Deep Dive - Supercharging Social Investment in Aotearoa NZ

Introduction

This month, IIN is excited to share with our community a deep dive into the recent publication by The ākina Foundation ,?The Power of Social Investment, by interviewing ākina CEO and IIN Board Member Nicola Nation . Nicola provides her thoughts on how social investment offers significant long-term opportunities while addressing critical societal issues such as poverty, education, health, and environmental sustainability. So here's some of highlights of our conversation with Nicola Nation.

Question 1 - Nicola, congratulations to you and ākina on the recent White Paper, "Developing a Successful Social Investment Approach: Supercharging Social Investment in Aotearoa New Zealand". Could you please provide a brief background around the purpose of this document and its key concepts?

Hon Nicola Willis first announced the National Party’s intention to develop a comprehensive social investment policy back in 2022. At The ākina Foundation, we have long been proponents of the potential for social investment here in Aotearoa, and so we have been following the development of this policy closely.

Social issues have become increasingly complex and multifaceted and the importance of aligning New Zealand’s financial investment with long-term social outcomes has never been more pressing. So far, the public dialogue around social investment has been quite narrow, focusing mostly on fiscal spending and how the Government can get the most “bang for its buck”.

We want to move the conversation beyond data and analytics. Although they are vitally important in any social investment approach, they must also work in unison with other factors. Our white paper aims to catalyse the conversation about how social investment could work in New Zealand, offering insights into its benefits, challenges, and opportunities. It is designed to inform political leadership, policymakers, investors, nonprofit organisations, and other stakeholders about the critical role social investment can play in driving sustainable social and economic development.

Question 2 - I'm curious, what do you mean by “social investment”, and what do you believe constitutes a good social investment? How should one go about measuring or examining a particular opportunity?

Social investment is a way to place positive social outcomes at the heart of our financial decision-making. By leveraging our capital for social good, across the public, private, and non-profit sectors, we can create resilient communities and a more equitable Aotearoa.

Social investment not only provides significant long-term opportunities, but also addresses critical societal issues such as poverty, education, and health. The basis of good social investment across these various investment models is that it takes an early intervention, community-led approach that is supported by an impact model, that it looks to recoup the best social and financial outcomes for money invested, that it takes a long-term approach, and that it is targeted and focused on outcomes.

Social investment can take many forms, from social impact bonds, co-funding, and impact investing, through to community investment and philanthropic lending. We believe there is a place for all of these models in the Government’s approach.

Question 3 - Chapter 2 is titled "There's Plenty of Capital, Keen to Make Change?" Please describe what investors are particularly interested in when examining social investment. And why are investors, it seems, more excited than ever to start investing in social investments?

There is a noticeable shift in the investing sector towards impact investing, driven by a recognition that philanthropic and public funding alone are insufficient to tackle our gnarliest social and environmental issues. Rightly so. As Jonathan Boston, Emeritus Professor of Public Policy at Te Herenga Waka—Victoria University of Wellington’s School of Government points out in the paper, we shouldn’t be relying on governments to do everything.

Similarly, Jamie Newth of Soul Capital identifies the end goal that I think perfectly articulates why there is so much interest in a social investment approach from impact investors who would be willing to invest capital: it’s the potential to drive our economy towards a more sustainable and inclusive place.

There is no lack of interest from the impact investing sector, but the Government needs to provide certainty to investors if it wishes to attract external capital to its social investment approach. As Alastair Rhodes points out in the white paper, to do this, it needs to develop investable propositions, as well as find ways to de-risk the investments for private and philanthropic investors.

Question 4 - Within the document you provide three key recommendations, could you please provide a high level overview of each recommendation and how you landed on them?

In his interview for the white paper, Helmut Modlik of Te Rūnanga O Toa Rangatira points to the absolute need for proximity in any social investment approach – a centralised, top-down approach will not work. Those who are closest to the issue are the same people who can create the greatest impact. This is the greatest barrier: our leaders in the community are in the best place to deal with social issues because they’ve already been at it for years, and we should be supporting them rather than standing in their way.

There are three recommendations in the white paper that ākina believes must be at the heart of the Government’s approach to social investment.

1. Firstly, that it listens to the community voice, involving the expertise of the community and those experiencing the change in developing policy settings.

2. Secondly, that government should partner with external funders to enable the entire social sector to achieve consistent outcomes in implementing its social investment policy.

3. Finally, that any social investment approach is apolitical and adopts a longer-term horizon to seeking outcomes, as well as develop a consistent measurement framework, to ensure the approach is substantive and enduring. ākina is already tapped into many of the communities and networks that the government will need to leverage in order to develop a successful social investment approach. We can act both as an intermediary, as well as arming the Government with a toolkit that supports effective decision-making.

Question 5 - What is next? Where do you see or hope social investment goes from here? How does ākina plan to support expected growth and what can the IIN community keep an eye out for?

All sides of politics and social services agree that we need to be doing better by our most vulnerable people. Ideally, this white paper will foster a better understanding of the dynamics and components of social investment across the board, and put the Government into a position where they are set up for genuine, long-term success.

They have the potential here to develop a lasting legacy, but it is only through informed dialogue, collaborative action, and good design that we can unlock the full potential of social investment to benefit all New Zealanders.

We hope to be a part of that journey.

Concluding remarks

The IIN would like to thank ākina and Nicola Nation for their time and for providing their thoughts on this informative work. We look forward to seeing how this piece may inform social investment within Aotearoa. If you want to learn more about?The Power of Social Investment?and stay informed about this work, follow IIN and ākina!