Expanding the impact

Our proven Journey to Social Inclusion (J2SI) program was expanded last year through a funding model that uses a combination of funding and financing from government, banks and philanthropy – an Australian first type of transaction.

The J2SI Social Impact Investment (SII) transaction is significantly different because it uses low-cost debt and a guarantee structure to support a government pay-for-performance contract. Harnessing debt and contingent grants as other forms of capital via this model follows a structure developed by philanthropists in the United States.

The J2SI SII represents a potentially important innovation for how organisations seek to structure and finance social programs in Australia, and the guarantee/contingent grant structure provides a new opportunity for philanthropists to deliver social impact. This particular model maximises the amount of good that is done per dollar.

Overall the combination of the innovative nature of this hybrid transaction and the emerging impact investing market in Australia resulted in a number of transaction-specific challenges. This is why we commissioned the Centre for Social Impact to conduct research on this for a case study of the transaction to offer solutions for others to learn from our experience.

“This case study is an opportunity to show philanthropy how they can actually use their money, not just as a handout, but also to enable programs like J2SI to happen,” Business Development General Manager Catherine Harris says.

“We want to see the economies of scale and the success of the program to be expanded around Australia; that’s our vision.”

The case study provides a significant learning opportunity about the use of a guarantee structure as part of a pay-for-performance contract so that they can be addressed for future efforts.

The case study also explains how the Australian Taxation Office has provided a Class Ruling for the J2SI SII which confirms for contingent grantors the interpretation of the Private and Public Ancillary Fund Guidelines and sets out a valuation methodology to calculate the benefit to apply against their annual giving obligations.

This will enable its use to be scaled nationally by other service providers and governments and providing more opportunities for philanthropists to support the programs being delivered.