Australia: Social Finance in Australia: Finding funding for the not-for-profit sector
not for profits update

On 25 November 2011, the Senate Economics References Committee released its report (Report) on its recent inquiry into the mechanisms and options for the development of financial products and services for not-for-profit organisations. The issues considered in the report have the potential to trigger alternative financing arrangements for charities and not-for-profit organisations and create a framework for social investment through mechanisms such as social impact bonds.

The report can be accessed here.

The Report recommends the establishment of a Social Finance Taskforce to set a strategic direction to coordinate opportunities for social economy organisations and investors to develop a capital market in Australia.

The Report identifies five principal areas critical to the development of a robust social finance and investment structure in Australia:

• Development of intermediaries and building the capacity of not-for-profit organisations to seek and access finance
• Educating investors of options and expectations, particularly in ventures which may deliver a 'sub-commercial' rate of return
• Promoting new social investment products such as social impact bonds specific to the needs of different not-for-profits
• Strengthening innovation in social enterprises, including access to seed capital
• Developing a measurement framework to evaluate investment performance and minimise compliance costs.

Broader NFP Reforms

While the broader reforms taking place for the not-for-profit sector tend to change the regulatory environment enabling charities and not-for-profits to carry out their mission, the Report sets out a roadmap for the potential options for sustaining the work of charities and not-for-profits.

Charities and not-for-profits should review the Report to consider the potential for financing sources beyond traditional grants and donations appropriate for their mission which can:

• encourage collaboration with the public and private sectors
• garner public confidence through collaboration and the ability to measure and report on outcomes
• provide a means of financially sustaining their activities to further their objectives.

Banks and financial institutions should review the Report to determine its impact and the potential for investment in the charitable and not-for-profit sector.

Gadens Lawyers is able to advise banks, financial institutions, not-for-profits, intermediaries and social investors considering social finance arrangements including the structure of social bonds and the effect of the Report.

For more information, please contact:

This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.