Good morning, thank you for all coming and thank you for inviting me here this morning.
I'd certainly like to directly thank Dr Peter Shergold and the Centre for Social Impact for the invitation.
And of course, thanks to my former Senate colleague and now fierce advocate of social business development and the power of the third sector, Cheryl Kernot.
I also like to acknowledge our international guest speaker, Mr Glen Saunders, who with over 25 years experience in social lending and investment, has a wealth of experience on these issues.
Finally, a good morning to the members of the Panel I'll be joining after my comments.
Social impact investing
This is a deeply important meeting today – the inaugural Investing for Impact Forum.
Today is unique in the Australian context as an opportunity to bring together the varying parts of the puzzle with a clear goal to catalyse "impact investing" into social businesses.
As you know, that's not just investment for profit's sake, but investment to both make a profit and to make an impact.
That's a positive impact on our society, on our community, on our environment.
While social impact investment is not entirely new in Australia, some aspects of it are relatively undeveloped here in comparison to the United Kingdom or Europe for example.
This is the case particularly in relation to financing of social enterprises.
That's why today is particularly important.
Today is a forum that brings together the individuals, the organisations, the institutional investors and the groups that can bring all of the pieces together and deliver the financial backing to make social impact investment move from niche to understood and mainstream.
So, I'd like to take this opportunity to congratulate you from the very beginning for just being here – your initiative in coming together to combine your shared knowledge on social businesses and social impact investment will make a difference.
A platform of sustainable growth
As I have said in many other forums over the past two years, the Rudd Government views social investment as an important factor in helping drive social, environmental and economic change.
At the same time, it is one part of a successful and diversified economic policy framework that has delivered Australia an economy that's withstood the global financial crisis.
We took decisive action on the part of the Government to cushion Australia from the worst impacts of the global financial crisis and it will take careful planning to face the challenges of a growing economy in a dynamic region and with significantly changing demographics.
The Government is focused on delivering sustainable economic growth that raises living standards and improves the quality of life for all Australians.
We are seeking growth which supports a strong and sustainable economy, and which provides opportunity and bridges the disadvantage gap, both in the cities and in the regions.
The challenges ahead
Despite our current strong position, Australia's living standards and government finances will face many challenges over the next 40 years.
These include a growing and an ageing population and escalating pressures on the health system.
For example, if spending on ageing and health stay at current levels, total government spending will jump from around 22 per cent of GDP in 2015, to around 27 per cent by 2050.
Raising productivity growth and removing barriers to workforce participation are crucial if we are to overcome the looming challenges.
As a direct response to the fiscal challenges presented by an ageing population and rising health costs, the Prime Minister announced the new National Health and Hospitals Network to deliver better hospitals and better health care for all Australians, wherever they live.
But planning for the sustainable future must also be about the health of our planet.
As outlined in the recent Intergenerational Report, known as Australia to 2050 – unmitigated climate change poses a significant challenge to Australia — environmentally, economically and socially.
Avoiding the effects of extreme climate change will require significant investments in clean technologies and research and development.
Addressing climate change will require governments to work together with businesses and the community.
In this regard, the Government has committed $75.8 million to the Australian Carbon Trust to further support individual action by households and businesses.
The Rudd Government's social investments
Nation Building Plan and action on social housing
A sizeable part of our success during the global recession can also be attributed to the Government's own record social investments.
The Government's biggest investment was in the greatest determinant of social inclusion, and that's jobs.
The Government's $42 billion National Building Plan was designed to protect Australian jobs and sustain the economy during the global financial crisis.
Treasury estimates that this package supported around 200,000 jobs.
Under the package:
- One-off cash payments were made to eligible families, pensioners, students, drought‑affected farmers and others.
- We are constructing or upgrading a building in almost every one of Australia's 9,540 schools, through the Building the Education Revolution program.
- More than 20,000 social and defence homes are being built, and others refurbished, under the social housing initiative.
The Government's social housing initiative builds on a range of other programs designed to improve housing affordability and assist Australians who are most vulnerable in the housing market.
These include significant increases in funding for social housing, remote Indigenous housing and homelessness services announced by the Council of Australian Governments in November 2008.
