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Joint Standing Committee on Foreign Affairs, Defence and Trade - 20/08/2014 - Role of the private sector in promoting economic growth and reducing poverty in the Indo-Pacific region

LOGUE, Dr Danielle, Senior Lecturer, University of Technology, Sydney

Subcommittee met at 08:57

CHAIR ( Dr Stone ): I declare open this public meeting of the Foreign Affairs and Aid Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade for the inquiry into the role of the private sector in promoting economic growth and reducing poverty in the Indonesia-Pacific region.

I welcome Dr Logue to today's hearing. This is a public hearing, so before inviting you to introduce yourself and make an opening statement, I wish to inform you that in giving evidence to this subcommittee you are protected by parliamentary privilege. Witnesses are also advised of the obligation not to give false or misleading evidence. To do so may be regarded as a contempt of the parliament. These are public proceedings, although the subcommittee will consider requests to have evidence heard in camera. If a witness objects to answering a question, they should state the grounds of that objection, and we will consider the issues. A Hansard transcript of the proceedings will be made. Dr Logue, do you wish to make an opening statement before we go to questions?

Dr Logue : Yes. I thank the committee for considering my submission and for the opportunity to contribute to the inquiry. I make my submission today in my capacity as senior lecturer at the University of Technology Business School, where I am also Director of our Social Innovation Fellowships Program, and also as a visiting scholar of Said Business School at the University of Oxford.

In my opening statement I would like to focus firstly on the new platforms and products that are emerging worldwide to better connect the supply of private capital seeking to have impact with the demand from those wanting to develop. Here I specifically refer to social stock exchanges. Secondly, I would like to focus on the role of academics in conducting research, in testing these new ideas and, importantly, in educating graduates and professionals about these new ways of doing business and development.

First I would like to briefly share my motivations and experience that led to making this submission and a desire to work with all the stakeholders involved in developing and delivering the Australian aid program. I bring a balanced perspective to this inquiry through a range of relevant experiences, culminating in my current role. First, I worked for the Australian Department of Industry in delivering business assistance programs that aim to use government funds to support and catalyse innovations and business activity in medical, biotechnology, engineering and IT sectors in New South Wales. I then worked in the private sector in foreign aid in the area of project contract management for projects from AusAID, ADB and USAID. I built from this to consult for multilateral agencies in this space such as the World Bank. More recently I am a graduate of the University of Oxford, having completed a Masters and PhD there at Said Business School. I have recently been invited to rejoin Oxford as a visiting scholar at the Skoll Centre for Social Entrepreneurship, and I have also been invited to be entrepreneur in residence at URS as part of their development innovation practice. I believe you have heard from them in previous hearings.

I inform you of these experiences to convey my enthusiasm to participate in this inquiry and as an academic that prides herself on being able to communicate, collaborate and work across boundaries in doing serious research and research with impact. A significant area of my research is on the diffusion of innovations, how we can take ideas from one location or industry and make them work in another, which came from my experience as a private contractor in development. As part of this I look at how we build markets, and today I focus on impact-investing markets and how to connect supply and demand in this interesting and rapidly emerging space. Impact investing intentionally seeks a social and financial return. It is not an asset class but rather a lens through which to make investment decisions. So, as indicated in my submission, fundamental to my comments today is the perspective that foreign aid or a portion of it could be reconceived as impact investments.

As the global impact-investing market gains traction, market infrastructure is emerging to connect social enterprises in both developing and developed countries with impact investors, including individuals, funds, institutions and foundations. In the development of a market estimated to be worth between $450 billion and $650 billion by 2020—possibly worth $30 billion in Australia by that time—one such piece of infrastructure is the development of social stock exchanges. Common to all types of investments and financial markets, exchanges and investment platforms help address the challenge that many investors face when seeking to make investments. For impact investments a social stock market helps to identify investable opportunities.

