Robust social infrastructure is essential for the good of our society and the growth of our economy, yet without adequate investment, rising demand from our ageing and growing population will not only cause drastic social and health problems but impact our future prosperity as well, writes Executive General Manager of Social Infrastructure at Australian Unity Ryan Banting.

Australia has a serious undersupply of the social infrastructure that is needed to support the wellbeing of our communities.

Whether it’s in aged care, student accommodation, childcare, specialist disability accommodation, retirement living or hospitals – we fall short on many fronts.

Robust social infrastructure is essential for the good of our society and the growth of our economy, yet without adequate investment, rising demand from our ageing and growing population will not only cause drastic social and health problems but impact our future prosperity as well.

It’s clear we need structural change to ensure we have the facilities and services that support the health of our communities. This will enable healthy economies where we all have the opportunity to thrive – now and into the future.

A unique opportunity for value-aligned private capital

There’s no magic formula for solving the infrastructure funding gap. The financing arrangements for such projects are varied and depend on the mix and relative cost of debt and equity financing. This, in turn, depends on the risk profile of different projects, along with the composition and risk appetite of prospective investors.

Government has had and will continue to play a vital role in financing and delivering critical health and aged care services. But it can’t do it alone.

Private investment, particularly from the pools of institutional money tied up in our capital markets, also has a critical role to play.

However, to realise the opportunity for private capital, investing in social infrastructure must be about more than a blank cheque and the hope of good returns.

Instead, it’s about getting the most out of value-aligned capital partnerships to ensure participants are incentivised to invest in long-term development and delivery relationships.

We see a solution that embraces and includes the important views and experience from industry, government, investors and capital partners, planners, operators, contractors, and health and medical research to face into the challenges ahead of us. Together, by taking a broader and longer-term view, we can get this sector into a shape that shifts the dial on community wellbeing and boosts Australia’s productivity.

But with opportunities come challenges 

The business case for investing in social infrastructure sector is compelling: strong macroeconomic drivers (education and childcare) and macro-demographic drivers (accommodation and living); bi-partisan government support; and favourable supply and demand dynamics. However, the sector is not without its challenges. For example:

• It generally takes longer to get investors up to speed in understanding these types of assets before they are able to commit capital – this of course will improve over time and we are already seeing positive shifts in awareness driven by the growing attention on healthcare infrastructure investing and, more recently, in the build-to-rent and student accommodation sectors;  

• Investors need to consider whether social infrastructure investments fall in the ‘infrastructure’ bucket, the ‘property’ bucket or the ‘alternatives’ bucket, depending on how they manage their capital; and

• Healthcare property, disability accommodation, childcare and aged care sectors are all facing long-term, protracted workforce shortages, while the demand for these services is only growing.

Successful, fit-for-purpose social infrastructure relies on workforce, technology, service delivery, good system design and the built-form.

In an investment portfolio, it doesn’t need to be a separate asset class, but rather a lens for robust due diligence and to help determine appropriate asset allocation and portfolio construction decisions for assets that are in high demand across our communities.

Measuring investment

While the investment proposition is strong, measuring the impact of social infrastructure investment extends beyond capital growth or the regular income it provides.

Investors are increasingly using risk-adjusted returns to make ‘initial screen’ investment decisions but more and more they are seeking measures of impact in deciding where to put their money.

When we invest in good, shared places and precincts we can build communities, we can increase wellbeing, we can build connections and we can build places that make people feel better.

It’s one of the reasons that Australian Unity developed our Community & Social Value framework. Established in 2021 with social impact specialists Social Ventures Australia, we can now measure the tangible social and community impacts our investments have, above and beyond straight financial returns.

The framework is based on three key impact areas:

• Lifelong wellness – ensures access to better healthcare through diverse services and initiatives, emphasising tailored care for improved health outcomes;

• Economic empowerment – focusing on building financial resilience, enabling individuals to fund their own wellbeing;

• Strong communities – fostering social innovation, bridging service gaps, and promoting living in place through investments in care, infrastructure, and specialist housing.

These areas underpin the measurement of unique social impact and inform Australian Unity’s investment in its business decisions, such as our investment in social infrastructure.

Addressing Australia’s social infrastructure needs is essential to support the growth of our economy and the future wellbeing of our communities. But getting it right relies on the coordination of workforce, technology, service delivery and system design.

This article was originally published on CEDA. Read it here.