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In an era of increasingly tightening funding of not-for-profits, and ever-present unmet social and environmental needs, new funding approaches are emerging.
Australia is beginning to adopt some approaches pioneered internationally, that seek to provide funding for activities that generate a positive social or environmental impacts. These approaches can include:
- social or environmental impact investments
- community finance
- new lending practices, and
- social impact bonds.
Many of these approaches offer blended return - a financial as well as social or environmental impact.
Each of these approaches raise legal issues for not-for-profits. In particular, for a not-for-profit to be able to seek impact investors, it must set up a structure that can attract investors. Not-for-profits cannot attract equity investors, and not-for-profits cannot be 'owned' in the same ways that for-profits can be (ie that cannot have shareholders). Similarly, not-for-profits cannot distribute profits. Therefore, legal structuring needs to be carefully considered if a not-for-profit wishes to be able to attract investors.
Our Social Enterprise Guide steps through legal structuring in more detail, including hybrid structuring that can enable not-for-profits to benefit from equity investors.
Not-for-profit Law delivered a webinar in April 2015 with Allens and NAB, comparing traditional funding approaches with new funding approaches, and outlining the key legal considerations. View the webinar here:
The following websites have more information on new funding approaches for not-for-profits:
- Impact Investing Australia - a not-for-profit focused on building impact investing in Australia
- NAB Impact Investment Readiness Fund - a fund to support organisations to become impact investment ready
- the NSW Social Innovation Expert Advisory Exchange - with resources and opportunities to seek professional advice to become impact investment ready
- Social Traders - a Melbourne-based not-for-profit assisting social enterprises to develop and scale.