tomkinson’s SIBs in Australia, 2017 updated for 2018

SIB Spotlight



Aspire SIB is Australia’s first social impact bond focusing on homelessness and offers investors the opportunity to obtain a competitive financial return while making a lasting difference to the lives of people in Adelaide experiencing homelessness. The bond, underwritten by the South Australian Government, funds the Aspire Program, run by the Adelaide based homelessness services specialist Hutt St. Centre, in collaboration with community housing providers Common Ground Adelaide and Unity Housing Company.


The bond was oversubscribed and raised $9 million from private and philanthropic investors.


Aspire Program

The Aspire Program is based on a housing first intervention model, and founded on the principle that people benefit more through first being given suitable housing followed by support in areas like health, education and employment. Participants will be provided stable accommodation, job readiness training, pathways to employment and life skills development. They will also have the long term support of a dedicated Case Manager to connect them with wider support services.


Key Features

  • Investor returns are determined by Government payments to the Aspire SIB Trust, which are based on savings generated.
  • Outcomes are determined by measuring health, justice and homelessness service utilisation relative to a historical baseline.
  • A bond term of 7.75 years with a 2% p.a. fixed coupon over 4.75 years, then performance coupon based on the level of the Trust’s assets.
  • In the event targets are met, investors can yield an estimated 8.5% per annum.
  • Termination rights for poor performance to limit downside loss to approximately 50% of principal.
  • Target scenario estimated return 8.5% p.a. (objective only).


Anticipated Impact

Approximately 600 adults who are experiencing homelessness are expected to be referred to the program over a four-year period, where each person will be provided support for up to three years.


An investor

The Aspire Bond presented a unique opportunity for the WC Rigby Trust, established to provide "low cost housing for the poor”. Ben Clark of Australian Executor Trustees, which was appointed trustees of WC Rigby Trust in 1913, realised that Aspire presented an opportunity for the trust to invest capital to achieve a mission-aligned outcome. As Ben notes, before deciding to invest ‘Our investment committee determined that critical to calculating the investment risk, was an understanding of the 'social' or program risk. In order to provide a qualified opinion, we needed to conduct additional due diligence on the capacity and capability of the charity partner delivering the Aspire program and it was not until we'd met with the CEO of Hutt St Centre and toured their premises, were we able to complete our due diligence and make a decision to invest.


Green bonds are innovative financial instruments where the proceeds are invested exclusively (either by specifying the use of the proceeds, direct project exposure, or securitisation) in green projects that generate climate or other environmental benefits…Their structure, risk and returns are otherwise identical to those of traditional bonds.

UNDP, Financing Solutions for Sustainable Development


The market for green bonds (also known as climate bonds) is one of the fastest growing in the world, with up to 50% annual increase taking it over USD 120 billion in 2017.8 The Australian green bond market is still relatively small; but current trends indicate it should grow rapidly as a diverse range of funds from institutional to ‘mum and dad’ investors subscribe for its bonds. Indeed, RIAA’s Benchmarking Impact 2018 report indicates that green bonds make up more than three-quarters of Australia’s impact investment asset class by dollar volume, and growth in Australia’s impact investing market is driven largely by the increase in green bonds, which account for $4.9 billion of the 2018 data set.9

2017 saw seven major green bonds valued at US$2.563 billion issued to more than 100 Australian institutions.10 In 2015, the $600 million ANZ Green Bond was one of the largest green bond issuance by any bank in the world. Other Australian organisations that are issuing green bonds include CBA, NAB, Westpac, Stockland, and Queensland Treasury Corporation.11


The wide variety of types of capital available in social finance – and the complex set of risk and return calculations attendant on each type – offers opportunities for innovative structured deals and funds that do not exist outside of this [social impact] sector. It is suggested… that only such blends of capital may offer the critical support needed by socially entrepreneurial organisations if they are to tackle the ‘wicked problems’ currently confronting the world.

Alex Nicholls, Rob Parson and Jed Emerson, Social Finance 201512

Blended finance involves bringing together investors with different risk and return requirements to enable transactions that may struggle to attract pure commercial funding.

To leverage the significant capital needed to accomplish large-scale and sustainable impact, structures are needed that appeal to investors seeking full risk-adjusted returns. By deploying instruments such as grants, guarantees and impact-first capital to de-risk investments and lower the cost of capital, blended finance helps attract investors with a lower risk tolerance. Indeed, blended financed transactions do not require that all investors must have a social impact motivation.

Figure 2.6Adapted from Blended Finance Vol 1: A primer for development finance and philanthropic funders, OECD & World Economic Forum, September 2015.

