Impact Investing views from across

‘The Ditch’

July 2016

Funding Investment Advice

Trusted partner to

funders and

providers

Practical

knowledge about

disadvantage

Outstanding

team

Financially

sustainable

2

SVA works to improve the lives of people in need.

Accountability Integrity Respect Humility

More effective funding More effective services Reduction in disadvantage

3

Impact Investing

Impact Investing

Impact FundsSocial Impact

Bonds

Social & Affordable

Housing

Returns =

Social

+Financial

4

Impact Investing: Who’s who in the zoo

Stage of

developmentConceptual /

early stage

“Investment

ready”

At scale /

“bankable”

Key

players

Capital

type

“Capacity building” SEDIF Funds • VC

• Mainstream banks

• “Specialist” banks

• Grants / donations

• “In-kind” support

• Family / friends

• Social business angels

• The gap where

banks don’t play

• Debt and quasi-

equity

• Commercial

debt and equity

Other

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Social Impact Fund #1

SVA Social Impact

Fund - $8mFund Manager

35 x Sophisticated

investors

1 x Superannuation fund

Private Investors – $5m

Investors

• Returns 6.6%-8% to

date

9 Other

InvestmentsFuture

Investments

Medical social

enterprise

Disability social

enterprise Investments

• [See next slide]

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SIF investment criteria

• Social enterprises, NGOs and CHP

• For profits or not-for-profits

• $250k-$1.5m+ deal size

• Debt or equity

Meet deal criteria

• Strong business model

• Prefer trading recordFinancial sustainability

• Clear social mission focused on addressing disadvantage

• Predominantly serving Australian communitiesSocial impact

• Strong track record

• Clear evidence of commitmentManagers

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Social Impact Fund #2 - investment focus areas (~$10 - 15m)

Impact Theme Investment Focus

1Employment

opportunities

• Disadvantaged workforces (e.g. long-term unemployed,

disability, indigenous)

• Disadvantaged postcodes (e.g. Western Sydney)

2Under-served

markets

• ‘Bottom of pyramid’ businesses (e.g. low cost gyms in

disadvantaged postcodes)

• Community regeneration (e.g. public infrastructure)

3Social

services

• Disability (e.g. NDIS, Australian Disability Enterprises)

• Healthcare (e.g. primary health in underserved areas)

• Aged care (e.g. NFPs, underserved areas)

• Social sector organizations

• Aboriginal corporations

4Education

and skills

• Early childhood education

• K-12 alternative education (e.g. community colleges)

• Vocational education

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Social and affordable housing

9

Super Funds – HESTA & beyond

Investment manager

(SVA)

Trust

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SVA credentials – social and affordable housing

Horizon Housing (“HH”) is a tier 1 community housing provider and one of Queensland’s largest providers of

affordable housing.

HH acquired the management rights over a portfolio of 995 NRAS properties and bought a controlling stake in

Australian Affordable Housing Securities (“AAHS”), a provider of NRAS compliance services.

Through the SVA-managed SIIT, SVA structured a debt finance package for both HH and AAHS. This transaction

was the first debt investment for HESTA, who are the sole investor in the SIIT.

Total debt facilities of $6.6M were provided via the SIIT and structured in the form of a secured cash flow loan.

Equity was provided by SVA, HH and Questus Pty Ltd (a listed affordable housing provider).

Sustain Community Housing is a not for profit developer of social and affordable housing with a focus on mixed

developments (private and social) to improve outcomes for tenants.

SVA jointly arranged debt facility with Social Enterprise Finance Australia to fund a residential property

development in Colyton, Western Sydney. The senior construction loan was part of the overall $2M financing for

the project which will deliver 2 dwellings into the social and affordable market in NSW.

The Colyton project is the first development under the Sustain Community Housing model.

Joint Senior Debt Arranger

December 2014

Sole Senior Debt Arranger

Equity Provider

Advisor

December 2015

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Social Impact Bonds

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Bonds: Newpin

Investors

GovernmentService Provider

Service Users

Newpin Social Impact Bond Structure

SPV

1. Program works with families to either safely return children in

care to their families or prevent them from entering care

2. $7m bond, key features:

1. Minimum 5% interest first 3 years

2. Principal protection 75% in years 1-3; 50% in years

4-7

3. FY16 results:

1. Achieved a ~62 per cent "restoration" rate

2. Paid 8-9% coupon to investors

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Bonds: Indicative economics

Example:• Expected future expenditure attributable to

“Intervention Group” $150m

• If reduce by 20%, $30m savings

• If savings split equally:

$10m investor

returns/bond costs

$10m service

provider costs

$10m net

government savings

Paid by

investors

$20m

payment

Government savings

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Bonds: Pipeline

South Australia

SVA working on first pilot SIB with

Hutt St Centre/Common Ground

Adelaide

Homelessness focus

Commonwealth

Minister spoken publicly about

SIBs

PwC actuarial approach

Victoria

Treasurer engaged for

SIB pilot - FY16/17

Queensland

Announcement by Treasurer

RFP shortlisted in May 2016

Recidivism/Out of Home Care

NSW

2 SBB pilots underway addressing Out of Home Care

– Newpin (SVA/UnitingCare), Benevolent Society

Office of Society Impact Investment established

• SVA working on a 'young people at risk' SBB

• SVA shortlisted on Mental Health & Chronic Illness

New Zealand

SVA advising Government on Social

Bond program

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Finally…

Ian Learmonth, Executive Director Impact Investing

Ilearmonth@socialventures.com.au

Tel: 02 8004 6729

www.socialventures.com.au

Any questions?

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