Phillip W. Fisher, founder of Mission Throttle and Douglas Bitonti Stewart, executive director of the Max M. & Marjorie S. Fisher Foundation, talked with impact-investing pioneer Sir Ronald Cohen about his personal journey — from his family’s flight from Egypt and his work with the British government on reducing poverty, to the importance of transparency and the appeal of green bonds.
Sir Ronald Cohen is considered by many to be the father of impact investing and European venture capital. In 2020, his book Impact: Reshaping Capitalism to Drive Real Change, made the Wall Street Journal bestseller list. Cohen was knighted by Queen Elizabeth in 2001 for his two decades of leadership in developing the venture capital industry in the United Kingdom. In April, he was awarded the 2022 Perlmutter Award for Global Business Leadership at Brandeis University.
What were the forces that launched your journey into impact investing?
I had gotten into venture capital because I felt I could do good and do well at the same time. I could create jobs in the UK, where 3 million were unemployed, and I could also make gains. I knew I would have to look after my parents. My parents lost everything in Egypt — we left with a suitcase and 10 Egyptian pounds each in 1957. That was a way for me to do good and do well. I realized that in many ways, the efforts we were expending in helping people who came from nothing to become wealthy were also not solving the issue of the gap between rich and poor. And so when I got a phone call from [UK] Treasury in 2000 to look at how we deal with poverty by leading a new task force [UK Social Investment Taskforce 2000-2010] I immediately said yes. The government was concerned that however much money it throws at social issues, it doesn’t seem to make a lot of progress. That call in 2000 set me off on the journey which brings us here today.
Why do you believe impact investing is critically important?
I realized, as a result of the work of the Social Investment Taskforce, that the reason we hadn’t made more progress in tackling social issues was that we had failed to bring investment capital to fund those who want to improve other people’s lives. The conclusion of the task force was that we need to innovate and develop effective ways to invest in bringing solutions to social problems. Now, 22 years later, we can see why we have failed to tackle climate issues and to close the widening gap between rich and poor. Black Lives Matter and the gilets jaunes [“yellow vest” protests in France] have once again brought social issues to our consciousness, this time alongside our urgent environmental challenges.
How has the field evolved over the past two decades?
For about a decade now, we have realized that we can change our system by bringing transparency to the impacts created by investors and businesses. When you begin to measure impacts on people and the environment, when you translate them into monetary terms, when you compare them with other investors and businesses, you change norms. You make it unacceptable for somebody to say, “I’m going to make a ton of money, but I’m going to destroy the environment in the process.” You’ve been able to get away with that when the only information available was your financial performance. But if your impacts are in plain sight and measured in monetary terms, and everyone can see that your business creates more damage than profit, all sorts of things begin to happen to you. You don’t attract talent, customers or investors. Instead, you attract regulation and taxation [like the carbon tax].
What do you envision the field to look like in the next two decades?
If you attend a board meeting, at the end of the decade, you will be analyzing not just your financial accounts but also your impact statement. Your audited impact statement will show, in monetary terms, your revenues, your costs and the different impacts you’ve created. You will analyze the monetary value of your environmental and social impacts — and strive to improve your impact and financial performance at the same time. You will quantify the investments you need to make in order to improve your environmental as well as human-impact performance. You will identify specific investments needed to improve it. For example, you will invest in your workforce to reduce diversity differences in employment, pay and advancement. You will also pinpoint ways to eliminate discrimination against gender or ethnic groups. You will do the same for your product impact and for the impact of your supply chain.
How does a socially conscious person get started in impact investing?
We need people to ask themselves, “How can I invest to create a positive impact as well as to realize attractive financial returns?” To do so, I would look within my investment portfolio at its different asset classes, identifying which companies are delivering the least negative impact or preferably the greatest positive impact. I would strive to hold green and sustainability linked bonds. Within my public equity portfolio, I would seek managers that take impact into account. The name of the investment game today is how you use impact to deliver superior investment performance; how you analyze companies according to risk, return and impact.
This article originally appeared in Crain’s Currency, a digital news and community networking platform, designed for families managing wealth and legacies.