Blended finance enables each public or philanthropic dollar to go further than it would on its own. For example, for every $1 received as a grant (eg. from a foundation), a deal may attract $5 from the private sector, given the improved risk-return profile attributed to the donor taking a first-loss position in a deal, or by providing a risk-sharing instrument like a guarantee.13

Globally, there is increasing interest in using blended finance to achieve the Sustainable Development Goals (SDGs). Blended finance transactions have effectively mobilised over USD 51.2 billion towards the 17 SDGs. These ambitious targets require a new level of global cooperation to fund the required projects. As Lord Malloch-Brown, a former UK diplomat who chairs the Business and Sustainable Development Commission said:14

Action is needed end-to-end across the whole investment system to scale up the use of blended finance, if we are serious about closing the funding gap for the sustainable development goals.

Development Commission

Figure 2.7Source: GIIN

*Note: if a Private Ancillary Fund (PAF) guarantees a financial institution’s loan to a Deductible Gift Recipient, the PAF can claim the discount between its income and the market interest rate as part of its distribution requirements.

Figure 2.8highlights the differences in structure between regular finance and blended finance

The term ‘catalytic capital’ refers to grants, guarantees, letters of credit, collateralisation, subordinated loans, concessionary or cornerstone investments that trigger additional capital not otherwise available. Catalytic capital often accepts lower returns to accommodate the economics of high-impact organisations that are profitable but not profit-maximising, whether due to an early stage of business development, tough markets, or a focus on impoverished populations.

Examples of how blended finance and catalytic capital have been used to bring high impact potential opportunities to life are explored in the Spotlights on the Vanguard Laundry Services, and the Journey to Social Inclusion deals below.

Deals Spotlight


Traditional funding models for homelessness services don’t cut it for the client groups we’re targeting... J2SI's Social Impact Investment enabled us to access different types of capital, the types of capital that will allow us to provide support for sustainable change.

Catherine Harris, Sacred Heart Mission

Sacred Heart Mission's (SHM) Journey to Social Inclusion (J2SI) is an innovative departure from traditional short-term, re-active homelessness interventions. It takes a housing-first approach and seeks to address homelessness and its associated challenges by providing relationship-based, long-term support for mental health and well-being issues, as well as resolving any drug and alcohol issues. J2SI also helps people to build skills and contribute to society through economic and social inclusion activity.

Structure of the deal

The J2SI Social Impact Investment (SII) is a unique partnership between government, the social services sector, investors and philanthropy, where the risk of achieving the outcomes for clients is shared between the parties, with the aim of achieving positive social change. The J2SI SII is the first social impact investment negotiated with the Victorian Government. The financing structure pays a return, based on agreed achieved social outcomes such as people staying housed and a lower use of healthcare services.

In contrast to a traditional Social Impact Bond, the SII accesses lower cost debt which is guaranteed by philanthropy if the outcomes for clients are lower than expected. In accordance with paragraphs 19 of the Private Ancillary Fund Guidelines 2009 and Public Ancillary Fund Guidelines 2009, the guarantee qualifies as a benefit and forms part of the annual distribution, as a below market rate guarantee fee is payable.

Social impact

Around 116,400 Australians are experiencing homelessness, and it is estimated between 23,400 and 38,300 of those people are adults trapped in a cycle of long-term, chronic homelessness with compounding challenges impacting their health, well-being, and employment. SHM, through J2SI, takes an evidence-based approach to homelessness, helping people with complexities put homelessness to bed and instead build a stable, independent life. J2SI SII will expand SHM’s J2SI program, to help 180 people in Melbourne break the cycle of homelessness over five years with three cohorts receiving three years of service. Service delivery commenced in August 2018. This will create lasting positive social change for communities and individuals.

Catalytic effect

In combining government financing, philanthropic guarantees, and low-cost debt, this transaction represents the first time low-cost debt with guarantees has been used to finance a SII in Australia, and demonstrates the strategic role of philanthropy in enabling social finance deals.

Catherine Harris, General Manager for Business Development at Sacred Heart Mission, says philanthropists were interested in the approach, however, a few were deterred by the concept of a “zero fee”, which was difficult for some investment committees even when the activity aligned with the foundation's mission. Harris commented:

Negotiating such a complex finance model was no easy feat. We've brought philanthropy and investors into the financial structure to share the risk. We did face challenges securing the partnerships, however. The challenge lay in getting people to understand the nature of the transaction and the benefits of long-term investing. The SII shows philanthropists can use their money, not as a handout, but also to enable programs such as J2SI to happen.

