Impact investment could deliver up to 10% per annum net of fees – Sir Ronald Cohen

Industry pioneer sees “potentially huge” inflows

Impact investment, investment to generate a measurable, beneficial social and environmental impact, could deliver financial returns of up to 10% a year and generate huge inflows in the future, according to industry pioneer Sir Ronald Cohen.

“If, as seems possible to me, impact investment can deliver 7-10% per annum net of fees with a low correlation to equity markets, this allocation should grow to 3-5% of high net worth individuals and foundation portfolios over a decade or two,” Cohen said in a major speech last week.

He asked rhetorically how big could impact investment get relative to SRI? The answer, he said, depends in part on financial innovation. He cited the recent cash equivalent “bond fund” from Threadneedle and Big Issue as a potentially large offering. He also envisioned large, diversified, quoted pools of Social Impact Bonds. Turning to pension funds, he cited the £250m investment pool (Investing4Growth) created by five local authority funds.
“So my conclusion is that the capital flows into impact investment are potentially huge.”

In a wide-ranging speech which amounted to a clarion call for the impact investment movement, Cohen said: “I believe we are now in the early days of a social revolution.”He foresaw ‘impact’ private equity, real estate, absolute return, fixed income and public equities.

Cohen is the venture capitalist who has shifted to become one of the leading figures in social investment. He is currently chair of the G8’s Social Impact Investment Taskforce, Big Society Capital and the Portland Trust. He is a co-founder director of Social Finance UK, Social Finance USA, and Social Finance Israel. He was co-founder Chair of Bridges Ventures. In an earlier life he co-founded and was Executive Chairman of venture capital firm Apax Partners.

He finished his address with a reference to Adam Smith’s “invisible hand” of the markets metaphor, saying: “Let us rise up together and let us bring the ‘invisible heart’ of markets to help those whom the ‘invisible hand’ has left behind.”

Cohen was speaking at an event organised by London’s new Lord Mayor, Fiona Woolf, as part of her Charity Leadership Programme.

It is being coordinated by her husband Nicholas Woolf, a former Arthur Andersen partner who sits on the Advisory Board, which Cohen chairs, at social investment firm Bridges Ventures.
Cohen’s comments come as major new research from Bridges and Bank of America Merrill Lynch on impact investment has been published.