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.

Paul Zak’s “moral molecule” helps us understand why giving is it’s own reward

ImagePaul Zak began studying oxytocin as a measure of trust. When oxytocin is present in our brains and blood streams, we are happier, more generous and more trusting. Great! So how do we increase oxytocin to get people to be more generous and trusting? It’s got a half-life of three minutes, but you can bring it on by hugging, dancing, sex, massage, praying… or for a more professional environment, people will produce oxytocin if they feel you trust them. Economies with a higher level of trust are more prosperous (although I wouldn’t jump to conclusions about cause and effect here).

I’m interested in what other people think the implications for this are in terms of giving and social investment. I wonder if models of funding that involve collaboration and connectedness are more likely to work because they’re boosted by this biological reaction to trust. Some risk sharing and risk management strategies may be more successful if they include a display of trust in other parties. This recognises that the way we behave with money isn’t driven exclusively by financial return, but by how much we value sharing and connecting with others.

Paul Zak is Professor of Economics and the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University. His new book is called “The Moral Molecule“. This Sydney Morning Herald article is a good summary of his work in the area and his 17 minute TED talk Trust, morality — and oxytocin is worth a watch.

My favourite bit, quoted here from the article, was the description of this experiment – flies in the face of Game Theory!

The starting point was a persistent mystery in Zak’s original field, economics: time and again, in experiments, people behave more generously than traditional economic models predict that they should. A classic demonstration of this is known as the Trust Game, in which pairs of participants communicate with each other via computer terminals: they never meet, and have no idea who the other person is. Person A is given GBP10 ($15.20), then invited to send a portion of it, electronically, to person B. Person A has a motive for doing so: according to the rules, which both players know about, any money that A sends to B will triple in value, whereupon B will have the option of sending some of it back as a thank-you. According to conventional notions of rational behaviour, the game should break down before it has begun. Person B, acting selfishly, has no reason to give any money back – and, knowing this, person A shouldn’t send any over in the first place.

Yet, in trials of the game, 90 per cent of A-people send money, while 95 per cent of B-people send some back. Analysis of the oxytocin in their bloodstreams reveals what is going on: by sending money to person B, person A is giving a sign of trust – and being on the receiving end of a sign of trust, it emerges, causes oxytocin to increase, motivating more generous behaviour in return. And it is not just receiving free money that causes people to feel oxytocin’s “warm glow”: in other studies Zak has conducted, random windfalls don’t cause nearly so much of it to be released. What counts is being trusted: trust in one person triggers oxytocin in the other, which triggers more trustworthy behaviour, and so on, in a virtuous circle. “Well, that’s except for the 5 per cent of people who are ‘unconditional non-reciprocators’,” says Zak, referring to the consistent minority of people who seem immune to this cycle. “What we call them in my lab is ‘bastards’.”

NPC’s shared measurement series – developing common metrics for common outcomes

New Philanthropy Capital (NPC) has so far produced three reports in its Measuring together series. Each report looks at measuring both final outcomes for program participants and outcomes achieved along the way. This is one of those endeavours where we all benefit from the reports and their methodologies, but the benefit of having charities in the same service area work together to develop them may be even greater.

[post edited April 2013]

I’m going to do an update here and just link to NPC’s work Mapping Outcomes for Social Investment, part of developing an impact measurement framework for Big Society Capital – there’s the outcomes matrix, outcomes maps and ‘Investing for Good’ by Adrian Hornsby and Gabi Blumberg of Investing for Good. The Good Investor is available in one of the most user-friendly formats if you click on that link and I can’t wait until the matrix and maps go online and PDF free (hint, hint)!!

Will we see more randomised controlled trials in social program evaluation?

Randomised controlled trials are the preferred measurement method for the NSW social benefit bond (social impact bond) trials. The Coalition for Evidence-Based Policy published an overview and demonstration of rigorous-but-low-cost program evaluations in March 2012. The publication highlights the use of randomized controlled trials (RCTs) with administrative data systems, providing a number of examples from existing studies. RCTs are widely considered best practice with respect to program evaluation.

