Sir Ronald Cohen, known as the rock star of social impact investing in the world, is on a whirlwind tour of India from March 17 to March 22 to promote a unified view of impact investment and to encourage policy change to help the $2-billion nascent industry in India. In an interview with Prasanta Sahu, Cohen, chairman of the Global Social Impact Investment Steering Group, says India should consider using unclaimed funds in banks to set up a body to provide capital to impact investment organisations and ease rules to allow the corporate social responsibility (CSR) funds to the sector. Excerpts:
How do you see the social impact investment gaining globally?
It’s going to grow more than $4-5 trillion in 20-30 years from a few billions of dollars now (according to an estimate $60 billion). It will overtake private equity and venture capitals.
How do you find the social impact investment eco-system in India?
What is very striking is that the profit with purpose impact investments started here many years ago. On top of that, the CSR rules, which are unique in the world in taking 2% of corporate profit and allocating it to charitable use, have started the eco-system in the country. (Under current rules, philanthropic trusts can’t put even a single rupee in impact investing because there is some profit being made. So, India’s Impact Investors Council has sought a change in tax law that they should be allowed to do this).
What can India learn from global practices?
One area to look at is unclaimed
assets in the banking sector. In the UK, the government allowed us to create a social investment bank, which is a wholesaler of capital for impact investment organisations, mainly, not-for-profit. We created an investment firm called Big Society Capital with £600 million of equity capital. I think for India, to have an organisation of this kind whose goal is to develop the sector on lines of the British experience, will make sense.
How can funding be enhanced for social impact investments in India?
I think one of the most exciting potential developments in India which we have been working for the last few days is the creation of charitable outcome funds. These would receive money from CSR allocations and contract with issues of social impact bonds to address different social issues in areas like education, health and skills. This would have the effect of crowding in money from investors, who might otherwise not provide money in grants, because they feel grants would not achieve the desired outcome. It is a way of adding a multiplier to the impact of CSR money.
Has the idea of social impact investment gained currency?
I see social entrepreneurs beginning to measure the impact of what they do and also express a desire to attract capital rather than just grant funding. So, today, the world we live in is one where a social entrepreneur can opt to choose a not-for-profit model supported by social impact bonds or a profit with purpose model supported by venture capital, impact venture capital, impact investment of other kinds. In India, there are 50 impact investment management firms with over $2 billion in core investments .
Is time ripe for social impact bonds in India?
A development impact bond in India has already been used in Rajasthan for checking dropout rates from primary schools for girls. I think India is on road to launching a number of social impact bonds. India could lead the world in tackling social issues.