Longer term, this transaction allows the J2SI model to be scaled and replicated under licence by social service organisations and state governments across Australia. SHM is developing a “J2SI product suite” and an Evaluation and Learning Centre to continue to refine the model so there is a real opportunity to expand J2SI around Australia to end chronic homelessness nationally using the new lower cost financing structure.

The NAB Foundation was one philanthropic party and provided a contingent pledge (similar to a guarantee) in the deal to ensure J2SI's access to low-cost debt capital. Lucy Doyle, Manager of the NAB Foundation commented that:

As a corporate foundation aligned with one of Australia’s major banks, we believe we have a responsibility to engage in financial innovation to help address complex societal challenges. Impact investing has the potential to unlock philanthropic capital, giving us an opportunity to move beyond traditional grant making to support the scaling and sustainability of proven impactful projects like J2SI.

Vanguard Laundry Services

The most exciting part about getting this deal up from the ground is seeing the impact it’s creating and its potential for replication. We are changing people’s lives with a blended finance model that really works, showcasing its massive potential.

Alex Oppes, SVA

Vanguard Laundry Services is a custom-built commercial laundry with a social outcome purpose of creating employment opportunities for Australians with mental illness. Involving over 50 parties, the Vanguard deal financed the building of the largest industry in Toowoomba, Queensland. The lead arrangers included Social Ventures Australia (SVA) and Vanguard’s founder, Luke Terry. Minter Ellison and King & Wood Mallesons provided pro bono legal assistance with Vanguard’s contracts and legal structure. This remarkable project demonstrates the challenges of leveraging social procurement and how to overcome them.


Deal structure

The Vanguard Laundry Services deal was funded and developed through a complex blend of monetary and in-kind donations, government grants and fee waivers and debt financing, including:

  1. The land for the laundry site was donated by Hallmark Property (alongside a project management fee waiver). The total value of the land and fee waiver was over $500,000.
  2. $850,000 in monetary donations were committed by partners, including $600,000 from the Paul Ramsay Foundation.
  3. Over $1,200,000 of debt was obtained through Westpac for the purposes of equipment financing. This debt was secured against the land donated by Hallmark Property.
  4. $1,000,000 in Federal Government funding as well as a waiver of $150,000 in council fees by the Toowoomba Regional Council. The Federal Government funding was secured over the course of five installments, with certain conditions precedent to funding (e.g. funding from other partners confirmed).



In the first year of operations, Vanguard Laundry Services reduced the number of participants reliant on Centrelink payments from 90.5% to 76.2%, and increased the median fortnightly income of participants by $392. This represented a 38.9% reduction in housing affordability stress.

After one year, all participants were able to record some employment experience (compared to 13.6% noting ‘no employment experience’ prior to commencement). Furthermore, 56.5% of employees recorded a history of ‘significant employment experience’ after a year of operations (compared to 31.8% 6 months prior to commencing). 78% of participants in the Vanguard Laundry Services program reported an improvement in health since commencing employment, with direct hospital savings estimated at just under $200,000.

The estimated five-year welfare savings to the government as a result of the program are estimated to be over $8.7m.


“Death affects us all and is an integral part of life. We will all die and we will all, at some time, face the death of beloved family members and friends.”

Tender Funerals provides a holistic, caring, and personalised approach to after death care and funeral services, with a focus on ensuring that cultural, family or community traditions are respected and met.

Established in 2014 as a not-for-profit, social enterprise initiative of the Port Kembla Community Project, Tender is a unique example of how blending different types of capital enabled truly impactful collaboration between a community organisation, a foundation, a social lender and the public.

Tender was able to use the proceeds a very successful StartSomeGood crowdfunding campaign for seed funding to get to market. Further funding from mission-aligned partners helped Tender to move beyond start-up phase. Social Enterprise Finance Australia (SEFA) which is at the forefront of developing innovative social finance models in Australia, then collaborated with the Vincent Fairfax Family Foundation (VFFF) to co-finance a deal that combined debt and philanthropy - a loan from SEFA Partnerships assisted with the purchase of the former Port Kembla first station, and a grant from VFFF enabled conversion of the building into a mortuary.

What SEFA said about the transaction:

“Tender is the first of its kind partnership in Australia. It demonstrates the power of a collaboration between a community organisation, the public (via crowdfunding), a foundation and a social lender that together create a very strong base for a sustainable social enterprise start-up.”

What Vincent Fairfax Family Foundation said about the transaction:

“The free flowing communication between the three organisations, and SEFA’s willingness to share its insights on financials, streamlined the Foundation’s processes and opened the door for collaboration in our newest strategic program – impact investment.”