The Government has also introduced the National Rental Affordability Scheme (NRAS), which provides financial incentives for institutional investors and not-for-profit housing providers to invest in affordable rental housing for households of limited means.
I have covered merely a snapshot of how the Government is investing in social infrastructure.
Investments in social enterprise
But we are also investing in "social enterprise".
As you here today would know, social enterprise can refer to traditional social and voluntary sector activities, as well as business models designed to deliver valuable social outcomes in a financially sustainable way.
Social enterprises offer training and employment opportunities to disadvantaged groups and provide an important foothold in the labour market for people such as the long-term unemployed, homeless people and people with disability.
Social enterprises can face a unique set of challenges, beyond those experienced by the for-profit private sector. Access to funding and balancing sustainability with social contribution are just two of these challenges.
It is for that reason that the Rudd Government is providing significant financial support to social enterprises through the Jobs Fund and the Job Services Australia Innovation Fund.
As many of you would be aware, the Jobs Fund is a $650 million Australian Government initiative designed to maximise job and training opportunities in local communities.
Social enterprises provide training and employment opportunities to the long-term unemployed, the homeless and people with disability. They are one way to break the cycle of disadvantage and help people into meaningful long-term jobs.
Total funding for social enterprises and support for social enterprises under Rounds 1 and 2 of the Jobs Fund was $66 million.
The Innovation Fund is a $41 million Australian Government initiative designed to address the needs of the most disadvantaged job seekers through funding projects that foster innovative solutions to overcome barriers to work.
Around $10 million was awarded to social enterprise under rounds 1 and 2 of the Innovation Fund.
But we are also working intensively on the less tangible features of fair and equitable society.
We are working on the social systems that allow individuals to progress and prosper – and this must necessarily involve action on social inclusion, or for some groups, the lack of social inclusion.
The Rudd Government's vision of a socially inclusive society is one in which all Australians feel valued and have opportunities to fully participate in the life of our society.
Achieving this vision means that all Australians will have the resources, opportunities and capability to:
- Learn by participating in education and training
- Work by participating in employment, in voluntary work and in family and caring
- Engage by connecting with people and using their local community's resources
- Have a voice so that they can influence decisions that affect them.
Some Australians will need more of a helping hand than others in order to make this vision true.
In today's complex society, Governments alone cannot address all the difficult social issues confronting Australians.
That is why the Rudd Government has also been building a stronger relationship with not-for-profits, including through a new National Compact between the Australian Government and the Third (or not-for-profit) Sector.
The National Compact is the result of more than two years of consultation and is an agreement that sets out how government and the sector will work together in order to improve the lives of Australians.
Role of the private sector
But one further area that needs to be increasingly brought within this broader array of action by the public and not-for-profit sectors, is of course, the private sector.
This is of course fundamental to why we are here today – to bring together institutional investors and potential targets of impact investments, and to discuss what we've achieved to know and what we might do next, including at a regulatory level.
The philanthropic sector is a good place to start – although of course, it is only one part of the answer.
But as a source of resources, innovation and civic engagement, it plays a growing and important role in creating an inclusive society, in powering-up the innovative social thinkers that will keep us moving forward towards our goals.
By utilising private funds for public good, philanthropists can support social outcomes that the government, the non-profit and corporate sectors cannot easily meet.
In recent times there has been a shift away from ad hoc giving towards real social investment made through longer term partnerships – what has been called 'engaged giving'.
One of the major recent developments in private philanthropy has been the creation by the Rudd Government of private ancillary funds – previously known as prescribed private funds – along with an entirely new system of regulation, transparency and reporting to govern them.
This new framework became effective on 1 October 2009.
These funds are, in essence, trust funds that can be set up by families or businesses as a vehicle for private philanthropy.
Private ancillary funds are important tools for social investment as they facilitate the building of long-term relationships with charities. Through these partnerships, philanthropists can be part of the change process.
These funds are tax advantaged as donations to them are tax deductible and the funds, once endorsed, are income tax exempt entities.
The sole purpose of private ancillary funds is to give to other charities – to distribute monies to those charities that are at the coalface, that are out in the community doing charitable works.