The Social Stock Exchange was officially launched in London in 2013. It showcases publicly listed impact enterprises that trade on the London stock exchange. Another example is the impact investment exchange which trades out of Mauritius that supports listing, trading, clearing and settlement of securities issued by social enterprises across Africa and Asia. In 2013 Canada also launched Social Venture Connection. Important to note here are the different modes of operation of these so-called exchanges which provide opportunity for Australia to consider if this is a platform that could be modified, leveraged or joined to also go towards achieving the goals of our foreign aid program. For example, could such a platform provide easier access to capital for women seeking to develop businesses by providing social ventures with a low-cost method of gaining access to investors?

All of this activity of course requires education on both the supply and demand side of the potential impact-investing market, as currently demonstrated in the nascent Australian market. Collaborations with educational institutions are needed to design and launch professional development and graduate programs. I am actively trying to contribute to this area. For example, I am currently in discussions with URS, Social Enterprise Finance Australia and Dr Pamela Hartigan, Director of the Skoll Centre for Social Entrepreneurship at the University of Oxford, on what programs we could run on impact-investing education for the Australian market when Pamela is returning to UTS in our summer. Secondly, I am also in conversation with the General Manager of the B Corporation movement in Australia and New Zealand as well as US colleagues on how we could develop a Couresra course or a massive open online course on how to turn businesses into B Corps. B Corps are certified to meet rigorous standards of social and environmental performance. This is also related to the debate in Australia at the moment about the need for new legal corporate forms such as benefit corporations, as recently created in the US. This legal structure or certification could be part of the requirements to participate in a social stock exchange.

These are all exciting ideas that are already happening in other parts of the world that Australia could research, prototype and trial. I was very excited to learn of DFAT's development of an innovation hub and their serious consideration of academic input and research into this process, which, sadly, since returning to Australia, I find is often a missed opportunity. I welcome your questions.

CHAIR: Thank very much, and we certainly appreciate your expertise in this very nascent area. You have really had a lot of very early experience in some of the key markets in the UK. In your submission where you describe in particular these new emerging platforms and exchanges, you don't talk about the challenges of measurement because of course these investment tools or vehicles live or die depending on how rigorous, accepted, objective, beyond corruption and transparent the measurement processes are. What is your experience in looking at social benefit bonds in New South Wales or the SIBs or DIBs as they are sometimes called? What is your experience of how measurement, consistency or tailor-made measurement instruments are evolving and have we learnt any lessons yet about how to manage that part of these new investment vehicles?

Dr Logue : This is definitely one of the complexities of this field and is often a barrier to achieving scale in this space. My understanding is that the London Stock Exchange relies on a particular framework—I believe it is social return on investment—to have a consistent measurement for those organisations that are listed on its platform.

What I see across the field and in different countries is there isn't a particular convergence on a measurement framework at the moment. There are some global initiatives such as the Global Impact Investment Rating System that is emerging. There are different measurements being used in the individual social impacts bonds. I believe that might be preferable for the social impact bonds, because of the different issues that they are actually dealing with such as juvenile justice, prisoner reoffending rates and things like that that they need unique and specific measurements that are meaningful for that particular task. At the moment, there are a range of frameworks available but different ones are being picked up by different platforms. But you are correct in that some of these mechanisms would need to agree on a platform for them to work.

CHAIR: My next question is about social investment bonds and development investment bonds. What is the difference between the two: is it where the government begins to engage in paying the investors? What is the difference if I was being offered SIBs or DIBs? What do these instruments look like?

Dr Logue : At the moment social impact bonds have rapidly diffused. They started off in the UK, and only just in the past month have their preliminary findings started to come back from the Peterborough prison. They are looking very positive and the first tranche of investors should receive their agreed return. Social impact bonds at the moment are very national or state based so the government that is essentially, say, the guarantee for that bond is the one that would receive the cost savings if that program works.

Development impact bonds—there are none existing at the moment. There is a working group. The added complexity is that the donor organisations that may provide the guarantee for the bond are not necessarily the ones that are reaping the cost savings, because of the nature of development. They are not there on the ground so that is an added complexity. I am unsure as to how that mechanism is going to work. It is going to take a little more research and perhaps the pooling of funds to reduce the risk for the different donors.

CHAIR: Because in your paper—or it could be some of the other papers we have received in relation to this particular reference in our inquiry—it is suggested that the DIBs, or development investment bonds, might be more like public-private partnerships.

