GCV Symposium 2021: Keynote – How to make an impact in impact investing

Sir Ronald Cohen, chair of the Global Social Impact Investment Steering Group and one of the doyens of British venture capital, delivered a keynote addressed to the audience of the first in-person GCV Symposium since the onset of the covid-19 pandemic.

Cohen addressed the audience in a pre-recorded message, in which he reiterated some of the main messages of his new book “Impact. Reshaping capitalism to drive real change” – copies of which were distributed to delegates attending the GCV Symposium live.

He emphasised the importance of major driving forces, shaping he has dubbed “impact revolution”. He identifies three major forces.

The first force is the change of values that are shifting consumption and employments preferences among the younger generation, with many unwilling to be associated with, work for and buy from businesses or products causing harm with their social and environmental impact.

The second force, according to Cohen, has been the role that technology plays, with the rise of artificial intelligence, machine learning, augmented reality and big data, which enables us to quantify and monitor the impact of economic activities.

The third major force shaping the impact revolution has to do with a general move toward more transparency. According to Cohen, the world is going into a direction of greater impact transparency in accounting and other spheres of life. He mentioned initiatives and organisations such as the International Financial Reporting Standards (IFRS) Foundation and the International Organization of Securities Commissions (IOSCO).

He commented: “We are, in my view, in the first stage of an impact revolution, which is going to be as pervasive and disruptive as the tech revolution which preceded it. And it is going to build on the tech revolution because tech innovation is coming now to disrupt established business models by bringing impact. Take the case of Tesla. It entered the automotive industry to shift its focus away from the combustion engine. The implications of this have been massively positive.”

He also shared with the audience that he was very involved in an initiative at Harvard Business School, which is bringing impact accounting to the fore, having researched over 3,000 companies, not only in terms of environmental but also in terms of employment and product impact. Out of the 3,000, 450 were revealed to cause more damage than they make in profit every year and a 1,000 create a damage of 25% or more than their profits each year, he said.

He shared his view that impact-weighted accounting will likely become a standard requirement soon because of the effects of impact thinking on investment decisions and valuations: “My prediction is that within three to five year, we will have mandatory publications of some form of impact-weighted accounts that enable to use the same unit of measurement for environmental damage, social impact and profits.

“If we want to tackle climate and social challenges effectively, we have to bring our economies, which means businesses and investors in them, to create solutions rather than, in the search of profit alone, create and aggravate problems. Impact is the invisible heart of markets that guides their invisible hand.”