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Arc Social Impact Bond
Investor update, January 2026
Dear Investor,
We are pleased to share that the Counterfactual Rates for the Arc Social Impact Bond (Arc SIB) have been determined. This update sets out the Counterfactual Rates and the process for determining them. It also describes the risks associated with the counterfactual and small anticipated size of the Measurement Group that may impact Noteholder payments. Capitalised terms in this update are defined terms in the Arc SIB Information Memorandum.
Counterfactual Rates
The Counterfactual Rates represent the level of service utilisation that would have been expected for male Arc participants in the absence of the Arc Program. A segment-specific approach has been adopted to ensure that the counterfactual flexes with the characteristics and complexity of the individuals who are enrolled in the Arc Program.
The Counterfactual Rates have been determined in collaboration with the Department of Families, Fairness and Housing, the Department of Treasury and Finance, the Department of Justice and Community Safety, and Vacro.
They were determined based on an analysis of Awarded Sentences,1 Homelessness Service Periods,2 and Emergency Department Presentations3 for a reference group of individuals meeting the Arc eligibility criteria who were released from prison during the two-year period from 1 July 2021 to 30 June 2023.
The characteristics outlined in the table below were found to be the strongest predictors of differentiated outcomes.
The Counterfactual Rates for each Outcome Measure, each year-post release and each cohort segment are detailed in the following tables.
Table 1: Justice Outcome
Table 2: Housing Outcome
Table 3: Health Outcome
The Justice Outcome Counterfactual Rates for Year 2 will be updated in 2026 to allow additional time for open cases to be finalised and the Housing Outcome Counterfactual Rates for Year 3 will be determined in 2026 when the full reference group has complete data for a three-year post-release period.
Counterfactual Outcomes
The Counterfactual Outcomes will be determined at each Calculation Date based on the total number of individuals in the Measurement Group, their segment, and the number of measured years (time since their release) for each of them.
Illustrative Counterfactual Outcomes example
At Calculation Date 4, Oliver has been out of prison for 1 year and 9 months. His cohort segment for each Outcome Measure is:
- Justice: Less than or equal to 12 months in custody in the 3 years prior to the most recent custody episode
- Housing: One or more Homelessness Service Periods in the 3 years prior to the most recent custody episode
- Health: Two or less Emergency Department Presentations in the 3 years prior to the most recent custody episode
The corresponding Counterfactual Rates for each cohort segment are as follows:
Oliver’s Counterfactual Outcomes are:
- Justice: 2.81 + ((2.32 × 9) ÷ 12) = 4.55 months Awarded Sentences
- Housing: 1.54 +((0.96 × 9) ÷ 12) = 2.26 Homelessness Service Periods
- Health: 0.63 + ((0.63 × 9) ÷ 12) = 1.1024 Emergency Department Presentations
These figures are aggregated with those of all other Enrolled Men to determine the overall Counterfactual Outcomes.
At Calculation Date 5, Oliver’s Counterfactual Outcomes will increase to reflect the fact that he has been in the Measurement Group for an additional 6 months.
You can refer to the Arc SIB Information Memorandum for detailed information about how payments are calculated, which relies on determining Counterfactual Outcomes.
Risk factors
The Arc SIB Information Memorandum outlined risks and uncertainties associated with making an investment in the Notes, including the counterfactual risk. The description of the counterfactual risk and risk mitigations have been updated in the table below.
Counterfactual risk
Description of risk
There is a risk that the Counterfactual Rates are an underestimate of the ‘true’ underlying rates that would eventuate in the absence of the Arc Program, and that payments will be lower than they ‘should’ be. Conversely, they may be overestimated and payments will be higher than they ‘should’ be.
There is also a risk that the Outcome Improvements understate the ‘true’ effect of the Arc Program due to the smaller anticipated number of Enrolled Men in the Stay Small Scenario, and that payments will be lower than they ‘should’ be. Conversely, they may overstate the ‘true’ effect and payments will be higher than they ‘should’ be.
Existing risk mitigations
The following risk mitigations were identified in the Arc SIB Information Memorandum:
- Each Outcome Measure was provisionally capped to avoid the distorting impact of outliers on the Outcome Improvements and calculated payments.