Dr Logue : That is right. They seem to be emerging in that way. What they do is shift the risk responsibility and accountability in a slightly different way but, in essence, it is still similar to a public-private partnership. What seems to be happening in the recommendations, I believe, from one of the working papers that is now online from the Social Finance UK and the Centre for Global Development is that the different agencies all pool their funds so everyone has minimal risk but also minimal investment in trialling these DIBs.

CHAIR: Clearly you are one of the better researched academics in Australia at this point with experience in relation to these enterprises. What type of case lends itself to social impact investment and SIBS compared to one where you would reach for the standard traditional NGO being directly granted funds from our aid program to undertake, say, the building of schools or trying to bring down malarial infections or whatever? Is there a clear environment or context where these types of enterprise efforts work or others where the old traditional process is more likely to give us the outcome, which is to increase development and reduce poverty in the Indo-Pacific, particularly for women and girls?

Dr Logue : This is a rapidly emerging space. We are starting to see some consolidation around the types of problems that SIBs are addressing. I think we see more rapid take-up in those problems where you can more easily attain some agreement on measurement, so whether prisoners are re-offending or not, whether children are in foster care or not, rather than perhaps some other complex problems where there are more qualitative measures and it takes a long time to get agreement. We are also seeing more rapid take-up in problem areas where assets such as affordable housing are more familiar to traditional investors as well, and those investors that are seeking or prepared to invest perhaps patient capital and take that longer term view. That is helping to catalyse that field. Affordable housing and aged-care services seem to be perhaps more popular or readily accessible for a SIB at the moment, particularly in the UK.

CHAIR: Or in New South Wales, with childcare SIB.

Dr Logue : Yes.

Mr LAURIE FERGUSON: This is not the thrust of your submission today, but you gave us a summary of your career and you spoke of an era in which you were project managing private sector involvement in foreign aid. Are there any cautionary experiences in that from the point of delivery and problems that you see in the pattern in which you participated?

Dr Logue : From working on the private contract side, I felt that a lot of ideas were already out there, and the experiences of the private contractors often perhaps were not tapped or consulted in the development and design of projects. A lot of our staff at the time were on the ground and could see where improvements could be made, but because of the restrictions and the rigidity of the contracts and the deliverables required there was no flexibility to perhaps innovate or correct issues on the ground when you saw that things were not working. That was several years ago now. Whether that has changed or not, that was my experience. A lot of good ideas and solutions could not be implemented because of the rigidities of the contracts.

Mr LAURIE FERGUSON: On the other side of the coin, do you see any issues that could emerge from the government's wish to deliver foreign aid and the performance of the private sector?

Dr Logue : Of course, with trialling these new mechanisms, platforms, products there is always risk, but I think there is emerging evidence from other players and nations around the world that can support arguments for testing and trialling some of these new ideas. Perhaps things could be done on a smaller scale; perhaps they could be framed or supported through research to support the scaling up of those. I guess there is always risk in trying to do things in a different way.

Mr LAURIE FERGUSON: With regard to the drift towards private sector involvement is there any danger of issues such as commercial-in-confidence et cetera? Obviously there are parts of government where we cannot investigate contracts because of commercial-in-confidence. Is that a possible issue with regard to delivery of foreign aid through private sector involvement? I appreciate that is not what you want to talk about today.

Dr Logue : I am just reflecting on that based on my experiences. It could be a particular issue there. I make these suggestions of these different platforms and involvement of the private sector or tapping their expertise not as a particular utopian solution but as something that we could mobilise in trying new ways of doing things and also to mobilise more funds to address the scale of these problems. Those are generally my arguments, the arguments that I make towards my MBA students. These are not solutions to all the problems at all, but they could be mechanisms to mobilise more funds to address the problems.

Mr LAURIE FERGUSON: You mentioned the B Corporation movement. Who are they?

Dr Logue : The B Corporation movement started off in the US a couple of years ago. The founder of the B Corporation, Bart Houlahan, will be in Australia in a couple of weeks time. The B Corporation movement is what, say, fair trade certification is to coffee. As an organisation, you can apply to be certified if you have met certain criteria for social and environmental performance. Large organisations and corporates in the US are taking on this certification. Ben & Jerry's is a popular example that is used. We have just started in Australia. There are about 1,500 corporations around the world that have taken on this certification process.

