The Social Enterprise

Development and
Investment Funds
Lessons from the implementation process
April 2013

Contents
The Social Enterprise Development and Investment Funds ........................................................................ 1
Lessons from the implementation process .................................................................................................. 1
Contents ....................................................................................................................................................... 2
1. Introduction.............................................................................................................................................. 3
The Social Enterprise Development and Investment Funds (SEDIF)........................................................ 3
Social enterprises ..................................................................................................................................... 4
The social investment context ................................................................................................................. 4
Why investment funds? ........................................................................................................................... 5
The implementation process ................................................................................................................... 5
2. Process steps of the SEDIF initiative......................................................................................................... 6
3. Genesis of the SEDIF ................................................................................................................................. 7
Policy need and opportunity .................................................................................................................... 7
Allocation for the SEDIF from the Jobs Fund ........................................................................................... 7
Early engagement - Building market access and credibility .................................................................... 7
4. SEDIF development .................................................................................................................................. 9
Supplementary selection process ............................................................................................................ 9
Phase 1 - Research ................................................................................................................................. 10
Phase 2 - Designing the initiative ........................................................................................................... 12
Phase 3 - Public consultation process .................................................................................................... 15
Phase 4 Developing the SEDIF Programme Guidelines and Assessment Documents ........................ 17
Phase 5 - Assessing proposals ................................................................................................................ 20
Phase 6 Negotiating Funding Agreements .......................................................................................... 23
Conclusion .................................................................................................................................................. 25
Future initiatives .................................................................................................................................... 25
Appendix A Useful Resources .................................................................................................................. 26
Appendix B SEDIF Supplementary Process EOI Template ....................................................................... 28

1. Introduction
This document draws on the experience of the Australian Government Department of Education,
Employment and Workplace Relations (DEEWR) in establishing the Social Enterprise Development and
Investment Funds (SEDIF), the first impact investment funds of their kind in Australia.
It outlines, at a high-level, the process followed over the course of a two-year period from 2010-12 to
design, develop and implement the SEDIF.
The implementation process has been formally reviewed by APIS, consultants that specialise in
capturing organisational and process learning. The APIS review, as well as the APSC State of the Service
Report 2011 and the Australian Innovation System Report 2011, have recognised the SEDIF as an
innovative initiative implemented through a well-executed process consistent with the Commonwealth
Grant Guidelines and Australian and international best practice.
This document draws on the APIS process review and the experience of the SEDIF project team to
capture the story of the implementation of the SEDIF and expand on the key lessons from the process
that may help to inform the development of other similar initiatives.

The Social Enterprise Development and Investment Funds (SEDIF)

The SEDIF is an Australian Government initiative designed to improve access to capital for social
enterprises to help them grow their operations, and by doing so, increase the positive impact of their
work in the communities in which they operate. The SEDIF is also designed, in the longer-term, to
catalyse the Australian social (impact) investment market: that is, the market for investments that
deliver positive social, cultural and/or environmental outcomes and some measure of financial return.
Through the SEDIF, the Australian Government has provided $20 million in non-refundable grants to
seed the establishment of three social investment funds. A key feature of the SEDIF is that each fund
manager was required to at least match the level of grant funding provided by the Government with
additional private investment. The grant funding provided a cornerstone investment to seed the
establishment of the new funds. Each fund manager was allocated the full grant on finalising the funding
agreement. The three funds managers have attracted a range of private investors, including a
superannuation fund, an international social bank and high-net worth individuals, to create a total
investment pool of over $40 million. The three SEDIF funds managers are:

Foresters Community Finance (Foresters);

Social Enterprise Finance Australia (SEFA); and
Social Ventures Australia (SVA).

The three SEDIF fund managers are now using this capital to provide tailored finance to social
enterprises to help them purchase premises and equipment, develop new services, or expand existing
services for the benefit of their communities. Further information on the SEDIF fund managers and the
types of loans and investments being made is at the SEDIF website.

Figure 1: the SEDIF initiative flow of capital

Social enterprises
Social enterprises play a vital role in generating new opportunities, businesses and services in
communities and are important partners with governments in a range of areas including the arts,
community development, education, employment, health care and social services.
A social enterprise is an organisation that combines commercial trading with a social, cultural or
environmental mission. The defining feature of a social enterprise is that it trades in order to fulfil its
social mission rather than trading only to create a profit for private benefit. One definition is that social
enterprises are organisations that derive a substantial portion of their income from trade and reinvest
the majority of their surplus in the fulfilment of their mission. New forms of organisations which put
purpose as well as profit at the centre of their work are emerging in Australia and internationally.
Social enterprises can be found in both the for-profit and not-for-profit sectors and come in a variety of
forms such as independent businesses, co-operatives, social businesses or the trading arms of charities.
Social enterprises are found across a range of industries such as hospitality, childcare, retail, light
manufacturing and recycling services. The types of social outcomes that are achieved by social
enterprises include training and employment opportunities for job-seekers, especially those facing
barriers to employment, and the delivery of new or additional services to communities.

The social investment context

The SEDIF initiative recognises the potential for social investment approaches to drive effective solutions
to social challenges and to encourage meaningful partnerships between the private, community and
government sectors.
Social investment is the term that is used to describe a range of ways in which those with resources can
contribute to solving social, cultural or environmental issues. Social investment is sometimes used to
encompass philanthropy, volunteering and corporate social responsibility, as well as a variety of
collaborations and partnerships across sectors.
The SEDIF is a social investment initiative, but focuses specifically on promoting impact investing
(sometimes called social finance) as a tool to generate resources to support social enterprise activity in
communities. The defining feature of impact investing is that transactions are made with the intention
of achieving a positive social, cultural and/or environmental impact and a financial return.
An investment fund is just one impact investment mechanism that can be used by governments to work
in partnership with private and community sectors to create positive impact. Impact investing can utilise
a range of financial mechanisms such as investment funds, direct debt or equity investments into
organisations, social impact bonds, tax incentives and guarantees.
4

Why investment funds?

The term funds is used in the SEDIF context to refer to investment funds that create and manage a
portfolio of investments. The funds do this by offering repayable financial products to social enterprises
which generate a financial return. The SEDIF funds are managed by independent fund managers at arms
length from the Australian Government. This is different to many other government programmes that
may be described as funds, but are managed by public officials and generally offer one-off grants.
The governments have established investment fund initiatives to pursue public policy outcomes before.
Examples include the support for the venture capital market and for scientific innovation.
Internationally, impact investment funds are making investments into organisations in both the forprofit and not-for-profit sectors in areas such as the arts, community development, economic
regeneration, the environment and social enterprise.
The SEDIF initiative was intentionally designed to utilise investment funds as the mechanism to target
sustainable support and finance for social enterprises to grow and develop. The funds were not
designed to provide start-up or seed funding, but to provide later stage finance for organisations that
have already been through that early phase of developing their operating model. The fund mechanism
was selected because it offered the opportunity to:

pool financial resources from multiple investors with different appetites for risk and return
through a familiar structure for Government and other investors;
target capital to social enterprises and recycle the capital through many enterprises over time;
create a demonstration effect that forges a new path for government involvement in impact
investment and introduces a range of investors to the social enterprise sector; and
harness the skills and market-focus of experienced fund managers to guide investment decisions
and further growth.

