First of its kind Social Benefit Bond supports efforts to keep families together - paves the way for socially responsible investors
14 June 2013
The Benevolent Society in partnership with Westpac Institutional Bank (Westpac) and Commonwealth Bank of Australia today announced a $10 million Social Benefit Bond (SBB) to fund the establishment of The Family Preservation Service, supporting up to 400 families over five years.
The New South Wales Minister for Families and Community Services Pru Goward today signed the contract for The Family Preservation Service, to be delivered by Australia’s first charity, The Benevolent Society. The service focuses on reducing the number of family breakdowns and children placed in the foster care system in New South Wales.
This is the first Social Benefit Bond in Australia to be arranged by two double A-rated Australian banks, in a two-tranche structure that is well recognised by the financial markets and overseen by investment fund guardian, Perpetual Corporate Trustees.
“This Social Benefit Bond is an innovative financing solution which should appeal to a range of institutional investors who not only want to secure attractive returns while supporting the role that can be played by the private sector in helping to reduce pressing social issues,” said Craig Parker, Westpac Institutional Bank’s Executive Director and Head of Structured and Asset Finance.
“The capital protected element is critical to encourage a broader appetite in the asset class, beyond the philanthropic market,” Mr Parker said.
“This is the first bank-arranged issue of a Social Benefit Bond in Australia so it is structured more like an actual bond, with capital protection measures in place to manage investor risk and rewards.”
“Essentially we are driving the establishment of a socially responsible asset class that provides investment returns based on reducing the cost to Government of pressing social issues,” he said.
The Social Benefit Bond includes a $7.5 million capital protected component with the return based on agreed performance outcomes which reflect the money saved by the New South Wales Government from keeping families together. The junior tranche of $2.5 million will be partially funded by The Benevolent Society, the Westpac Foundation and the Commonwealth Bank of Australia and will be marketed to other charitable foundations and philanthropists. The $10 million, five-year bond is expected to have a minimum investment of $50,000.
“Superannuation funds seeking capital guaranteed investment products will be attracted to the Social Benefit Bond, with the underwritten component likely to generate wider institutional interest over time,” Mr Parker said.
According to Simon Ling, Global Head of Debt Markets at the Commonwealth Bank, Social Benefit Bonds could potentially fill a significant funding gap as it is clear that government spending and philanthropic donations aren’t always sufficient to tackle the variety of social problems facing many Australians.
“From a Commonwealth Bank perspective, it’s great to bring our considerable resources, experience and depth of knowledge to this project, and structure one of the first Social Benefit Bonds in Australia. It very much aligns with our vision to excel at securing and enhancing the financial wellbeing of people, businesses and communities,” Mr Ling said.
“There has recently been one Social Benefit Bond placed successfully with Australian investors, and we are hopeful that our transaction will be met with a similarly strong investor demand. We expect to be approaching a broad number of potential investors shortly,” he said.
Steve Hawkins, General Manager of Business Development at The Benevolent Society said; “This type of financing encourages discipline in the reporting of social outcomes, which means greater transparency for taxpayers, and also creates an asset class which does not require a choice between being a philanthropist or an investor.”
Benevolent Society CEO Anne Hollonds said the Social Benefit Bond was fundamentally about supporting families.
“While this is an exciting new way to finance our work, what’s most important is turning lives around and reducing the growing number of Australian kids who can’t live with their families,” Ms Hollonds said.
“Parents want the best for their children, but some need extra help to create a safe home where their children can thrive – especially if they never had that chance in their own childhoods.
“This Social Benefit Bond will allow us to work with up to 400 families who recognise they need to change and want to put their children first and help them develop the skills they need to safely raise thriving kids.”
The Benevolent Society’s Social Benefit Bond issue will be open to investors from early July to late August unless subscriptions close earlier.
“Initial market soundings indicate strong appetite for this asset class particularly given the full subscription and early closure of UnitingCare Burnside’s Social Benefit Bond in May 2013,” Mr Parker said.
Perpetual will be providing pro bono services in the role of trustee and security trustee, which will provide further assurance that the Social Benefit Bond will be administered in the best interests of investors whilst enabling valuable services to be delivered to NSW families.
Chris Green, Group Executive, Perpetual Corporate Trust commented, “Perpetual has been involved in philanthropic services for over 120 years and we are delighted to be working with Westpac, Commonwealth Bank of Australia and The Benevolent Society in supporting a pioneering program that will have a lasting impact in our community. Furthermore, our experience as the leading provider of corporate trustee services for the financial services sector will bring comfort to investors on the way the Social Benefit Bond is to be administered.”
About Westpac Institutional Bank
Westpac Institutional Bank (WIB) delivers a broad range of financial services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand.
WIB operates through dedicated industry relationship and specialist product teams with expert knowledge in transactional banking, financial and debt capital markets, specialised capital, and alternative investment solutions. Westpac Institutional Bank, a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714
About Commonwealth Bank
The Commonwealth Bank is Australia largest financial institution, providing convenient and accessible banking and financial services for all Australians. The Commonwealth Bank commenced operations in 1912 and since then, has grown to a business with over 700,000 shareholders and relationships with more than 12 million Australians, offering a full range of financial services to help every Australian build and manage wealth. With more branches, agencies, ATMs, EFTPOS outlets and 24/7 call centres than any Australian banking and finance competitor, including Australia’s leading internet banking service, the Commonwealth Bank is Money Magazine’s Bank of the Year.
The Benevolent Society
We help people change their lives through support and education, and we speak out for a just society where everyone thrives. We’re Australia’s first charity. We’re a not-for-profit and non-religious organisation and we’ve helped people, families and communities achieve positive change for 200 years. www.benevolent.org.au
About The Benevolent Society Social Benefit Bond
Foster care is an ever increasing cost for governments. A 2009 report by the Boston Consulting Group concluded that foster care costs New South Wales State Government $38,000 per child. Including indirect costs, the real figure is closer to $66,000 a year.
In March 2012, a consortium led by Westpac with the Benevolent Society and the Commonwealth Bank won the New South Wales government tender to issue this bond, focussing on keeping at risk families intact, and thereby reducing the number of children entering the foster care system in New South Wales.
The project will be run by The Benevolent Society which has rigorously designed preventative programs for families. For more details on the program visit www.benevolent.org.au