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A new wave of investors is looking for social impact as well as a financial return on investments.

And researchers at UWA's Centre for Social Impact are providing the platform for investors to ride that wave.

Private investors and corporations around the world are rapidly expanding their role in financing social initiatives and programs and there is a greater awareness by governments of the need to work in partnership with them. In the UK, investors can put their money into social support initiatives developed by community organisations and, if those programs achieve good results, the government will pay the investors a return on their money.

"The logic of such programs is that governments may save a lot of money in health and other support funding when social initiatives are successful but rather than design and manage the programs themselves they leave it to innovators to come up with new ideas and programs," explained Winthrop Professor Paul Flatau, Director of the Centre for Social Impact in the Business School.

It can be cheaper for a government to pay social investors (interested in both some financial return and some social return) a dividend than to develop and run programs. The State saves, investors who may wish to receive some but not necessarily full market return are happy, and the people who would otherwise not receive social services can have their lives changed.

"In the UK they are called ‘social impact bonds'. The State government in NSW is starting to offer the same program and they are calling them ‘social benefit bonds'. In the US, the government has made $100 million available in the current budget for ‘success bonds', with the same purpose of investors funding social programs.

"It's a new world," he said. "I hope it will continue to grow, to create great interest, innovation and success in social support systems. Philanthropists and business may be interested in also stepping in to help fund outcomes-based programs and support governments."

But for investors to be interested, there must be evidence that the programs succeed.

Professor Flatau recently presented the Centre's three-year research program for Mission Australia recently in Sydney which evaluated the impact and effectiveness of the Michael Project, for homeless men.

"It was a program to provide integrated services for homeless men in Sydney which covered basic health (we found that dental and podiatry needs were a serious issue); haircuts (it's surprising how many more doors open to a man with a decent haircut); drug and alcohol counselling; and a range of recreational programs to get the men reconnected with their communities."

The Centre's research found that Government costs had been reduced significantly by the project. The program had costoffsets larger than the cost of the program itself.

Professor Flatau has a background in economics. "Up until now there has been no work in Australia on the economics of homelessness intervention and its impact," he said. But this is the sort of work needed to attract investors who, distinct from straight philanthropists, want both a financial return and a social impact hit for their money.

"We look at social problems with a business lens. We evaluate programs, look at how they developed, their financing and their leadership. We're particularly interested in the social innovation behind programs.

"Historically, it has been governments that fund this need in society but the world is changing and we are seeing more of a role for business in social initiatives. It has already started with the corporate world."

He said investors are interested in social enterprises such as Mission Australia's Soft Landing project in Sydney.

"It's a mattress recycling business that employs Mission Australia's clients. They take mattresses that are thrown out all over the city, pull them apart and sell the reusable parts, such as foam, metal and timber. The business makes money, it is good for the environment that these mattresses don't go in to landfill, and it gives the people who work there some skills and confidence and a work history, so they can go out and find another job."

Similarly, the Michael Project would have been a good two-way investment (although it was a purely philanthropically-funded project).

Health and justice are two issues for homeless people that cost governments dearly.

"Nights spent in hospital by homeless men is a really significant driver of the health costs of homelessness to the community," Professor Flatau said. "There is a huge difference in that area between homeless people and the rest of the population." But the Michael Project improved the health of homeless men, reduced their social isolation and their quality of life and reduced calls on hospitals and rehabilitation.

"Although the project wasn't about accommodation, the project had a big impact on these men's accommodation too with a significant move away from supported accommodation or the streets, and into public housing or rental accommodation. Some of them got jobs, earned money, started to feel good about themselves and no longer needed government support."

Published in UWA News , 14 May 2012