The terms on which the Australian Government funding was available provided an incentive to other
investors to participate. In particular, applicants were asked to demonstrate how they would use the
government capital to attract other investors. This design feature provided flexibility for applicants to
consider a range of approaches for the use of the Australian Government funding such as first loss
capital and to offset management costs which were able to maximise a risk-return profile that was
attractive to other investors in a nascent market with no detailed track record of success.

The implementation process

Each section of this document provides an overview of a phase of the SEDIF development and
implementation processResearch, Design, Consultation, Development of the Guidelines and
Assessment Documents, Assessing Proposals, and Negotiating Agreements. The SEDIF process was
iterative and a number of phases overlapped, particularly in the early research, design and consultation
phases. Each section summarises what the SEDIF project team did during each phase, highlights the
approaches that worked best and notes some issues that would need to be considered in developing a
similar initiative.
Other resources that may be useful in considering social investment initiatives are listed at the end and
can be found at the Social Innovation website.

2. Process steps of the SEDIF initiative

This section provides an overview of the phases of work that the project team undertook; from initial conception of the SEDIF initiative through the phases of
research, design, consultation, assessment and selection of the fund managers, including a supplementary process to select the third fund manager. The initiative
took over two years to implement, although the timeline was affected by the 2010 election process; the supplementary process was able to be streamlined based
on learning from the initial selection process. The following process timeline captures the indicative duration of each phase.

Figure 2: The SEDIF implementation process timeline

3. Genesis of the SEDIF

Policy need and opportunity
Prior to the introduction of the SEDIF, programmes like Jobs Fund and Innovation Fund had provided
one-off grants to social enterprises for discrete projects or to develop an aspect of their operations,
especially in the start-up phase. While this grant funding was valuable, some enterprises were beginning
to report feeling trapped by success in that grant funding was often harder to secure as their
organisations became more mature. Increasingly, social enterprises were seeking alternatives to grant
funding to help them grow their operations and move their businesses onto a more financially
sustainable footing.
In Australia, however, there were no specialist providers of finance and support for social enterprises
and many were reporting difficulties in accessing the right sort of finance for their business needs in the
mainstream financial market. This issue was also highlighted in the 2010 Productivity Commission report
into the Contribution of the Not-for-Profit Sector which recommended that Australian governments
should assist in the development of a sustainable market for not-for-profit organisations to access debt
financing.1
Internationally, social investment had been generating interest from governments and impact
investment funds were proving successful in creating new avenues of finance and support for social
enterprises.
The SEDIF initiative built on the international experience to support the social enterprise sector in
Australia. It also recognised the potential catalytic effect of making a relatively modest investment to
stimulate private investment to contribute to establishing new impact investing intermediaries and
providing the opportunity to recycle the funds through social enterprises thereby creating more value
than might be generated through regular grants-based funding.

Allocation for the SEDIF from the Jobs Fund

The Jobs Fund was a grants programme that was designed to assist communities most affected by the
economic downturn by providing employment and training opportunities over the short term and
targeting job creation and skill development as pathways to employment for the most disadvantaged
job seekers over the medium to longer term. The Jobs Fund targeted projects that created and
protected jobs, and built community infrastructure and social capital in local communitiesincluding
establishing social enterprises.
The opportunity was identified to allocate $20 million from the Jobs Fund to develop a new mechanism
to leverage investment in social enterprises so that they could develop and scale their businesses to
achieve positive social changes in their communities across Australia. The parameters of the Jobs Fund
shaped some of the elements of the SEDIF including the focus on social enterprise investment and
development. The allocation from the Jobs Fund recognised the potential of impact investment
initiatives to make a contribution to promoting economic activity, stimulate enterprise development and
create jobs in communities.

Early engagementBuilding market access and credibility

In the early stages of considering the design and approach of the SEDIF initiative, DEEWRs Social
Innovation Strategist, a senior official charged with driving the social innovation and investment agenda
within DEEWR, engaged with key finance and community sector stakeholders to explore possibilities for
1

This has since been reinforced by the Senate Economics References Committee Inquiry Report,
Investing for good: the development of a capital market for the not-for-profit sector in Australia,
November 2011.
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how an impact investment fund might operate and be utilised in the Australian context. The Strategist
drew on existing networks and made new connections with international stakeholders to draw on their
experiences developing investment funds elsewhere.
The Strategist used her networks particularly to research the drivers of success for impact investment
funds; ensure that the vision for SEDIF was grounded in the reality of the market where the
implementation would take place; and brokered a network of expertise and support that could be
drawn on to support the SEDIF initiative as it developed.
This early engagement work was a critical element in seeding the idea of government interest in an
impact investment fund in Australia and was an important priming step that would lay the groundwork
for the development of the SEDIF process and for establishing the funds in the market.

4. SEDIF development

This diagram represents the process of development and implementation of the SEDIF initiative from
the early research phase through to the SEDIF funds selection and operating in the market.
In particular, the research, design and consultation phases overlapped and informed each other, for
example research of particular features continued through the design phase and the consultation
process raised perspectives that influenced design elements of the initiative.

Supplementary selection process

The SEDIF implementation included two selection processes. The initial SEDIF selection process awarded
$16 million of the available $20 million to two funds managers, Foresters and SEFA. The project team
conducted a supplementary selection process to award the remaining portion of the funding allocation
consistent with the objectives of the initial process. SVA was awarded $4 million through the
supplementary selection process.
The phases of the supplementary selection process were largely consistent with the initial process
however given the restricted timelines and the modest amount of remaining funding the team refined
and streamlined the approach based on the learnings from the initial process. The lessons and
refinements that were made to this supplementary process are reflected throughout each phase of this
document where relevant.

Phase 1 - Research

What we did
The SEDIF was the first social investment initiative of its kind in Australia. As there were no local
precedents to draw upon, the project team started its work by conducting a comprehensive review of
the international literature on social investment and social investment funds.
The research process included an analysis of the key features of social investment funds operating in the
UK, US and Europe, as well as an in-depth literature review of approaches to social enterprise
investment and support, and reviewing examples of other leading social investment practice.
The project team drew on international experiences about:

how government could best support new investors to enter the social investment market;
ways to test the capacity of social finance intermediaries to connect investors with social
enterprises in need of finance; and
ways to build the capacity of social enterprises to use new forms of finance to create scalable
and sustainable social change.

The project team also focused on developing a thorough understanding of the design features necessary
to ensure the fund would be an attractive and viable proposition for a range of private and social
investors. This international research was supplemented by a review of the social investment activities
that were already happening in Australia and an investigation of taxation in the philanthropic and social
investment context. This research formed part of the evidence base for the design elements of the
SEDIF.
The research process particularly identified research from the USInvesting for Social and Environmental
Impact developed by the Monitor Institute and Solutions for Impact Investors: From Strategy to
Implementation developed by Rockefeller Philanthropy Advisors that influenced the design parameters
of the SEDIF to ensure a good value for money proposition for investing public funds. In particular, these
reports verified and reinforced:

the value of the catalytic effect of government involvement in impact investing and the
importance of developing networks to engage stakeholders before launching the initiative; and
The key elements of excellence and success that investors are looking for when considering
whether to invest in impact investment funds of this type.