The Government's overriding intention is to ensure public confidence in private philanthropy that is supported with tax concessions remains strong into the future.
The sector has responded positively to the new framework, including the guidelines which brought in simplified distribution rules for funds.
The rules cut red tape by removing the need for complex accumulation and distribution plans, and streamlined the existing endorsement process for funds. They also clarified existing investment rules, giving more certainty to philanthropists and improving public confidence in the funds under management.
There are now over 800 funds in existence, with assets of almost $2 billion. In the short time since 2001, private ancillary funds have made distributions for the public good of over $450 million.
The largest recipient of fund distributions in 2007-08 was the welfare sector, comprising 31.5 per cent of total distributions, with educational and environmental organisations also receiving a substantial proportion of donations.
The success of the private fund model in Australia demonstrates the positive impact of the tax system in supporting this sector, enabling individuals, families and business to take a strategic and inter-generational approach to their charitable donations, and investments for charitable purposes.
Helping business get what it needs to invest
Of course for business to take the next step and invest, rather than just give, you have certain, reasonably well defined needs.
You need a degree of certainty about what you're investing in, a degree of confidence your investment target is prepared and understands the challenges of enterprise.
So much of this rests on a steady flow of information.
As such, the Government is also looking at ways to build the capacity of the not-for-profit sector to respond to the business community's desire for a more evidence-based, social investment approach to philanthropy.
To inform policy in this regard, the Government commissioned a Productivity Commission study into the contribution of the not-for-profit sector, with a focus on improving measurement of its contributions and on removing any obstacles to maximising the sector's contributions to society.
The Productivity Commission gave its final report to the Government in February, and the Government is currently considering the detail of that report.
In addition, in 2008 the Rudd Government announced that it would provide $2 million over three years to assist the St James Ethics Centre in its efforts to promote responsible business practices.
In a world first, funding has enabled the Centre to become the focal point in Australia for two important initiatives: the Global Reporting Initiative – the international gold standard for reporting on sustainability; and the UN Global Compact – the global initiative in corporate citizenship.
And the social enterprise sector is making its own important contribution to this flow of information and experience.
Social Business Australia is a new organisation that was created to assist social business with access to the resources and support they need to scale up and trade successfully.
Social Traders is running a mapping project in partnership with the Queensland University of Technology Australia, called 'Finding Australia's Social Enterprise Sector'. This big-picture overview will help to raise the public profile of social enterprise and generate greater interest from organisations interested in contributing to improving social outcomes.
And, Social Ventures Australia is providing support to the sector through advice, funding and consulting services to individual enterprises.
Australia's funds management pool
We also have another major basis that stands to serve this agenda – and that is our superannuation savings and general funds management sectors.
As I have identified many times before, there is a growing realisation within the funds management industry that a range of environmental, social and governance (ESG) issues pose core investment risks with the potential to impact heavily on the long‑term viability of investments.
It is for these reasons that the Government announced in early February that the Rudd Government would provide financial assistance to the Responsible Investment Association Australasia to establish the Responsible Investment Academy, the world's first academic-level centre for responsible investment education, training and innovation.
The Academy will deliver a range of education and training programs, including diploma and certificate courses that will enable the investment community to better assess the ESG considerations.
I look forward to seeing the maturity of the Responsible Investment Academy as it further promotes corporate social responsibility, including the growing role of impact investing, in Australia, and the important role that the investment community can play to encourage companies to better integrate ESG considerations in their operations.
The Rudd Government has been a strong social investor.
And our social investments have made a major impact across the key sectors.
We have seen how a Government with a strong commitment to social outcomes and social inclusion can use a combination of investments in social infrastructure and policy settings to encourage and grow social enterprise, to genuinely change people's lives.
But we have also seen how the right policy settings can open up the process of partnership.
Of bringing private money in through a transparent and well regulated philanthropic sector, or private business resources into social investments when the investors have access to clear and readily available data and information.
So, the direction is a clear one – we have made much progress, but there is always more to do.
I understand that your Forum will be producing a report from today's proceedings and I greatly look forward to the Forum's ideas on opportunities and barriers to development of social investment in Australia as a key part in that process forward.