NPC looks at getting involved in social investment from a charity perspective

Funders might assume that charities will be excited about the recent growth in social investment markets. New Philanthropy Capital (they do the best work!) produced A guide to social investment for charities in November 2011.


Charities need to think carefully before taking on social investment: they need to understand the risks and take steps to mitigate them, and be clear how the investment will create social benefit and improve the lives of their beneficiaries. For charities that have considered the risks fully and are confident of a future income stream, social investment can be an effective way to enable them to do more for the people they help.

Raleigh citizens will create their open data policy and catalogue

While governments across the globe are committing to open data policies, these are proving harder to deliver than to write! Raleigh has asked its citizens to contribute to their policy development. The great thing about this, is that they’ll get an idea of who wants to use their data and how. Government data are often published to answer a set of random questions in formats that aren’t accessible to statistics programs.

I expect Raleigh will have much more success with this approach than the UK Cabinet Office did with their Public Data Corporation. Announced in January 2011, the Public Data Corporation was to “bring together Government bodies and data into one organisation and provide an unprecedented level of easily accessible public information and drive further efficiency in the delivery of public services”. Unfortunately, it took so long to figure out how it was all going to work, that the Department of Business, Innovation and Skills struck it off the register in January 2012. We may yet see a revival of the Public Data Corporation, although the proposed Raleigh approach of providing a centralised directory to separate agency data sources may be the compromise they’ll have to make.

Why are crime rates in similar towns are so different?

A couple of great studies in NSW look at communities with similar demographics and differing crime rates and ask what it is that makes the difference. One ‘Why do some Aboriginal communities have lower crime rates than others….A pilot study‘ was published by R. McCausland and A. Vivian in the ANZ journal of criminology vol. 43(2) pp 301-332. The other ‘‘A tale of two towns: Social structure, integration and crime in rural NSW‘ was published by P Jobes, J Donnermeyer and E Barclary in Sociologica Ruralis vol. 45, pp. 224-244.

Big Data… what’s it all about?

I’m still getting my head around the concept of big data, but it’s creating some buzz. From its Wikipedia page

“Big data” is a term applied to data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process the data within a tolerable elapsed time. Big data sizes are a constantly moving target, as of 2012 ranging from a few dozen terabytes to many petabytes of data in a single data set.

I quite like Melissa Hardt’s brief and easy to read Govloop blog post summarising big data. In it she refers to the Obama administration’s US$200m “Big Data” Initiative announcement – it ends with a good summary of spending in various departments.

I heard it said that “big data” is a McKinsey term – whether it is or not, they’ve produced a report that scans the data, systems, talent and potential in the US.

The interest point here for me is data visualisation – realtime, moving pictures of systems.. imagine flexible public services with realtime responses to their service environment…

NSW Government ICT strategy – first mention of open data and open government in NSW – Yay!

The Department of Finance and Service ICT Policy unit has led the move into open government and open data for the NSW public service with the development and publication of their ICT Strategy. Let’s hope this heralds much greater access to NSW public data! The Strategy will be driven by the ICT Board, with seven Directors General including Premier and Cabinet and Treasury. The idea of open data is pretty radical for the NSW Government at this point, so there’s huge potential for impact!

NSW Government ICT Strategy 2012

Information and communications technology is an everyday tool for almost all our daily transactions and information needs. It allows for innovative approaches to government service delivery and community and industry engagement. The NSW Government ICT Strategy 2012 sets out the first steps to support the public sector to drive better service delivery, greater transparency and better value from investment in ICT.

Download the full NSW Government ICT Strategy 2012 pdf (23 MB) or the overview document pdf (2.7 MB).

Omidyar Network to fund social impact bonds globally

Omidyar Network to fund social impact bonds globally

Omidyar Network announces grants to Social Finance UK and US, but the following exerpt from this article seems to suggest some of the money is destined for Australian social impact bonds!

Omidyar Network’s grants will support the expansion of social impact bonds in the United States, Ireland, Scotland, Australia, Canada and Israel, as well as in the international development sector.