The project team used this research to inform the design of the SEDIF initiative in order to attract
credible applications from Fund Managers that could demonstrate these critical elements for success or
else demonstrate through the assessment process that the necessary quality of proposition was not
available in the Australian market at that time.
To support the research process and the translation of the research findings into a viable design, the
project team engaged a consultant with experience in international and Australian social finance
contexts, including in capital raising and establishing investment funds. The consultant contributed

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specialist knowledge to the research and design phases which bolstered the design integrity, the
attractiveness of the initiative to investors, and in turn, the overall success of the initiative.
The Social Innovation Strategist continued to engage with stakeholders in the social enterprise and
finance sectors during the information gathering and research phase of the SEDIF. This was important to
ensure the project team was utilising the best available research, to reality test elements of the
approach, gauge interest from key stakeholders and gain an early assessment of the likelihood of
investors being attracted to SEDIF.
The research and design phases were reflexive and additional research continued to be progressed as
the project team moved through the design and consultation phases.

What worked best

The combination of comprehensive desktop research and early engagement with leading practitioners
was critical to the teams ability to develop a clear vision for the SEDIF and identify the most appropriate
mix of features to include in its eventual design.
Given that social investment is a relatively new field of practice, it was essential to supplement the
literature reviews with dialogue with experts and practitioners to gain a thorough understanding of the
design options and to tailor them for the emerging Australian social investment market.

Things to consider
The SEDIF project team benefitted from the expertise and connections of the Social Innovation
Strategist, and was able to access expertise and guidance through these networks. In circumstances
where these deep connections to the market and social sector are not present within the project team,
it may be necessary for public sector officials to contract specialist assistance from experts to explore
the potential and build the connections with the target organisations.
Rich sources of information are now available to inform research and design processes for impact
investing initiatives. An example is ImpactBase, which is a searchable, online database of impact
investment funds and products, developed by the Global Impact Investing Network. This resource was
not available during the SEDIF research phase and should be drawn upon in considering similar
initiatives. A useful list of resources is provided at Appendix A.

Key Questions

What is the nature of the social change sought and is there evidence to inform the objectives of
the initiative?

What linkages could be made with organisations that have experience developing similar
initiatives?

What resources are available to offer information on international approaches to impact

investment funds?

What insights can be gleaned from case studies?

How can the international research be contextualised to suit the Australian context and market
conditions?

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Phase 2 - Designing the initiative

What we did
The research on international and local impact investing approaches underpinned the design process
and shaped many of the key design elements of the SEDIF. The SEDIF initiative was intentionally
designed for the social enterprise context and to act as a demonstration of how governments could
work differently to enable communities to address social and environmental challenges beyond that
offered by traditional grant-based funding.
The design process was deliberate and iterative and was informed in a continuous manner by the
emerging literature and feedback from stakeholder engagement and public consultations to design an
initiative that simultaneously met public policy objectives and the needs of investors and investees. The
design phase focused on realising the vision for SEDIF through a rigorous process to refine the key
elements of the initiative and the strategy for delivery.
In the early stages of the design process, the SEDIF team established an inter-departmental committee
(IDC) to provide whole-of-government input to the initiative. An expert Advisory Committee was also
established including members with expertise in finance and funds management, social enterprise and
social investment, as well as legal and governance fields applicable to the SEDIF.

Figure 3: the SEDIF assessment governance arrangements

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The Advisory Committee was not a decision-making forum, but provided expert advice to the DEEWR on
certain aspects of the design of the initiative as well as on applications during the assessment phase.
Members were selected for their expertise and experience across a range of areas including sound
investment, legal and governance issues, risk management and social enterprise.
During the design phase the SEDIF project team began engagement with the departmental legal advisers
so that all essential accountability requirements could be built in to the design of the initiative at the
early stages.
The project team, with support from the consultant and Advisory Committee developed the critical
design elements of the SEDIF which included:

that government grant funding be leveraged on at least a 1:1 basis to increase the overall pool
of funds available for investment in social enterprises;
flexibility in how the Australian Government grant funding was used to support the funds and
attract investment in lending to support operating costs in the early stages as well as to provide
a buffer to absorb some of the risk for investors coming in to a new market;
clear focus on capacity building support for social enterprises and that the finance was used
effectively to support the achievement of social policy goals;
attention to the need for the fund managers to develop a pipeline of social enterprises that are
ready to take on investment to grow their business and sustain their impact;
the requirement for the fund managers to demonstrate robust governance and riskmanagement arrangements;
appropriate and regular reports to ensure Government could monitor the establishment of the
funds and manage any risks appropriately without undue administrative burden distracting fund
managers from the task at hand. This also helps to build the evidence base for possible future
initiatives and the evaluation of SEDIF; and
a reserved right for the project team not to recommend an applicant in the process if the
required standards were not met. This was an important provision in light of the nascent state
of the social investment market in Australia. Effectively it enabled the grant process to simulate
a reverse auction dynamic into the market and maximise scope to achieve value for moneyor
not deploy the funds.

What worked best

The project team was careful to establish and make use of appropriate expertise including the
consultants, the IDC, internal legal team and Advisory Committee throughout the design process. By
drawing on the skills, interest and experience of others early in the process, the team was able to
develop a robust vision and set of objectives for the SEDIF and move quickly into the development of
the SEDIF Guidelines and assessment documentation.
Taking the time to fully explore and road-test how the SEDIF initiative could be used to best effect in
attracting investors, and designing the fund accordingly, was central to its eventual success. A key design
decision was to allow for the use of the grant funding in a way that helped to reduce some of the
financial risk for investors, for instance, by allowing the grant funding to meet some of the operational
costs for the fund managers. This decision was taken in recognition that this was a new type of
investment fund in Australia and that the fund managers and investors would be the first entrants into
this relatively new market. This design decision had the intended effect of stimulating interest from a
range of fund managers and private and institutional investors.
The expert consultants experience in establishing and managing investment funds enabled the team to
test the design features and objectives against her practical experience. It was invaluable that the theory
that had been drawn out of the research process could be tested against a pragmatic framework that
was contextualised for the Australian market. This opportunity to stress-test design elements against
what was practical and realistic for the Australian context was critical to selecting design features such
as the leverage requirement of at least 1 to 1 on the government investment, and the requirement for
13

the government contribution and the private investor contributions to be paid into and held as a unified
fund.
The decision to engage with DEEWRs legal branch early in the process was also important as it provided
the opportunity for the legal team to become familiar with social investment, a relatively new area given
that DEEWR had not established an investment fund initiative of this type before. Ensuring the legal
officers had adequate time to develop their understanding, rather than waiting until the initiatives
Guidelines were developed, helped to expedite later stages of the assessment and negotiation process.

