The contingent grant model, as developed by NAB, the Victorian government and Sacred Heart Mission, will reportedly enable philanthropic organisations to provide a financial guarantee to investors that fund social impact investing programs.

According to NAB, the new instrument “unlocks philanthropic capital to underwrite the risk of losses and lowers the cost of financing” and is the first transaction in Australia that includes guarantees from philanthropy in the delivery of a government pay-for-performance contract.

The bank’s chief customer officer in corporate and institutional banking, David Gall, said, “This is financial innovation of the best kind because the end result is more tangible help for vulnerable people in our society.”

Social impact investing is typically able to tackle a range of social and environmental issues such as homelessness, mental health and offender rehabilitation.

For Sacred Heart Mission general manager Catherine Harris, “the contingent grant model gives service providers, such as us, and governments the ability to unlock the potential of philanthropic capital”.

“It’s a win-win for governments, not-for-profit groups and philanthropic organisations,” she said.