"The role that PAFs played in providing first loss protection to investors in the Diversified Impact Fund was important to maximise fund size. This was particularly relevant for new impact investors because it allowed them to gain exposure to the space while having their risk significantly reduced. Our hope is that with the continued development of the market, and growing investor confidence, we may not need this support in future funds but it was critical at this point in the evolution of the social impact investing market."

Michael Lynch, Executive Director, Impact Investing, Social Ventures Australia

Social Ventures Australia closed the raise of a $15 million Diversified Impact Fund (DIF) in March 2018. The DIF is investing in social and affordable housing, social enterprises, impact businesses, non-profits and social impact bonds. The Fund has replaced SVA’s $9 million Social Impact Fund (SIF), which had $4 million of government grant money. The SIF made 10 investments, created more than 160 jobs for disadvantaged Australians and enabled the construction of 22 social and affordable dwellings, and returned approximately 6.7% p.a. since inception.

The DIF features an innovative 20% downside protection structure ($3 million) which is supported by 11 leading Australian PAFs and philanthropists. It is structured as a series of callable loans, with the money only called in the event of a shortfall at the end of the Fund. PAFs are not paid for providing the guarantee, but are able to count the implied market value of doing so against their 5% Minimum Annual Distribution. PAFs can count the following notional distributions:

  • Annual commitment fee = 3% of callable loan amount for the full 10 years of the DIF (or until the loan is called)
  • Interest rate = 3% + RBA cash rate of any amount of the Loan drawn down for the duration it is called; and
  • Loan forgiveness = any amount of the Loan drawn and later forgiven.

Below is a summary of how the downside protection works:

  1. Investors commit $15m into the Fund and PAFs severally commit $3m of downside protection via a series of callable loans. The Fund invests in a series of impact investments.
  2. At the end of 10 years (or the early termination of the FUnd), the Trustee calculates whether investors have received $1.00 per unit in combined capital and income distributions.
  3. If a shortfall exists, SVA will call upon the callable loan from the PAFs, up to $0.20 per unit.
  4. SVA provides the PAF moneys to the Fund via a back-to-back callable loan.
  5. The callable loan will be repaid to the extent that the Fund realises assets following the Fund termination. PAFs agree to forgive the remaining amount of the loan.


Wildlife Wonders, Photo credit Doug Gimesy

When finance and funding come together to support a project’s purpose the results can be incredible.

Lizzie Corke, CEO Conservation Ecology Centre

Wildlife Wonders is an ecotourism project of the Conservation Ecology Centre (CEC). Situated on the Great Ocean Road, the attraction will enable visitors to experience the unique environment of the Otways, observing and photographing iconic animals in a natural, predator-free setting. Visitors will be guided by qualified conservationists, and the overall experience will be heightened with design and creative input from Brian Massey, Art Director of ‘The Hobbit’ films and landscape designer of NZ attraction, ‘Hobbiton’.

Wildlife Wonders is set to become a significant employer in the region, providing jobs in tourism and conservation. As a social enterprise, the profits will be reinvested back into the activities of the CEC to ensure that the wildlife and natural habitats of the Otways are protected through ecosystem restoration, ecological research, species recovery programs, community education program, and community skills development.

Other key long term benefits of Wildlife Wonders include:

  • Creation of local jobs: at least 44 jobs during construction and 35 new full-time positions in both ecotourism and conservation once operational;
  • Enhanced visitor experience: amplified experience of the Great Ocean Road, directly increasing stay and spend;
  • Providing a leading example of social enterprise: an economically sustainable approach to environmental conservation.

The project has been spearheaded by CEC’s CEO, Lizzie Corke, who said the challenge for CEC had been securing reliable funding for its conservation work.

We needed a funding stream that was reliable and secure for furthering the conservation effort.

Behind this project is an innovative multi-party, layered finance structure which blends government venture funding, philanthropy and private grants, patient loans and debt capital.

To date, the Wildlife Wonders project has received a $557K Tourism Demand Driver Infrastructure Grant from the Commonwealth Government to initiate preliminary work, planning and the financial model. An additional $2 million was secured from the Regional Jobs and Investment Packages program through the Commonwealth Government and $1.5 million has been announced from the Regional Tourism Infrastructure Fund by the Victorian Government, to total a combined $4 million in venture funding from the Federal and State Government. The investment is expected to deliver ongoing and sustainable economic and environmental benefits. The RE Ross Trust, SEFA and a private investor have provided debt capital for the purpose of purchasing the project site and commencing on ground works.