Things to consider
During the design phase of a similar initiative, it is important to balance the public policy objectives with
the likely needs of investors and investee organisations (in this case, social enterprises). Finding the right
mix of design features is essential to eliciting a positive response from social investors and to meeting
the needs of the end-users of the investment.
Investment markets are constantly evolving and what may appeal to investors at one point in time may
not be as attractive at another. It is essential to understand early in the process what type of investors
may be attracted to the social impact of the proposal, their likely appetite for risk and return, and how
the investment can be structured to meet these needs while also meeting accountability requirements
for the use of government funding.
Similarly, it is important to ensure that the initiative will deliver products and services that will meet the
needs of the investee organisations so that the investment capital is being used for its principle purpose
of creating social impact and generating financial returns.
In this case, the mechanism for government fundinga grantwas a given. In other circumstances,
different options could be considered e.g. concessional loan (e.g. Bridges Ventures, UK) or equity-like
investments (e.g. Innovation Investment Funds, DIISRTE).
Some grand funding is subject to income and/or capital gains tax assessment in the hands of the
recipient. In the context of an investment fund this can be a significant factor affecting cash flow and
viability. The issue should be explored early in consultation with both the Department of Finance and
Deregulation and the Australian Taxation Office.

Key Questions

What expert assistance is required to support the design process and translate the research and
evidence to inform the design parameters?

What is the appropriate financial mechanism to establish funds for your timeframes, policy, and
market circumstances?

Would a mechanism such as a grant, loan, guarantee or investment generate the most value?

How have the needs of investors and investees been accounted for in the design process and
how can they be reality-tested?

How can the design parameters for the initiative promote collaboration and cross-sector
partnerships to get the right mix of skills to support the initiative?

What are the key impacts sought by the initiative and how will performance be measured and
evaluated?

What are the governance arrangements to support the implementation of the initiative?

Have the taxation implications of the initiative and funding mechanism been explored?

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Phase 3 - Public consultation process

What we did
To test the proposed design, and to gain further input from stakeholders, a consultation paper was
developed that set out the key themes in the international and Australian literature on social
investment to assist in explaining the Governments vision, objectives and proposed strategy for
establishing the SEDIF.
The consultation paper set out the two main policy goals for SEDIFto improve access to finance for
social enterprises and to catalyse the development of the social investment market in Australia.
The paper set out the possible design elements of the initiative including leverage arrangements, target
impact areas, social enterprise eligibility, impact measurement, financial products, approach to building
the capacity of social enterprise and possible rates of investment returns. The paper also provided an
overview of the possible governance elements of the SEDIF such as fund manager eligibility, legal
structures, governance systems, regulatory and accountability capabilities, and the cost of management
arrangements.
The paper sought views and feedback on these elements from interested organisations and individuals
including social finance intermediaries, philanthropic organisations, social sector organisations and
relevant state and territory government departments.
A public consultation briefing session was held and was well attended by representatives from a range
of organisations.
All written submissions to the consultation process and views from the briefing session were recorded,
analysed and collated by the project team. This material was used to refine the final design of the SEDIF
and inform the development of the SEDIF Programme Guidelines and the Assessment Guide which is
described in more detail in the following section.

What worked best

The consultation process was designed to elicit the views of stakeholders about what would be
important to consider in order to contextualise the overseas evidence and experience for the Australian
market. The feedback that was garnered through the process informed and reinforced the key design
elements of the initiative.
Consistent with good practice consultation, the process allowed for both formal written submissions
and a briefing session for interested organisations to engage in face-to-face dialogue and seek
clarification on issues from the project team. This ensured that a range of views could be sought and
considered in the development of the SEDIF Programme Guidelines.
The project team synthesised the submissions into a detailed matrix which served as a useful tool and
source of evidence for the development of the SEDIF Guidelines. All organisations and individuals that
participated in the briefing session and submission process were added to a stakeholder database and
were provided with updates on important milestones during the process, such as the call for fund
manager applications and the announcement of the successful fund managers.
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Things to consider
During the process of designing a similar initiative it will be important to engage with the target sector
or organisations at a timely point in the process. This will help to build relationships, develop credibility
and allow sufficient time for quality contributions to be taken into consideration in the design process.
Consideration of a range of forums to achieve engagement and insights from different parts of the
market is important.

Key Questions

How can a stakeholder network be developed that allows for an appropriate mix of views and
experiences to be heard through the consultation process?

What is the strategy to build credibility in the market?

What networks can be accessed to develop relationships with stakeholders?

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Phase 4 Developing the SEDIF Guidelines and Assessment Documents

What we did
A competitive grants process was used as the mechanism to establish the funds from the $20 million
allocation. The SEDIF Guidelines (the Guidelines) which governed the grants process were developed,
drawing on the requirements of the Commonwealth Grant Guidelines, the Financial Management and
Accountability Act and Financial Management and Accountability Regulations 1997, international
research, design process, submissions to the consultation process, feedback from the IDC and advice of
the expert consultant and the SEDIF Advisory Committee.
The principal objective of the SEDIF was to establish two or more investment funds which generate
social impact investment in addition to financial return and increase capital for social enterprises in
Australia through capacity building.
The short term objectives of the SEDIF were to: provide a catalyst for market development; test capacity
for, and existing barriers to, social impact investment and access to capital for social enterprises;
capacity building for social enterprises; and target investment in priority areas for impact.
The longer term objectives of the SEDIF were to: support development of infrastructure to build the
social impact investment market; support innovative product development; and attract longer term
investment in priority areas for impact. Overall the Government was seeking applications from fund
managers which articulated an approach to achieving these objectives through demonstrating:

optimisation of the social impact of the fund with an appropriate financial returns floor and
effective and efficient market investment practice and decisions;
capacity to establish the fund and perform consistent with the strategic intent, including
appropriate mix of skills, experience and staff qualifications;
an approach designed to deliver a balanced portfolio of supported social enterprises and of
investment products which deliver social and economic impact;
effective processes to establish an investment pipeline, including a robust approach to
developing investment readiness in social enterprise in the Australian context;
robust governance, risk management and internal systems;
a contribution to the development of investment for social and economic impact in Australia,
including contribution to shared knowledge and practice;
transparent evaluation and reporting and clear application of evidence in strategy and
operations;
optimisation of innovation while applying the rigour of the market; and
utilisation of the initial Australian Government investment to attract further investment
including the required initial leverage of at least 1:1 and the requirement to attract ongoing
investment to grow and sustain the fund for the medium and longer term.

The Guidelines were framed around a set of objectives with a focus on the targeted outcomes rather
than prescriptive programme rules. This flexible approach recognised the prospective fund managers
expertise in establishing and managing investment funds, as well as encouraged innovative design and

17

consortia arrangements for the collaborative delivery of the SEDIF. It also reflected the objective of
providing a catalyst for market development.
The selection criteria were designed to allow prospective fund managers to demonstrate their capacity
to deliver across all elements of the SEDIF objectives, support the market development aims of the
initiative and deliver a fund that represented good value for money for the Government. Specifically the
selection criteria were seeking responses that would demonstrate:

the fund managers vision for the fund, the proposed strategy to achieve this vision and
objectives for the SEDIF;
capacity to deliver on the strategy and plans articulated;
the proposed investment strategy and approach to achieving social and economic impact;
the proposed scale, investment model, risk management and governance arrangements for the
fund;
the overview of the proposed approach to measuring and demonstrating social impact and
maintaining relationships with investors; and
overall value for money of the proposal for the Australian Government.

