Good Return responds to the new DFAT Policy

Good Return responds to DFAT’s new Aid and Development Policy

Last week, Minister Penny Wong and Minister Pat Conroy released the eagerly awaited Australian Government's new international development and aid policy. The policy has set Australia’s development cooperation agenda moving forward and is the first substantive development policy for nearly a decade.

Overall, Good Return was pleased to see how the new policy actively responded to contemporary problems facing our region including climate change, gender inequality, disability and poverty. These complex and multifaceted issues are immediately related to Good Return’s own mission and programs. Good Return also welcomed the diversity of voices highlighted in the policy, including Australia’s First Nations people, and the vital focus on local leadership and contextualised policies.

While the policy focus on security, stability and prosperity is a clear response to the current strategic international context, Good Return considers it critical that Australia’s international development policy continue to be centred on our responsibility to address humanitarian concerns and promote human rights in our region. The government must be held accountable to its poverty reduction commitments and contribution to the United Nations Sustainable Development Goals.

Crucially, the policy is also underpinned by a new Performance and Delivery framework and the Development Finance Review. The Development Finance Review (henceforth Review) is the outcome of DFAT’s call for submissions from the Australian development ecosystem in September 2022 and considers new forms of development finance to support Australia’s foreign policy, trade, security, and development objectives.

Good Return was particularly pleased to see that several recommendations from the Good Return submission to the DFAT Development Finance Review in September 2022 were influential in the final Review.

First, Good Return welcomes Recommendation #3 of the Review that noted “In Southeast Asia, Australia should expand its use of development finance and strengthen connections with private investors, like-minded agencies and MDBs. To support this, Australia should scale up existing blended and climate finance mechanisms, including lifting EMIIF’s investment cap to AUD 250 million…with a focus on climate finance and gender impact investment”.  

In particular, Good Return welcomed the new focus on blended and climate finance as a key development strategy moving forward and the raising of the cap on the Emerging Markets Impact Investment Fund (EMIIF) as it clearly aligns with Good Return’s own recommendation to “provide incentives for impact investment: Provide grants and first-loss risk capital to enable impact investment funds to establish operations in developing countries and crowd in private sector investment (extending the work of EMIIF)” (GR Recommendation #3).

Indeed, Good Returns’ Impact Investment fund was recently featured by OnImpact Media as a leading example of blended finance in this context.

Second, with over 20 years of commitment to gender equality in our region, Good Return was also glad to see the Review’s explicit focus on gender and climate in relation to blended finance and more broadly. Recommendation #6 of the Review committed “to introduce a gender equality performance target that 80 per cent of new development finance investments effectively address gender equality in implementation… and consider options to incorporate a stronger focus on disability, social inclusion, and First Nations peoples”.

In fact, the Good Return Impact Investment Fund’s core aims include gender equality and climate smart agriculture. The Fund focuses on making agricultural value chains more inclusive in Cambodia and Indonesia, and identifies and supports small to medium sized businesses that play a vital role in bringing jobs and income to people living in poverty, especially women.

Third, Good Return welcomed the Review’s call for an enhanced role for philanthropic funds in development finance. This recommendation should be situated as part of DFAT’s “whole-of-country approach” - or that all Australian entities, beyond Government, will be required to support positive development impact moving forward.

Once again, this policy objective directly related to Good Returns’s own recommendation to “unlock philanthropic funding: Establish an Outcome Fund (funded via grants) for the government to invest alongside charitable foundations to pay for successful development outcomes” (GR Recommendation #2) and to “Unlock investment capital: Establish a blended finance mechanism for foundations and investment funds to invest alongside the government in development initiatives…” (GR Recommendation #3).

Good Return also embraced the fact this recommendation was situated in an ongoing process of learning whereby it was admitted that “While there is opportunity to mobilise significant financing from philanthropic organisations and impact investors to respond to development and climate challenges in our region, DFAT needs to build its capability to engage with the private finance community more meaningfully” (Key Finding #12). After all, creating and implementing innovative development financing policies will be a steep learning journey for all.

Fourth, Good Return was pleased to see Recommendation #7 of the Review: “Establish a dedicated unit within DFAT to support enhanced engagement and collaboration with the private finance community, including philanthropic organisations and impact investors”. Once again, this clearly mirrored Good Return’s own recommendation to “Establish a separate entity or an autonomous unit within DFAT to manage DFAT’s development finance activities” (GR Recommendation #11).

On the other hand, whilst Good Return welcomed parts of the policy that introduced new innovations within Government such as the autonomous unit or “‘International Development Finance Advisory Committee” (Recommendation #4), moving forward Good Return would like to see a greater focus on using previous expertise or “[leveraging] existing impact investment vehicles to maximise impact” in both policy and implementation. In particular, Good Return believes that this can be done by “[engaging] NGOs as social impact technical assistance providers to conduct pre-investment assessments and verify social impact of any investments” (GR Recommendation #6).

Moreover, whilst Key Finding #6 of the Review stated that “gaps in market access for finance limit growth in the SME sector in Southeast Asia…[constraining] clean energy transition, women’s economic empowerment, job creation, and innovation”, Good Return believes a greater focus on the ‘missing middle’ or MSMEs in both policy and implementation will be required. In this context, Good Return will continue to advocate to “fund NGOs active in financial education and small business development in Asia and the Pacific to build a pipeline of investible small business opportunities so that investments flow to low-income communities” (GR Recommendation #10).

Overall, Good Return is delighted to see the increased emphasis on development finance within DFAT’s strategy. This means that Good Return’s own programs are increasingly aligned with DFAT’s policy agenda, and demonstrates that Good Return’s approaches to financial inclusion are recognised as leading the way in approaches to sustainable development in our region.