How do we get super funds involved in social investment?

In Australia, superannuation funds are large and growing, so they’re the ideal social investors of the future. But super funds are also highly regulated and risk averse. And rightly so – we don’t want fund managers taking huge risks with our super! So there are two options. Firstly, we can lower the risk of social investment products to suit the requirements of funds. Secondly, most superannuation funds offer their clients a choice of options with different risk and return profiles. There’s an opportunity here to allow clients to chose to invest a portion of their super in social investment options, although we may not quite be there yet…

Phillipa Yelland’s article in today’s Investor Daily, Jury still out on Social Benefit Bonds, questions whether Social Benefit Bonds are good investments, interviewing Nick Ryder from NAB and Peter Murphy from Christian Super. Ryder neatly summarises the SBB concept and notes that we’re looking at a class of investment that do “not necessarily require people to choose between being a philanthropist or an investor”.Image

Murphy’s reservations have to do with the SBB’s complexity, the difficulty of understanding the metrics and using Social Return on Investment (SROI) figures. These reservations reflect where the SBB scene is at in Australia right now: we have three SBBs under development in New South Wales, none in the rest of the country, and none operational. We can’t fully understand the risk to investors until the terms, structure and the metrics of the SBBs under development have been decided on. The use of SROI is a separate issue. While it will be useful and meaningful to know the full social return of the SBB investments, returns to investors and Governments are unlikely to be calculated using this method. Investor return depends on outcome change, measured in a way that is closely related to costs Government is able to avoid. SROI itemises outcome change for all stakeholders and gives each of these a value. The basis of an SBB is limited the value of the outcome change for one stakeholder – the Government body funding it.

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