The NSW government has encouraged investors to be prepared for potential early failures in social impact bonds, but added it is willing to share in some of the risks, believing the long-term returns and social benefits can outweigh loses.

While the state’s first social impact bond in the Newpin program has delivered a return of 12.2 per cent to investors, NSW Premier Mike Baird cautioned other bonds that were being developed may not always work as well.

“That’s a risk because we are at pioneering stage,” Baird said at the Impact Investment Summit in Sydney, adding failing your way to greatness was too often lost by governments in a real context.

“The encouragement I want to give you is be prepared to fail, because the long term returns you get will outweigh those losses as we learn on this journey. We are prepared as a government to share some of that if you are, because I think it’s worthwhile.”

He added the government wanted to build the market and understood it had a role to play in providing liquidity, a pipeline of investment, and surety.

The government is “very close” to putting out requests for proposals for three more social impact bonds. One is in improving outcomes in childhood education, another is around adoption, and the last is around helping ex-offenders reintegrate into society.

“The difference and the power is immense. It is really just limited by how much we think we can do together. Impact investment is now one of the growing classes in the world – there is trillions of dollars available and investments from superannuation if we get this asset class right,” Baird said.

“If we get it right we have the benefit of long-term returns, but more importantly a changed and better society, and that’s what it’s about.”