What is also happening in the UK as part of their B corporations is a certification process and also a benefit corporation—B corp—legal structure. That is now available. That addresses that issue rather than shareholder value or stakeholder value. That is where an organisation or corporation can legally pursue social and environmental goals as well as profit for their shareholders.

Mr LAURIE FERGUSON: You gave the very iconic example of Ben & Jerry's. Has there been any controversy about others that have been given the designation, or has it been fairly welcomed by the NGO sector?

Dr Logue : It has been welcomed. At the moment, I am involved with colleagues in the US who are doing research on how people are using this certification, whether it is similar to corporate social responsibilities, whether there are concerns around greenwashing by corporations, whether they are actually achieving these standards, whether they are labelled a 'dirty firm' and they are using this to signal that they are improving. But I believe that the B corporation criteria and the regular monitoring and testing overcomes a lot of that so that you can avoid that greenwashing effect.

Senator IAN MACDONALD: My apologies for not being here earlier. I missed all of your opening statement, so perhaps you have dealt with this already. But are you familiar with Australia's aid work, particularly with our near neighbours?

Dr Logue : I am familiar from my experience as a private contractor in managing projects mainly in the Asia-Pacific region.

Senator IAN MACDONALD: My question, then, is a very general one. Is there a better way we could be assisting—through private sector involvement or any other way? Do you have a view on that?

Dr Logue : I perhaps do not have the final answer to that question, but in my—

Senator IAN MACDONALD: Is there a better way?

Dr Logue : Yes. In my submission I say that I think there is definitely a role for the private sector's expertise, new ideas and solutions to be tapped and incorporated into the design of the aid program. I think there is also a role that the government could play in supporting new platforms, such as, say, social impact bonds or social stock exchanges, and providing and supporting a mechanism that better connects supply and demand. Being a catalyst in that space would help mobilise more private sector funds into that space to support government directions as well. I believe, optimistically perhaps, that there is evidence out there of a global movement towards impact investing. If it is true, the scale of this market could be up to $650 billion by 2020. I think there is a growing pool of impact investors that could be brought into this space to help support the aid program and various initiatives throughout the region.

CHAIR: What is the typical interest being repaid on one of these social outcome contingent investment vehicles? Typically, what sort of interest are the investors looking to get?

Dr Logue : From my understanding, the rate we are seeing at the moment is between eight and 16 per cent. It varies depending on what tranche of investor you are and when you entered the agreement. At the moment what is very interesting, from an academic and research perspective, is how rapidly these social impact bonds have diffused without the results being named yet. As I mentioned, the Peterborough Prison was the first social impact bond in the UK. The preliminary results have only just come through in the past month on that social impact bond for the past couple of years. That is on track to achieve its results. You can see that contributing to even further momentum. The United Kingdom is the most advanced in developing and delivering social impact bonds. There is a social impact bonds unit within their Department of the Prime Minister and Cabinet as well.

CHAIR: So would those who have invested in that prison example be closer to the 16 per cent return than the eight per cent?

Dr Logue : I believe so, but I would have to check. I can follow up on that for the committee, if you like.

CHAIR: That would be good.

Dr Logue : I believe it is at the higher end because of the initial returns.

CHAIR: So it is a very good investment, if you compare it with the stock exchange or superannuation.

Dr Logue : Yes, absolutely.

CHAIR: It might be too early in the day for us to get much in the way of percentages and proportions, but are you aware of any that have failed to meet their preset measurable outcomes and so investors have not been paid?

Dr Logue : No. At this stage the Peterborough Prison is the most advanced social impact bond. Those are the only results coming in at the moment.

CHAIR: Are the Gates foundation and the World Bank getting very excited about development impact bonds?

Dr Logue : Yes, I believe so. There was a recently released working paper that came from those discussions between the Gates foundation, the World Bank and part of the working group on development impact bonds. Social Finance in the UK, which has led the social impact bonds over there, is one of the key authors in that space. Again, I refer to the complications of that space—the return to the donors that are putting in those funds. It is very different when the donor is not in the same national context or region that is recouping the benefits of that instrument.

