“Impact investing” is a buzz phrase amongst some of the world’s biggest financial institutions. Basically, it’s all about investing in things that not only provide a financial return but also produce significant and measurable social and economic impacts.
Social impact bonds (or Social Benefit Bonds) are designed to attract private sector investment to social projects delivered by the non-government service sector. The bonds are issued by the Government and pay a return to investors, contingent on the achievement of measurable social outcomes that represent cost savings to the Government. This removes the upfront costs to Government and any risk associated with funding unsuccessful projects. When the economics stack up, the Government pays for outcomes not activities. The emerging impact investment market is shaping change in the aged care, health, social and education sectors internationally – and Australia is catching on. New South Wales already has two Social Benefit Bonds in play and South Australia, Victoria and Queensland are all about to join in the movement.
In an article featured in The Conversation, Jason Potts discussed the potential for social impact bonds to be a source of arts and cultural funding, concluding that they do offer a model worth considering. Those delivering the service need to collect evidence that social outcomes are being achieved and that these outcomes represent savings to the government. While the social benefits of the arts are well documented, reluctance by some to measure outcomes could leave them out of this innovative public finance movement.
For participatory arts and cultural programs and arts-based therapies, the instrumental social impacts might be simpler to measure and agree on, but in most cases individual intrinsic impacts precede shifts in higher order social outcome measures. Capturing these outcomes is critical. Unlike the public sector, private investors won’t put up with a lot. They’ll invest in a program if they’re confident it can achieve the agreed outcomes and they’re unlikely to continue to fund it if it’s not demonstrating (at least) movement towards achieving them.
But what if there were a standardised set of intrinsic outcome measures that the Government agreed were worth investing in?
Social Benefit Bonds in the arts might be closer than we think.