As a result of these grants and investments, Wildlife Wonders has raised $6.5 million, which marks the halfway point in reaching its goal of raising a total of $12.5 million.

Case Study – Medicines Development for Global Health (MDGH):

Medicines Development for Global Health (MDGH) is a Melbourne based not-for-profit global health organisation founded in 2005. MDGH’s vision is to eliminate neglected diseases by developing, seeking regulatory approval and delivering affordable medicines and vaccines for people who need them most. To achieve this, MDGH operates a social enterprise and reinvests all profits back into the company for its purposes.

Recently, MDGH completed the development of moxidectin, the first new treatment for river blindness in 30 years. River blindness is a neglected tropical disease affecting 16 million people in sub-Saharan Africa, and it causes severe skin reactions and, in some cases, leaves the victim blind. Moxidectin is a broadly used veterinary product for parasitic worms and mite infections but this is the first registration for human use worldwide.

MDGH’s development of moxidectin has been funded by various investment structures. The Global Health Investment Fund (GHIF) invested US$13 million to finance MDGH’s development activities. The GHIF is a social impact investment fund designed to provide financing to advance the development of drugs, vaccines, diagnostics and other interventions against diseases that disproportionally burden low-income countries. In particular, the GHIF seeks to invest in opportunities that have a clear impact on public health in developing countries, while still providing value in high-income countries. GHIF’s funding enabled MDGH to submit a New Drug Application (NDA) to the United States Food and Drug Administration (US FDA) to register moxidectin to treat river blindness in humans.

MDGH has also recently received AU$450,000 funding from seven Ancillary Funds to help them in the development of further human uses for moxidectin, particularly as a treatment for scabies. Scabies is caused by microscopic mites embedding themselves into the human skin and causes debilitating itching and more serious secondary infections. MDGH sought the funding, in the form of impact investment loans, to bridge the gap between current cash flow constraints to continue the development of moxidectin for scabies, without diverting funds away from the development of moxidectin for river blindness, which was still awaiting US FDA approval at the time.

As of 13 June 2018, the US FDA approved moxidectin for the treatment of river blindness in patients aged 12 years and older. Accordingly, MDGH were awarded a priority review voucher (PRV) under the FDA’s reward initiative for registration of new treatments designated for neglected tropical diseases. MDGH will trade their PRV on the market to repay the loans that were provided by the seven PAFs.

“The funds received last year from the seven ancillary funds were pivotal to maintain the work MDGH are conducting around scabies while awaiting the FDA approval on moxidectin for river blindness and it was great to see such interest in the finance structure used.”

Ronan Lehane, Capital Collaboration


“APS Foundation was pleased to invest to in MDGH to enable the research into use of moxidectin for the treatment of scabies which afflicts indigenous Australian and other communities around the world while the FDA approval process was completed.”

David Ward, APS Public Ancillary Fund

  1. Impact Investing Australiia
  2. Alex Nicholls & Jed Emerson, Capitalising Social Impact, ‘Social Finance’, Social Finance’, Oxford University Press, 2015 at 2.
  3. Tom Gotsis, ‘Social Impact Bonds and recidivism: A new solution to an old problem?’ (February 2017) NSW Parliamentary Research Service.
  4. Organisation for Economic Cooperation and Development (OECD), ‘Understanding Social Impact Bonds (Report 2016) available at <>.
  5. Peter Ramsden for OECD, ‘Social Impact Bonds: State of Play & Lessons Learnt’ (2016).
  6. Krzysztof Dembek et al., ‘Impact Investing Australia 2016 Investor Report’ (Report 2016) 6.
  7. Emma Tomkinson, ‘Social impact bonds (SIBs) in Australia’ (18 July 2017) available at <>.
  8. Cole Latimer, ‘Climate bonds market to hit a new benchmark in 2018’, Sydney Morning Herald (10 January 2018).
  9. Responsible Investment Association Australasia ‘Benchmarking Impact: Australian Impact Investment Activity and Performance Report’ (Report, 2018).
  10. Oliver Yates, Clean Energy Finance Corporation, ‘Australia’s Budding Green Bond Market’ available at <>.
  11. Grant Thornton Australia, ‘The Green Bond Revolution’ (19 July 2017).
  12. Alex Nicholls, Rob Parson and Jed Emerson, Social Finance, Oxford University Press, 2015.
  13. James Militzer, Next Billion, William Davidson Institute (November 2017) available at <>.
  14. Fiona Harvey, ‘Blended Finance is key to achieving global sustainability goals, says report’ The Guardian (24 January 2018) available at <>.
Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.