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Cohen: 2020 will be impact investing ‘tipping point’

The Apax and Bridges co-founder wants 100 pension funds and endowments to allocate 5-10 percent of their assets to impact investing.

Apax Partners and impact firm Bridges Fund Management‘s co-founder has said 2020 will be the “tipping point” for impact investing.

Speaking in London on Monday at the launch of The Rise of Impact, a report by the UK National Advisory Board on Impact Investing, Sir Ronald Cohen outlined three criteria signalling this point. This will be the year when:

  • 10 percent of startups will have impact at the core of their business;
  • 100 pension funds and endowments will allocate 5-10 percent of their assets to good causes; and
  • 10 percent of the UK government’s sub-contracted services will be through “pay-for-success” vehicles that are part-financed by capital markets

The report outlines five steps needed to help create an inclusive and sustainable economy.

1. Adopt an inclusive and sustainable UK investment agenda

Institutional investors should align their strategies with the UN Sustainable Development Goals. The board also recommends the establishment of a £2 billion ($2.6 billion; €2.2 billion) Inclusive Economy Catalyst Fund.

2. Empower savers to invest in line with their values

Use the new auto-enrolled defined contribution pension scheme as a launchpad to help individuals invest in socially useful causes. DC pension providers should engage their members on how they want their values to be reflected in their investments and develop “Pensions with Purpose” products.

3. Put purpose at the heart of public procurement    

The UK government should embed social value into all of its tender decisions, with a minimum weighting of 20 percent. It should expand “outcomes-based” private sector programmes by establishing a central government outcomes fund.

4. Accelerate the rise of purposeful business

UK businesses should “select, express and manage a societal purpose”, a process that the government could ease by creating an “inclusive company legal form”, among other steps. The government should also appoint a Purposeful Business Taskforce to develop best practices and recommend incentives for adoption.

5. Strengthen the UK’s role in international development

CDC Group, the development finance arm of the UK government, should visibly champion investment in developing markets and drive engagement with other UK-based investors. Asset owners should also put more capital to work through the framework of the Sustainable Development Goals.

Led by Bridges’ co-founder Michele Giddens, the UK National Advisory Board is part of a global steering group of 13 states plus the EU, which Cohen chairs.