CHAIR: Who or what is Instiglio? You say it is a US firm emerging and now testing steps for projects in developing countries. Can you tell us about that? Who owns them? What are they? What are they up to?

Dr Logue : At the moment, reports are coming through from their website. They are a private firm. I would have to take on notice to provide additional material to the committee. When I was trying to research the development and how far these DIBs have gone, they were the one firm saying that they are trying to trial these on the ground. I am not sure whether any foreign governments or donor organisations are involved or whether it is a mixture of private donors from different countries that are testing that idea. I am happy to take that on notice to provide additional material.

CHAIR: You are obviously quite interested—and I can understand that—from an institutional perspective to set up courses to train investors or those who might be trying to broker these sorts of new SIBs and DIBs.

Dr Logue : I am. Part of what I have done at the University of Technology, Sydney is establish our social innovation fellows program. Upon returning to Australia, I was speaking with our social enterprise development and investment fund, who were saying that there were not enough investor-ready social enterprises. There are a lot of funds out there but not enough investor-ready social enterprises. So as part of the response of the university to help build this market we put some of our top-performing MBAs on social enterprises that are very close to getting impact investment. We take referrals from the social enterprise development investment fund, who are quite busy at the moment and do not have the capacity to provide a lot of assistance and consulting work to those enterprises that they would like to fund but which need a little bit more work on their business models, governance structures, financing and so on. We work with them in a very targeted way to get them over the line to get that impact investment.

CHAIR: Can you give us some examples of key social enterprises in Australia that might be interested in the social impact investment arena?

Dr Logue : There are many different social enterprises. There are a range of scales as well. There are a lot emerging in the affordable housing sector that, say, Social Enterprise Finance Australia are funding. There are a range at a smaller scale, perhaps cafes that are employing that those with disabilities to help with employment, returning a profit. There are a lot in the environmental space. There is a great one that is funded by Mission Australia operating out of Wollongong to collect mattresses from councils and recycle them into sporting goods. They employ ex-prisoners and sell these high-end sporting goods. There are many different examples. I am happy to provide a list, if you would like.

CHAIR: Opportunity shops would be another example.

Dr Logue : That is true. There is often an argument that this social enterprise idea is not something new that different organisations—

CHAIR: That is right. They have been around for a very long time.

Dr Logue : They have been doing it for a long time—that is right. I think the focus and attention now has been on a lot of the online platforms, and the social enterprises in new spaces as well have garnered a lot of attention. There are also a lot more academic courses, degrees and major being offered in this space, reflective of the change in attitudes and interests of the millennials, as we say.

CHAIR: I think some of the confusion is with the new jargon and language. A lot of people think that this is new and that we have never seen this sort of social enterprise before. In fact, we have been littered, since probably the early days of the colony, with philanthropic trusts trying to do good deeds.

Dr Logue : Yes, absolutely. I think what is emerging now is the label of 'social economy', where you see the range of different organisational structures from not-for-profit to for-profit, social business and social enterprises. So we are getting a range of different legal structures in that space as well. But you are absolutely correct: this type of model has been around for a long time.

CHAIR: It has been around for a very long time. We are going to be hearing more about cooperatives and mutuals as the morning goes on. Would you like to comment on how you see cooperatives or mutuals fitting into this renewed focus on social enterprise? How do they fit into the continuum of comparing outcomes—say, forming a cooperative to have coffee growers or cocoa growers get together to get a better price and a better scale to perform versus helping with direct aid services, having an investment bond which perhaps identifies how many tonnes of coffee might be sold compared to the benchmark, how many women are engaged, what the price might be for their product and that sort of thing?

Dr Logue : It is not my direct area of expertise, but I think we will see a lot more attention paid to the cooperative form. I am not sure why it fell out of fashion, but I think it is coming back into play. Because it is an already readily available and understood legal form and structure, I think we will see a lot more attention in that space. That is my impression from the field.

CHAIR: In Australia, particularly in agriculture, cooperatives were the first form of farm enterprises in my state colonies.

