Global Steering Group (GSG) Background
The Global Steering Group for impact investment was previously known as the G8 Social Impact Investment Taskforce, which was a UK initiative created in 2013. The aim was to catalyse the development of the social impact investment market. It has done this by providing analyses of the market, potential trends and recommendations to all actors involved. Sir Ronald Cohen was appointed to lead the taskforce in 2013 and has been at the head ever since. In 2015 the taskforce was superseded by GSG. The GSG has been recruiting governments to help its aim in pioneering this movement – Spain is the 22nd country to join, this conference was organised to formally introduce them to the group.
Sir Ronald Cohen
Sir Ronald Cohen is an Egyptian born British businessman, after graduating from Harvard Business School he became a consultant at McKinsey. Then in 1972, along with 2 partners, he founded one of Britain’s first venture capital firms, Apax Partners. The business expanded rapidly during the 1990s, they provided startup capital for over 500 companies. In 2002 he co-founded Bridges Ventures, an innovative sustainable growth investor that aimed for financial, social and environmental returns. Bridges Ventures have raised 8 funds in total and they have around £600m under management.
Sir Ronald was also part of the Social Investment Taskforce in 2000 – 2010. This was set out to “assess the ways in which the UK could achieve a radical improvement in its capacity to create wealth, economic growth, employment and an improved social fabric in its poorest communities.”. Additionally, Sir Ronald chaired The UK’s Commission on Unclaimed Assets from 2005-2007. The outcome was to launch the Big Society Capital (BSC), the world’s first social investment bank. £600m of unclaimed assets from the UKs 4 main banks were retrieved and invested into the new BSC institution. The BSC has since invested into many social enterprises around the UK and has permitted many of these social entrepreneurs to improve the lives of countless UK citizens. As previously stated, Sir Ronald is also the head of the GSG. Below is a brief summary of the inspirational speech he gave at the conference.
Main Takeaways from GSG Conference
Overview of Historical Financial Trends:
- Initially investments were mainly into government bonds and securities – returns were of a low steady income
- Introduction of financial return measurement – led to investments into firms for higher financial returns
- Introduction of risk measurement – led to VC and PE investments – gave birth to technology startups and even more competitive returns
- Development of Impact measurement – currently leading to a rise in Impact Investments – giving birth to social enterprises, which are creating both social and financial returns
Recommendations for Governments:
- Collaborate more in the Impact Investments space in order to reduce risk, e.g. aid in early stage investments
- Change current regulations which benefit a capitalist world, to a system that also benefits a world for social impact
- Put pressure on large firms to become more social and raise awareness to investors about how they can gain both financial and social returns
- Create more incentives for impact investment, e.g. the UK has a tax relief initiative for impact investments
History & Bigger Picture of Social Impact & Impact Investment:
- Philanthropy was born in the 1920s – it was introduced to help those in need
- Government then intervened to solve these problems with welfare initiatives
- Philanthropy then shifted to solving more complex problems
- These problems have now become too large and complex – this has led to the intervention of entrepreneurs.These entrepreneurs are creating social enterprises in order to help fix these issues in both a sustainable and scalable manner.
- Impact investment has been increasing rapidly as these social enterprises have come into play. The total Assets Under Management (AUM) in this sector has been doubling each year since 2015. In 2018 total AUM in impact investment was $500bn, if this trend continues, the total will reach $1tn by next year.
- There has also been a slight change in mindset in the philanthropy sector. Those donating millions to charities are starting to invest into social enterprises.
Why Are Social Enterprises so Attractive?
These social enterprises are more sustainable and scalable than traditional charities & NGOs, plus they provide financial returns. Social entrepreneurs are aiming to solve societal issues by leveraging business models in order to both make a profit and create a positive impact on society. Social enterprises are more sustainable and scalable. These businesses reinvest the profits they make to expand their operations, thus resulting in a larger social impact. Additionally, social enterprises have a clearer measurement of the positive impact they are creating – they leverage these social measurements in order to be more attractive to Impact Investors.