Invisible hands, visible hearts
Jimmy, a young man in his mid-twenties, arrives home to his boyfriend, in a place they are renting, after a long day at work. He is assistant manager of an inner city Melbourne restaurant.
This ordinary end to a day hides how far Jimmy has come.
Jimmy’s is a story of what impact investment can achieve in Australia.
A few years ago, Jimmy was on the streets. After years of abuse from his mother, father and stepfather, which worsened when he came out as gay, he walked out.
Self-medicating with marijuana, he found himself on the streets in a downward spiral of drugs, psychotic episodes and depression.
But his life turned around thanks to a social enterprise called STREAT.
STREAT provides disadvantaged young men and women in Melbourne, particularly those on the streets, with a pathway to careers in the hospitality industry.
But STREAT is not your usual social service provider.
STREAT has investors.
It generates income through its hospitality businesses.
It anticipates that its shareholders will achieve returns of 7-12% per year. For STREAT, it’s about achieving scale and self-sustaining revenue to improve outcomes for marginalised young people while also providing a return for investors.
STREAT is an impact investment enterprise.
Impact investments aim to solve society’s problems through market-based, for-profit models that provide both a social benefit and positive financial return.
Impact investments involve the invisible hand of the market meeting the visible hearts of investors, entrepreneurs and governments.
In Australia’s current climate impact investment has real potential.
We are a prosperous country with a reasonable standard of living and access to services.
But even after two straight decades of economic growth there are still a number of Australians without a decent standard of living. According to ACOSS, some 2.55 million or 13.9% of the population live below the relative poverty line (50% of median income).
As noted by Treasurer Joe Hockey in his 2014-15 budget speech, this situation is likely to worsen as governments around the country increasingly tighten their belts on service delivery.
A long-term gap is forming between demand for necessary services, and what governments can actually provide. Accenture & Oxford Economics estimate that the Australian Government will be short by about $54 billion or 3% of GDP by 2025.
In such a climate, impact investment offers an opportunity for Australia’s corporate, investor and philanthropic community to help solve some of Australia’s most complex problems.
They can do this while still earning market or below market returns.
This does not relieve governments of their responsibilities but it can assist governments in fulfilling them more efficiently.
The NSW government recently launched Australia’s first social impact investment policy. This will see it try to solve some of NSW’s most complex problems in partnership with investors and the non-government sector.
Hopefully this is the start of a trend in government policy right around the country.
Ambassador John Simon in his co-authored book, More than Money, estimated the international impact investment market to reach between $500bn and $1 trillion in the next decade. Australia needs to be part of this boom.
The potential impact is clear. Jimmy is now in a loving relationship, living in a place he can call home, and embarking on a long-term career in the hospitality industry.
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