Today’s article discusses a recent Brookings Institution event where England’s finest in the social investment field Sir Ronald Cohen discussed multiple topics in the field…
How Revolutions In Finance & Education Are Transforming Virginia’s Purpose Economy
John Kluge – Forbes
The father of European venture capital, Sir Ronald Cohen, asked a room of nearly a hundred economists, policymakers, and financiers at a Brookings Institute event, who among them thought an extra $1 billion in aid would solve Africa’s education challenges. Not a single person raised their hand. The United Nations Sustainable Development Goals (SDGs), are estimated to require a global investment of $3-4 trillion per year. Currently, total aid equates to about $150-200B a year, a fraction of what is required to meet the UN’s goals of solving large-scale human and planetary challenges. Sir Ronald indicated, “It’s plainly obvious we need to attract capital to meet these goals.” True, but how?
Sir Ronald’s solution, at least in part, is the scaling of social impact bonds (also known as pay for success contracts)—what he calls “the equivalent of venture capital for social impact.” The Impact bond market has been growing rapidly since its inception in 2010—there are now over 56 globally and around 90 in various stages of development. So far, they have delivered between 3-15% returns for investors. Dr. Emily Gustafsson-Wright, a Brookings Fellow and lead author of their most recent report, estimates the market for impact bonds will triple by 2020. Finance has indeed evolved from measuring financial return in the 19th century, to measuring risk and return in the 20th century, to now measuring risk, return, and impact.