- Each Outcome Improvement is determined on a cumulative or ‘program to date’ basis to reduce the impact of year-to-year statistical volatility.
- The small female Arc cohort is not included in outcomes measurement as their measured outcomes are highly susceptible to statistical error.
- Contractual reviews will be undertaken if performance is significantly higher or lower than planned. The parties will explore the reasons for the higher or lower than expected performance, including the counterfactual, and whether contractual changes are required. Refer to the Information Memorandum for further details.
- Program performance will be monitored by the Joint Working Group, a governance committee established under the Implementation Agreement. SVA is represented on this committee along with other stakeholders.
Additional mitigations
During the process of determining the Counterfactual Rates, additional mitigations have been established:
- The Counterfactual Rates reflect an adjusted mean for each cohort segment in the Reference Group. The mean has been adjusted upwards to reduce the likelihood that Counterfactual Rates are an underestimate of the ‘true’ underlying rates that would eventuate in the absence of the Arc Program.
- The agreed caps for Homelessness Service Periods and Emergency Department Presentations are lower than the provisional caps in the Information Memorandum. Homelessness Service Periods are capped at 7 and Emergency Department Presentations are capped at 6. Awarded Sentences remains capped at three years.
As we move into the third year of service delivery, our focus will be on monitoring early outcomes data with the Joint Working Group, using Vacro’s reporting data to understand service delivery and its impact for participants, and integrating insights from the independent evaluation commissioned by the Department of Treasury and Finance.
We expect to provide the first Arc SIB Annual Report to you around June, which will provide insight into the early outcomes achieved by the Arc Program.
Thank you for contributing to a program that is changing lives by creating the conditions for stability, personal growth, and reduced reoffending. Please reach out with any questions.
Kind regards,
Elizabeth Caldwell
Director, Commissioning for Outcomes
Social Ventures Australia
Patrick Bollen
Associate Director, Commissioning for Outcomes
Social Ventures Australia
1 Justice Outcome: Awarded Sentences is the length of any sentences related to offences committed in the two-year post-release period.
2 Housing Outcome: Homelessness Service Periods are a calendar month in which an individual accesses one or more homelessness services and has their status recorded as homeless.
3 Health Outcome: Emergency Department Presentations are presentations at a Victorian public hospital emergency department.
Disclaimer and confidentiality
This update has been prepared by Social Ventures Australia Limited (ACN 100 487 572) (SVA) as the Manager of the Arc SIB Trust (ABN 39 880 516 089). Please refer to the Arc Social Impact Bond Information Memorandum dated 21 June 2023 as updated on 25 March 2024, SIB Deed Poll as amended by the amending deed poll dated 25 March 2024 and Purchase Deed as amended by the amending deed poll dated 25 March 2024 for information on structure and terms. The information contained herein should be considered as indicative only and does not purport to contain all the information that any recipient may desire. SVA does not provide financial advice and recipients should seek independent financial advice. Further, statements in this update are not intended to be tax advice and investors should consult a professional tax adviser, if necessary, for tax advice required in connection with completion of tax returns.
To the extent permitted by law, SVA and its respective related bodies corporate, officers, employees and advisers do not make any representation or warranty as to, or take responsibility for the accuracy, reliability or completeness of any information in this update nor do they give any assurance that the results, valuations, performance or achievements expressed or implied by any forward looking statements contained in this update will actually occur. Recipients are cautioned not to place undue reliance on such information. Whilst this update has been prepared by SVA in good faith and with due care, SVA and its respective related bodies corporate, officers, employees and advisers disclaim all liability that may otherwise arise due to any information contained in this update being inaccurate or due to information being omitted from this update, whether by way of negligence or otherwise.
Investors should note that past performance of the Arc Program should not be treated as an indication of future performance. This update and all the information contained in it must not be disclosed to any person or replicated in any form without the prior written consent of SVA Nominees Pty Ltd (ACN 616 235 753) in its capacity as trustee of the Arc SIB Trust.
© Social Ventures Australia Limited, 2026
All images have been supplied and information (as applicable) has been supplied from Vacro. All images are published with the consent of the image owner.
Acknowledgement
of Country
Social Ventures Australia acknowledges and pays respect to the past and present traditional custodians and elders of this country on which we work.
‘After the Rains’ by Richard Seden for Saltwater People, 2024.