In addition to the responses to selection criteria, the applicants were required to provide financial and
credit information to demonstrate: their financial viability; that they held or could obtain any applicable
financial service licence; projected budget and cashflow statements for the proposed fund out to three
to five years; a risk management plan for the fund; and evidence of indicative commitments for the
leveraged investment. The requirement for this detailed information was designed to test the fund
managers capacity to deliver on their vision and strategy for the fund.
The Guidelines requirements for this rigorous evidence of the applicants capacity to execute their
vision, coupled with flexibility and an outcomes focus were features designed expressly to elicit a range
of different but credible proposals for investment funds, thereby maximising the potential for social
investment market development outcomes from the initiative.
The Guidelines also set out the rigorous two-stage assessment process which the project team would
follow to select the successful fund managers. Consistent with the requirements of the Commonwealth
Grant Guidelines, the document set out the roles and responsibilities of applicants, government
assessment team and programme delegate; terms of eligibility; and the conditions of funding. The
Guidelines were released with a call for proposals and allowed a two month period for applications to
be submitted.
A comprehensive assessment guide was also developed as a reference tool for the project team to draw
on as a resource and moderating tool during the assessment process. In consultation with the Advisory
Committee, the guide included summary points of suitable responses to assist the assessment team to
apply the criteria consistently and accurately to all applications. The documents also set out the roles
and responsibilities of all members of the assessment team and the processes for consultation with the
delegate and highlighted the procedures that would be followed to ensure probity standards were
consistently applied and maintained.

What worked best

Maintaining an outcomes orientation to the Guidelines and avoiding an overly prescriptive approach
provided an opportunity for prospective fund managers to design and propose delivery strategies which
reflected their particular strengths and approach to building the social investment market in Australia.
A strength of the Guidelines was the provision for applications to include partnerships or consortia
arrangements, recognising that different organisations have different capabilities and supporting a
collaborative approach offers the opportunity to bring the right mix of expertise to the fund. This
provision also recognised the value of supporting intermediaries in the social investment fund context
and the importance of including organisations that are best placed to connect social enterprises with
the opportunity for investment.
18

The Guidelines also clearly established the compliance requirements and the details of the two stage
assessment process. This helped applicants to make an assessment of the expectations, timing and likely
resource requirements of the process in advance of submitting applications.
For the SEDIF supplementary selection process, the project team chose to undertake a limited selection
process that targeted only the compliant applicants from the initial process. This was a deliberate
decision that took account of the quality of applications in the initial process, the quantum of remaining
funding and the timelines for disbursing it. To ensure continued transparency, an Addendum to the
SEDIF Guidelines which set out the requirements of the supplementary selection process was developed
by the project team in consultation with the departmental legal advisers and published on the DEEWR
website.
The application process was also streamlined to reflect learning from the initial selection process. There
were two specific features of the supplementary selection process which had a significant impact on
streamlining the assessment. The first was the development of an Expression of Interest template (see
Appendix B) which helped to target specific elements of the selection criteria. This was developed based
on the comparative assessment table devised at the end of the initial selection process. The second
streamlining feature was the inclusion of a supplementary selection process briefing session. This
provided an opportunity to share the lessons learned through the initial selection process with
prospective applicants. A secondary benefit to this briefing session was that prospective applicants were
provided with an opportunity to develop networks some of which have continued beyond the SEDIF
process.
Importantly, both of these products enabled a robust comparison and assessment of diverse proposals
from funds with different financial structures.

Things to consider
It is important to ensure that the project team is adequately resourced and is able to tap into specialist
skills and advice to support the development of Guidelines and the subsequent assessment and
selection processes.
It is also important to give consideration to a future evaluation of the initiative and to ensure that the
programme objectives are clear, realistic and measurable. It may be helpful to collect some baseline
measures to support any future evaluation at this stage as well.
The timing and length of the application period for seeking fund managers should be commensurate
with the requirements of the application process. This is particularly important where the social issue is
complex, or where it is expected that organisations will need to form consortia to raise the necessary
capital or establish new cross-sector relationships.

Key Questions

Are the objectives of the initiative clearly articulated and has the evaluation of these objectives
been considered?

Are the Guidelines requirements in relation to selection criteria and additional implementation
material sufficient to allow for a robust assessment of applicants capacity to deliver?

How will a value for money assessment be made across a range of applications?

Has an appropriate balance been met between flexibility for applicants in fund design and the
ability to comparatively assess diverse proposals?

What tools can be used to streamline this process?

19

Phase 5 - Assessing proposals

What we did
The project team conducted a two-stage assessment process that included an initial first stage relative
assessment process against the selection criteria to determine the strongest applicants for shortlisting.
The second stage of the assessment process provided an opportunity for the project team to seek
clarification on points within shortlisted applications and to allow the organisations the opportunity to
expand and clarify their vision and implementation plans for the fund.
During both stages of the initial and supplementary selection processes financial and investment
professionals were contracted to provide expert analysis of the applicants financial models and
investment strategies. This expertise provided critical support to the project team to support robust
assessments of applications.
The SEDIF Advisory Committee also provided expert advice on aspects of applicants proposals through a
series of meetings throughout the assessment process. It was particularly useful to draw on the
Committees expertise in relation to fund structures and legal issues, approach to social enterprise
capacity building, approach to measuring the impact of the funds, quality of the proposed investment
strategies and the potential of each proposal to support the growth of the social investment market in
Australia.
The assessment process was supported by thorough financial and organisational due diligence
conducted by the Departments financial viability assessment team. This was a challenging process
because of the unusual nature of the consortium arrangements, the participation of organisations based
internationally and the sensitivities of finance sector organisations to providing commercial information
to the Department. The project team managed this process by working as a liaison between applicants
and the financial viability assessment team, ensuring information flow and timely responses to requests
for additional information.
In the final stages of the assessment process, the project team, with assistance from legal advisors,
designed a bespoke concept draft of the funding agreement which used precedents from the
investment and funds management industry and then incorporated the essential accountabilities that
government needed in the agreements.
Taking account of the fact that the SEDIF initiative asked investment fund managers to operate at arms
length from Government, the legal advisors based the other provisions of the agreements on what a
commercial cornerstone investor would reasonably expect in a similar type of agreement. Using this
approach, the agreement met all the accountability requirements for spending public funds coupled
with the commercial reality of a funds management arrangement.
A concept draft funding agreement was provided to the applicants in the final stages of the assessment
process so that they would aware of what they would ultimately need to sign up to, including the
accountability framework for spending public money, when participating in the negotiating process.
Being clear with the applicants on the parameters of the agreement helped to test that there would be
no showstopper issues before final selection. This included ensuring that applicants had the necessary
approvals from their boards and investors.
20