Dr Logue : I think it is reflective, too, of a movement that is focused far more on collaboration, crowdfunding and crowdsourcing of ideas. There are platforms, such as OpenIDEO, which use design thinking but sources of expertise from communities all over the world. That collaborative nature of problem solving is going to be reflected in placing that cooperative form back on the agenda.

CHAIR: Which might be a reaction to the alienation and isolation in mass society with urbanisation of populations and the loss of so-called village culture.

Dr Logue : I think it is a form that has historically been successful and one that we already understand, so I think there are great opportunities there.

Mr RUDDOCK: I have read the material and I am just trying to get into my own mind what recommendations you might be suggesting we make about the way in which our officials delivering our aid program ought to be harnessing these capacities. We might write about it in our report and hope somebody reads it, but what is the action plan that you think we should be recommending to the government that leverages this?

Dr Logue : I was quite excited about DFAT's initiative of having an innovation hub because I thought, 'There is a space where we can actually research, test and prototype some of these different platforms.' I was interested in a social stock exchange which could be for Australian firms and international firms and that could be part of the action plan. We could consider investing in or being part of a movement with development impact bonds and participating in that as well. I think having such an innovation hub is an opportunity to bring the expertise of the private contractors into play as well that of academics to have all those people around the table—not just another committee but a space to prototype and test some of these ideas.

Mr RUDDOCK: Going back to the point being made by Sharman before about outcomes, if these are profitable—and that is what is being suggested—why does the government need to do anything?

Dr Logue : The government needs to be involved in order catalyse some of these ideas. They will not happen on their own—that is my understanding

Mr RUDDOCK: That is why I am trying to tease out from you what we should be suggesting in the way of recommendations. I have some views about Australia's view of business. I think sometimes we do not have enough confidence in our own ideas and, in areas of investment, people wait to see what happens elsewhere and other markets will take these matters up before Australians will invest. They are very cautious. I understand that. I am looking at prioritising our aid money, which is meant to improve people's welfare in situations of significant disadvantage. I look at something like this and I say, 'We can encourage. We can make some speeches and talk about it. That is fine.' But if you are going to leverage it by using government resources, what should we be leveraging and how can we show that it is far more beneficial to be doing that than dealing with children's health or education or other matters?

CHAIR: You mean directly through a grant?

Mr RUDDOCK: Yes.

Dr Logue : In responding to your question I would probably reflect on what I have seen happening in the national impact investing market. The inquiry into how to build a social finance market in Australia resulted in the government supporting the establishment of three social enterprise development and investment funds. Those funds have been able to provide very early-stage investments in the pipeline we are seeing emerge. I think that, without those funds, that would not have happened at such a scale. We would probably be a bit out of the game in Australia and missing the opportunities to connect global markets. From my research and experience, I would like to see the government not necessarily doing all of these things but really starting to focus on building the infrastructure that enables the private sector to become more involved and to catalyse some of these early-stage initiatives.

Mr RUDDOCK: So if I was making a recommendation that we should establish a social fund as a trial to demonstrate that these initiatives work, how much would it take and where might it be appropriate to do it?

Dr Logue : I am not sure how to answer that off the top of my head. I am sure UTS would love to be involved!

Mr RUDDOCK: I am completely serious. If we are suggesting we should set up a social stock exchange in, say, the Solomon Islands to list their opportunities, how much would it cost? How would you go about it? What would you do? I do not know. We are being asked to make recommendations to our colleagues who administering our aid money. We are going to change priorities. You are asserting that these are profitable. I am asking, 'If they are profitable, why wouldn't people do them anyway?' You are saying that there are a whole lot of other factors. So I am suggesting a trial. Have I got this right or wrong? I am trying to look at model that we can recommend, developing your ideas and setting out how we would go about it.

Dr Logue : I think you are absolutely correct. Some of these ideas and new products are profitable, but they need the supporting infrastructure around them. So I think that is where some of the funds could be put into play—whether the government is involved in trialling the ideas and being an early-stage first mover in that space or whether it is about prototyping say, a social stock exchange. I think these things could be done with as little money as possible, actually. Although, of course, as a researcher I would like to see more money. With a reduced aid budget, I think we could follow some of the mentality in the entrepreneurship space around the lean start-up and so on. You do a very lean, minimum viable product and prototype. You test it and, if it does not work, you make modifications and so on. I would have to sit down and do a bit more research to figure out what the possible costs might be, but I think with a very minimal investment we could trial some of these ideas and catalyse others.

