The 2015 QCOSS Conference was held on 13-14 October 2015 at the Brisbane Convention and Exhibition Centre.

On day one of the conference, a panel discussion was held around the new Queensland Government initiative of social benefit bonds.

This video gives a short snippet of the highlights of that panel discussion.

The panel included (from left to right):

  • Professor Gary Sturgess, Professor of Public Service Innovation at Griffith University
  • Christine Crain, Director, Social Benefit Bond Pilot Program, Queensland Treasury
  • Adam Allan, Social Impact Investing Queensland
  • Jerry Marston (facilitator), Climate Change and Sustainability Services, Ernst & Young


Jerry Marston: Thanks very much, it's a very interesting topic we're closing on formally today and I'm glad that there's a good audience for it, because we've got a very good panel lined up to both talk a bit about their perspectives and then take any questions from you. So we have got three engaged and experienced panellists with us, with three different perspectives, I guess, or three different hopefully linked and coordinated perspectives on this new area of social impact investing.

Gary Sturgess: My interest in this has always been in the design of the incentive regimes, I have no particular interest in the finance side - I know that a lot of people do and they do some work, but my interest has always been in what this would do to the provision of better services, what this would do to stimulate better services. Obviously an important element of that shift has been the desire to liberate providers to innovate, to come up with radically different ways of solving complex social problems. Because of the amount of financial and operational risk that is being shifted to the delivery agents, it will take time to develop the instruments, to develop the models both on the government side and on the provider side and that's a good thing, because we're learning how to commission for outcomes and to hold people accountable for that and all of that's new.

Jerry Marston: There has been recognition quite quickly there needs to be some support to getting organisations ready, so a readiness fund is also in play here as it has been elsewhere, recognition that this new approach, this new complexity, this new arrangement, these new relationships do need organisations who are going to pitch for this in this new environment, because we need organisations to go through a learning process and possibly coaching as well as developing capacity.

Adam Allan: I would point out at this point in time bonds definitely aren't for everybody, they require a lot of organisational capacity and capability, a lot of planning to get there and then once you've got a program that's ready to fly, the actual time, organisational bandwidth, that you need to get a transaction up and running is significant. So the starting point has to be: have we got a program that's compatible with this type of financing, is the issue or the program that we're running consistent with a key government theme, is that theme particularly costly to government - in which case it's going to have more appeal - is it a theme that has the potential to attract investors? So before you even embark on the journey of getting yourself outcomes ready for a bond financing you need to say OK, can we tick those boxes? If we get to a situation where we say yes we have a program and an organisational set-up and an issue that's attractive to a bond, the question then is how do we go from where we are now to being outcomes ready and by outcomes ready we mean being able to evidence all of the things that you've said you will achieve will be achieved you've built evidence bases, you've got data.

Christine Crain: When you're looking at social benefit bonds, and I'm sorry it's unfortunate they've been mis-named, they're not actually a bond instrument in the true sense, they are predicated on pooling private investment funding, and private investors or the intermediary working with the service provider to provide a service based in response to outcomes that government is prepared to pay for. If those outcomes are achieved then government will pay back to the investors their return on investment and potentially their capital as long as the outcomes that were contracted and agreed have actually been achieved, so any return to the investor is predicated on achievement of the outcomes.

As you would be aware, Queensland announced their pilot program in July this year and one of the opportunities that we see from the Queensland pilot program is that we have a number of jurisdictions that are learning and documenting their learnings, and what we're looking to do from the Queensland perspective is actually leverage off those learnings. From the very beginning we understand there's a lot to know, there are about 40 of these transactions around the world and not one-two are the same, so it's not something that you can pick up, there's no guidelines to it and I think that reflects the complexity of the actual transactions and the nature of the services that we're dealing with. So from Queensland's perspective we're looking for the opportunity to start working with private sector and the community services sector and across government differently, about how we can potentially attract private investor funding into preventative and early intervention services that would actually complement the services that we're already delivering in the acute and crisis areas.

One of the lessons learnt from the other jurisdictions in this, and this is world-wide, the number one risk is data – whether it be data to actually formulate your views on where the high cost high demand services are, or whether you actually have the data to provide an evidence-base for your proposals. Or if you have the data to actually provide information to measure the outcomes that you're going to be paid for, or the investors will be paid for. So in the spirit of being a pilot, Queensland Treasury is actually investing in developing an information repository or portal and we're looking to link data, so in the first instance, prior to going to market what we would like to do is be in a position to share the demand and cost data for the areas of interest from government when we go to market.

Jerry Marston: And just for clarification, and on the size and the nature of it, we're talking about three potential projects?

Christine Crain: Yeah, we're looking at three policy areas, so we're looking at the re-offending, homelessness and indigenous services, now they're very broad policy areas and we're looking over the next two to three months to start working on where in those spectrums of disadvantage we'd actually target outcomes that we would go to market with. That's part of our discussion groups that we'll be facilitating in the next month and also market sounding activities so that we can actually have the opportunity to talk with yourselves, talk with investors and talk with financial intermediaries. Interestingly enough investors play a very important role in this, we have plenty of good ideas about how we would like to roll out services, but with social benefit bonds you also have to couple that with investor appetite, so we have a lot of work to do to understand in the Queensland context what the investor appetite is, and the opportunities are for those three policy areas.

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