What worked best

An important feature of the assessment process was allowing the shortlisted applicants to clarify and
refine elements of their proposal. This is uncommon in a competitive grants process but proved
effective in that it allowed the project team to fully understand the proposals and built trust with
applicants which helped during the negotiations of the funding agreements. Feedback from the
applicants indicated that this helped all parties to develop a clear, shared understanding of the
proposals.
The project team was able to maximise the value of the Advisory Committees expertise by preparing
extensive analysis of the applications, developing comparative materials and allowing sufficient time for
the Committee to review the papers ahead of the meetings. This meant significant additional work for
the project team, but this was rewarded by quality and timely advice from the Committee.
The project team undertook thorough and ongoing risk management processes but applied a risk
tolerant approach, with appropriate accountabilities, in consultation with probity advisers. This
approach was suitable for the complexity and innovative nature of the initiative. For SEDIF, the factors
that increased risk tolerance included clear plans for how the assessment and selection would be
conducted including the process for managing conflicts; regular consultation with advisers on managing
probity issues; documenting all decisions and processes; and the protection of not having to fund any
proposal if a minimum standard was not met.
The requirement to provide rigorous application material such as projected cashflow statements,
implementation plans, and indicative investment commitments allowed the project team to make a
comparative assessment of a number of very different proposals. The key elements of each of the
proposals were distilled into a comparative table, including with the help of financial analysis
professionals in relation to financial statements, which allowed the assessment team to make a value
for money decision despite the differences in approach across the various proposals.
The lessons from the initial SEDIF assessment phase were built in to the design of the supplementary
selection process. The project team took the opportunity to reflect on the initial process, draw on the
skills the project team acquired during the first process and make some refinements to refine and
streamline the experience for applicants, as discussed in the previous section.
Based on the comparative value for money assessment table that had been developed in the initial
process, an expression of interest template was developed for the supplementary selection process.
Consistent with the approach taken in the initial process, a staged assessment approach was conducted,
which included allowing for refining of proposals in the second stage.

Things to consider
During an assessment process of this kind it is important to recognise the strengths and gaps in
expertise in the project team and consider contracting external experts. This will lend credibility and
robustness to the assessment process and help to mitigate risk.
Allowing time for refinement of shortlisted proposals before a final assessment can achieve higher
quality proposals and build relationships with applicants that are important for a smooth funding
agreement negotiation process. Feedback from the SEDIF applicants was that this was a helpful feature
of the process and a constructive way of working with Government. It is particularly important to allow
enough time for a thorough assessment process.

21

Key Questions

What external professional assistance might be required to support the project team?

How will the assessment process maximise the opportunity for quality proposals to be
successful?

What tools can be used to maximise the efficient use of resources by applicants in preparing
their applications and assessors in undertaking the assessment?

22

Phase 6 Negotiating Funding Agreements

What we did
The project team and the departmental legal advisors engaged a private sector legal firm that had
specialist experience in establishing investment funds. Involving the specialist legal support from the
beginning allowed the advisors the time to develop their understanding of the context of the initiative
to target their advice appropriately.
The project team took a transparent and constructive negotiating position throughout the process while
being very clear about the areas of government accountability to ensure that there would be no
surprises for the applicants and their private investors. It was particularly important to foster these new
relationships early in the process to ensure a respectful and productive negotiation.
The project team worked to have the funding agreements reflect the fund managers individual
approaches to managing their funds which were underpinned by the objectives of the SEDIF initiative.
There was recognition during the negotiation phase that some elements of the fund managers activities
would be influenced by lessons learned during the establishment phase of the funds, and so the funding
agreement was drafted to enable an adaptive response in these circumstances.
A comprehensive reporting framework was built in to the funding agreements and includes the
requirement for an annual impact report to be made publicly available. This report is to document
performance, progress and demonstrate the social or environmental benefit of the fund.
Significant resources were devoted to tailoring each funding agreement separately to provide
appropriate security for the Australian Government while reflecting the different visions, structures and
business models presented by each of the funds. Built into the requirements of the contract, the fund
managers have established integrated governance arrangements to help mitigate risk, implement the
funds and monitor performance. The Funding Agreements were finalised with significant support from
external legal advisers and probity advice from the internal legal team.
Towards the end of the funding agreement negotiation process, the project team organised workshops
with all members of each consortium and the external legal advisers to create a forum for the issues,
questions and concerns of all parties to be worked through. The workshops built relationships and
mutual understanding within and across each of the distinct fund proposals, and helped the respective
fund managers visions to be translated into key messages ready for the launch of the funds into the
market.

What worked best

The combination of the expertise of the investment funds legal advisers and the departmental legal
team was critical to the success of the negotiation process. This was an important arrangement for
building credibility in DEEWRs negotiating position, ensuring accountabilities were adequately
considered and mitigating the risk of establishing a new initiative of this kind.
The project teams flexible approach to developing highly tailored funding agreements for each fund
manager to reflect the specific vision and approach to managing the fund resulted in an open and
constructive negotiation process. This work required considerable resources in order to have robust
23

working relationships but reinforced DEEWRs focus on outcomes and preserved the fund managers
individual approaches.
Another refinement made during the supplementary selection process was the development of an
integrated sample funding agreement which captured de-identified clauses from the first two funding
agreements. The project team made the funding agreement available to all participants at the beginning
of the supplementary selection process. This enhanced transparency, provided a clear indication of
expectations and allowed participant organisations to allocate appropriate resources to the process.
This sample funding agreement is also a useful demonstration material, as well as a resource for other
areas of government wishing to establish a similar initiative. Utilising the sample funding agreement
would save considerable costs and time for any future initiative.

Things to consider
It is important to maintain a flexible approach to contract negotiations while ensuring all accountability
and probity requirements are met. It is helpful to consider the resources of the applicants and
streamline and tailor the application and negotiation process where possible. This will engender trust
and support constructive ongoing performance monitoring and engagement.
Maintaining an outcomes orientation throughout all the phases of the development of a similar
initiative will assist in ensuring the negotiation process remains focused. This will make working with
applicants that are not familiar with government contracts and process more comfortable and ensure
that fund managers are accountable for delivery against their specific, but agreed, business plans in the
future.

Key Questions

Will additional appropriately qualified legal support be required to support the negotiation
process?

What reporting requirements have been built into the funding agreement and how will this be
managed over the life of the agreement?

How will the agreement provide a roadmap to recover the government contribution in an event
of default?

24

Conclusion
The three SEDIF funds are now operating in the market and DEEWR has an ongoing role in monitoring
and evaluating the success of the funds. The fund managers continue to build the practical evidence
base for impact investing in the Australian market to build the social investment market and inform the
development of future initiatives.
The SEDIF funds are playing a pioneering role in impact investing and social enterprise support in
Australia. As an increasing number of investments in social enterprises are made and the approaches to
measuring and communicating impact are developed, the SEDIF funds will become an important source
of learning and experience about social enterprise and the developing potential of impact investment in
Australia.