Mr RUDDOCK: I have not talked to my colleagues about how we might make recommendations in relation to those matters.

Dr Logue : I am happy to provide additional research.

Mr RUDDOCK: I tend to be fairly action driven. When I get a submission, I ask, 'What can we do? How would we go about it? Is it likely to work?'

Reading the material, I did not feel that I knew where I would take what you are submitting to us. If you can develop it further, I would find that very helpful.

Dr Logue : I absolutely can do that. I am having conversations at the moment with the Social Stock Exchange in London and also with the exchange operating out of Mauritius, the impact investment exchange, to see the costs involved in running those models. Those are very different exchange models. I am happy to provide that detail to the committee.

CHAIR: In the New South Wales case, we have had the trial of the social benefit bonds, which are one of the world's first, as we know. This is where ABC childcare centres were in strife and a number of NGOs got together and put out social benefit bonds. They have now matured, or they are coming up to maturing.

Dr Logue : They are, yes.

CHAIR: That is an example of where there has been a good return—

Dr Logue : A very good return.

CHAIR: much better than the market typically, the stock exchange on mining or property or whatever. Perhaps we could look at that particular example and see how that delivered compared to some other way of dealing with the problem they had at the time of funds access.

Dr Logue : I think as part of that case study the context was that there was quite a crisis for all these childcare centres going under, so quite high returns were offered to bring the investors on board very quickly. That is my understanding of that situation.

CHAIR: Was that government guaranteed? I do not know whether it was. I think the consortia of NGOs guaranteed the investment in that case.

Dr Logue : I am not quite sure.

CHAIR: I think that is the only Australian example we have at this stage.

Dr Logue : Yes. We have two. Some of the social enterprise development investment funds are involved; some of our largest not-for-profits, such as the Benevolent Society, are involved; and the Commonwealth Bank is involved on behalf of its investors. That was quite an exciting space, and I believe it is making good returns.

Mr RUDDOCK: These facilities had been built, they were operating and there were kids in them. There was a driver for it. You can understand what the driver was. I do not know whether you go to East Timor or the Solomon Islands or Niue—wherever—and find those sorts of drivers that become a basis for your potential investment in which we are saying people will get an eight per cent return. I do not know. If we are saying that our aid program should be directed to assisting to develop these, I am asking myself, 'What sort of model is it that we can suggest that may deliver that?' I have been a great supporter of the Grameen Bank. It always seemed very positive to me. That is a form of private sector involvement. It has been demonstrated to work in a particular environment, and I have encouraged others to pick it up. We can make lots of supportive speeches, but we are being asked to make recommendations in relation to the way in which we deliver our aid program, and I am saying, 'How do we do that?'

Dr Logue : I completely agree with the tension and difficulties, which is why I think the private contractors as well as your existing aid program delivery staff on the ground can help in identifying the different problems or perhaps the impact investment opportunities. My research and work more recently has been around what type of platforms and mechanisms could connect these different groups, the demand and the supply. That is why I have been looking into this idea of a social stock exchange, where that could provide some low-cost access to capital. We know we have a lot of impact investors out there that are interested. How to get that demand is a similar issue we are having in the Australian market. Finding those investor-ready social enterprises may take some additional work, but there are already a lot of people on the ground that could perhaps be tapped to find those investor opportunities.

Mr RUDDOCK: I would be interested to read your further submission.

CHAIR: Dr Logue, thank you for the evidence you have given us today. We have asked you to provide additional material, if you do not mind. We would appreciate it if you could forward that to the secretariat as soon as you can.

Dr Logue : I am happy to do that.

CHAIR: You will be sent a copy of the transcript of the evidence you gave today, to which you can make any corrections that are required. For the information of other witnesses, we are broadcasting this hearing on parl.net. We thank you most sincerely.