Future initiatives
Impact investment funds, such as the SEDIF, take time to design and negotiate and are unlikely to be
suitable where there is a pressing social need requiring immediate response or funding short-fall. A
commitment to co-design, collaboration and realistic timeframes are critical to the successful
development and implementation of an impact investment fund.
For an impact investment fund to be a viable policy response a number of factors need to be present or
capable of being developed in a reasonable timeframe, including:

an investor market that is attracted to the social, cultural and/or environmental objectives of
the fund and willing to supply the capital;
investee organisations that are seeking capital, are able to take on the capital and manage it in a
way that achieves both the intended social impacts while generating financial returns; and
appropriately qualified and licensed fund managers who can operate the fund.

As foreshadowed at the outset of this document, there are a range of social investment mechanisms
that can be utilised to support public policy outcomes. Further information on other approaches is
available at the Social Innovation website.

25

Appendix A Useful Resources

Australian Centre for Philanthropy and Non-profit Studies (QUT) and Social Traders (2010) Finding
Australias Social Enterprise Sector (FASES).

Barraket, J. & Weissman, J. (2009) Social Procurement and its Implications for Social Enterprise: A
literature review. The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University
of Technology

Burkett, I. (2010) Financing Social Enterprise: Understanding Needs and Realities. Foresters Community
Finance

Burkett, I. & Drew, B. (2008) Financial Inclusion, Market failures and New Markets: Possibilities for
Community Development Finance Institutions in Australia. Foresters Community Finance

Burkett, I. & Langdon, D. (2005) Social Enterprise and Social Tendering: A guide for Government
Departments, Large Social Welfare Organisations and Corporations. New Mutualism Group

Bridges Ventures and The Parthenon Group (Eds.) (2010) Investing for Impact: Case Studies Across Asset
Classes

Clark, C., Emerson, J., Thornley, B. (2012) A Market Emerges: The Six Dynamics of Impact Investing, The
Impact Investor: People and Practices Delivering Exceptional Financial and Social Returns

Corcoran, J. & Charlton, K. (2009) Background Issues to Addressing Disadvantage in Social Investment.
The Centre for Social Impact

Credit Suisse and the Schwab Foundation for Social Enterprise. (2012) Investing for Impact: How Social
Entrepreneurship is Redefining the Meaning of Return

E.T. Jacksons and Associates Ltd. (2012) Accelerating Impact: Achievements, Challenges and Whats Next
in Building the Impact Investing Industry, Rockefeller Foundation

Freireich, J. & Fulton, K. (January 2009) Investing for social and environmental impact: a design for
catalyzing an emerging industry. Monitor Institute

Godeke, S., Pomares, R. (2009) Solutions for Impact Investors: From Strategy to Implementation,
Rockefeller Philanthropy Advisors

J.P.Morgan. (2010) Impact Investments: An Emerging Asset Class

26

Kernot, C. (2009) Social Enterprise: A Powerful Path to Social Inclusion. The Centre for Social Impact.

Lyons, M. (2007) Mobilising Capital for Australias Nonprofits: Where is it needed and where can it come
from? National Roundtable of Nonprofit Organisations Limited.

Monitor Institute (2009) Investing for Social and Environmental Impact: A Design for Catalyzing an
Emerging Industry

Noya, A. (Ed.) (2009) The Changing Boundaries of Social Enterprises. Local Economic and Employment
Development, OECD

Productivity Commission (2010) Contribution of the Not-for-Profit Sector: Research report. Australian
Government, Productivity Commission

Social Innovation eXchange and The Young Foundation (2010) Study on Social Innovation. European
Union / The Young Foundation

Social Investment Task Force (2010) Social investment: ten Years On. Final Report of the UK Social
Investment Task Force

Social Ventures Australia (2009) Social Enterprise Support Models

Thornleigh, B., Wood, D. Grace, K., & Sullivant, Sarah (2011) Impact Investing: a Framework for Policy
Design and Analysis, InSight at Pacific Community Ventures & The Initiative for Responsible Investment
at Harvard University

United Nations Global Compact and The Rockefeller Foundation (2012) A Framework for Action: Social
Enterprise and Impact Investing

Wood, D., Thornley, B. & Grace, K. (2012) Impact at Scale: Policy Innovation for Institutional Investment
with Social and Environmental Benefit, Insight at Pacific Community Ventures & the Initiative for
Responsible Investment at Harvard University

27

Appendix B SEDIF Supplementary Process

EOI Template

28

Social Enterprise Development and Investment Funds (SEDIF)

Supplementary Selection Process

Instructions for Participants and Expression of Interest (EOI) Template

November 2011
Indicative Key Dates
2 November 2011

Eligible organisations invited to participate in the

supplementary selection process

14 November 2011

Briefing session for eligible participants

14 December 2011

Closing date for Expressions of Interest to be

received by 5pm AEDST at
socialinnovation@deewr.gov.au

Late January / Early February 2012

Shortlisted participant(s) invited to develop full

proposals and unsuccessful participant(s) notified

Late March 2012

Successful participant(s) notified

April/May 2012

Funding Agreement(s) negotiated

May/June 2012
Instructions for Participants

Successful participant(s) announced

Expression of Interest Timeframe

The Department of Education Employment and Workplace Relations (DEEWR) has invited eligible organisations to
participate in a supplementary selection process from 2 November 2011. Expressions of Interest (EOI) close at
5pm (AEDST) 14 December 2011.

Expressions of Interest
Participants must provide information responding to all of the requirements of the EOI template including
completing all summary tables. Proposals must be succinct, targeted and relevant. Participants must address all
selection criteria. Diagrams and dot points are permitted. Information in blue square brackets is intended as
explanatory notes to guide participants responses. Please delete all blue text before submitting your EOI form.
Responses may be up to 2 A4 pages per criterion.

Attachments that must be submitted with the completed EOI template

When submitting the EOI template, participants must also provide:

Indicative letters of commitment from investors for the initial leverage of at least 1:1 on the
Australian Governments investment including evidence that such funding can be secured and
payment made prior to, or at the same time as entering into a funding agreement;
An organisational structure diagram;
A fund structure diagram (including flow of funds); and
An indicative establishment budget.

Participants are required to submit the completed EOI template and attachments electronically to DEEWR at
socialinnovation@deewr.gov.au. Expressions of Interest close 5pm (AEDST) 14 December 2011.

If an electronic proposal cannot be submitted, participants can submit one hard copy of their proposal, together
with attachments, to DEEWR by courier or hand delivery at:
Social Enterprise Development and Investment Funds
Attention: Alicia Cullen
Location Code: C50MA7
Department of Education, Employment and Workplace Relations
GPO Box 9880
CANBERRA ACT 2601

All proposals, whether electronic or in hard copy format must be received by the date and time specified for
close of Expressions of Interest. Receipt of proposals will be acknowledged by the Department. Late proposals
will not be accepted.

Assessment of EOI proposals

Proposals will be assessed by the DEEWR Assessment Team. No assessment will be made until Expressions of
Interest have closed.

ii

DEEWR will shortlist the strongest EOIs for further consideration. Shortlisted participant(s) will be invited to
develop their EOI proposals for further assessment against the SEDIF objectives, selection criteria and conditions
of funding.

DEEWR may seek the advice of the SEDIF Advisory Committee and technical advisors on the proposals received as
required.

DEEWR may contact any participant(s) and seek further information about their expression(s) of interest and may,
in its absolute discretion, consult with one or more participant(s) and/or undertake consultations with other
relevant parties regarding any proposals.

The Assessment Team will make recommendation(s) to the Delegate on proposal(s) to be supported.

As set out in section 8 of the SEDIF Guidelines, funding will only be granted on execution of a funding agreement
with DEEWR and the successful participant(s) satisfying any and all conditions precedent to funding specified,
including fund managers having secured other investment to leverage the Australian Governments investment
on at least a 1:1 basis (please note this is not commitment to invest, but payment into the fund).

It is anticipated that funding agreement(s) will be executed by late May 2012.

iii

Social Enterprise Development and Investment Funds (SEDIF) Supplementary Selection

Process
EXPRESSION OF INTEREST (EOI) TEMPLATE

Contents
1. EOI Cover Sheet
2. Proposal Summary Sheet
3. Financial Information Summary Sheet
4. Selection Criteria

SEDIF Expression of Interest Template November 2011

1. EOI Cover Sheet

Participants must complete this summary table (should not exceed one A4 page)

Organisational and Consortia Information

Lead organisation and
representative name*

Contact Details
Address:
Phone:
Mobile:
Email:
Partner organisation(s) (if
applicable)

AFSL number or status

* Please note DEEWR will be working throughout December 2011 and January 2012 on assessing EOI proposals. If
required, please provide an alternative contact during this time.

SEDIF Expression of Interest Template November 2011

2. Proposal Summary Sheet

Participants must complete this summary table (should not exceed one A4 page)

Please provide a short overview of the proposal.

Describe the types of social enterprises and social impact areas your fund will target.

Please list the types and range of financial products your fund will offer.

Please list the investors and the quantum of investment.

Organisation

Amount ($)

Any Relevant Conditions

Indicate the amount of Commonwealth funding being sought (up to $4 million). Note - this must not exceed the
total amount of other investment shown above.

What is your estimate of the timeframe for establishing the fund(s)?

SEDIF Expression of Interest Template November 2011

3. Financial Information Summary Sheet

Participants must complete this summary table (should not exceed one A4 page)

Programme overview
Item
Interest rate charged to social enterprises on
financial products
Any other costs to social enterprises
Targeted return to investors (rates, allocation,
timeframe)
Projected flow of loans for the first three years
(number of loans, size of loans)
Amount of available funds for investment at
the end of year three
Amount of Government funds retained at the
end of year three
Amount of additional other investment
attracted over the first three years
Cumulative net profit/loss on programme
(including capacity building costs) over three
years
Projected scale of the fund(s) at the five and
ten year time horizon
Programme expenses
Item

$ (cumulative over three years)

Total programme expenses

Anticipated total management fee paid
Other programme expenses (including staff,
rent, insurance, travel, audit,
communications etc)
Provisions for bad and doubtful debts
Anticipated capital raising fees (if any)
Anticipated capacity building costs (if any)
Further details to be provided below

Management fees (as a percentage of funds

under management) Please provide for each year
if different

SEDIF Expression of Interest Template November 2011

Costs of capacity building activities for social enterprises

Item

$ (cumulative over three years)

Anticipated capacity building costs (if any)

Please provide a breakdown of main cost items
(eg salaries, training, materials etc)

SEDIF Expression of Interest Template November 2011

4. Selection Criteria - (Responses should not exceed 2 A4 pages per criterion. Please delete blue text before submitting.)
Criterion 1 - Vision, Strategy and Objectives
Vision and
strategy for the
proposal

[A clearly articulated short and longer term strategic vision for the fund with realistic timeframes that take into account investor appetite,
social enterprise investment readiness and the maturity of the social investment market in Australia.]

Value for money

for government

[A description of how the government funding will be used to accelerate the development of the fund(s) and stimulate the social investment
market in Australia. Provide an overview of the blended value proposition of the fund(s), and how the government funding will be used to
crowd in other investment.]

Structure and
staffing

[A clearly articulated legal and organisational structure capable of meeting regulatory, licensing and operational requirements of the fund,
including governance structures. A clear description of the skill sets and experience of key personnel and partnership arrangements if a
consortium is proposed.]

Diagrams
representing the
organisational
structure and flow
of funds through
the proposed fund
structure must be
annexed to this
form.

Criterion 2 Investment Strategy and Portfolio Management

Social enterprise
eligibility

[Describe the range of social enterprises that will be targeted and the criteria by which social enterprises will be assessed including the approach
to assessing their investment readiness. Provide a description of the target impact areas aligned to DEEWRs portfolio objectives.]

A diagram
representing the
investment
readiness appraisal
process may be
annexed to this
form.

Engagement
(Origination)

[A clearly articulated strategy for building connectivity with the social enterprise sector and developing the pipeline of investment ready social
enterprises.]

strategy

Capacity building
A diagram
representing the
capacity building
approach may be
annexed to this
form.

Portfolio
management
strategy

[A clearly articulated capacity building approach that provides development opportunities for social enterprises to address gaps identified by the
investment readiness appraisal process which aims to improve their capacity to take on finance.]

[A clearly articulated portfolio management strategy that reflects a range of risk profiles, a range of financial products and the maturity of both
the social investment market and the social enterprise sector in Australia. Include details of any relevant committees and processes.]

Criterion 3 Investment, Financial Model, Risk and Governance

Establishment
An indicative
establishment
budget must be
annexed to this
form.

[A description of the timeframe and budget for establishment of the fund(s), including key milestones such as launch of the fund(s), point
when the fund(s) will be open for business, executing first deals and timeframe for impact.]

Investment
model

[A clearly articulated approach to securing ongoing additional investment to grow the fund(s) and develop support for the social investment
market in Australia from a mix of investors that recognises a range of investor motivations.]

Financial model

[A clear indication of the projected scale of the fund(s) over time, outlining how profits will be used, management fees and any other
expenses. Please include any other information relevant to your proposed financial model.]

The summary table

of financial
information must
be completed.

Governance and
risk

[A clearly articulated approach to governance and risk management including the proposed governance arrangements and compliance
processes. Describe any relevant conditions relating to the AFSL.]

Criterion 4 Performance, Impact and Investor Relations

Social and
economic impact
measurement

[A clearly articulated approach to impact measurement (including any relevant partnerships) that is congruent with market expectations,
provides evidence of the performance of the fund(s), demonstrates to potential investors the blended value of the fund(s) and can be
benchmarked internationally.]

Investor
relations

[A clearly articulated approach to managing investor relations including a proposed reporting framework and reporting frequency reflective
of the development of the fund(s) over time, and that meets the needs of investors and government and is able to be benchmarked
internationally.]