‘Allow charitable foundations to make for-profit investments’

KR Srivats New Delhi | Updated on January 20, 2018 Published on March 20, 2016

India needs to sync with the world on impact investment, says Ronald Cohen

India must allow charitable foundations to make ‘for profit' investments to expand the ‘impact investing’ ecosystem in the country.

This should be allowed on the basis that the money (returns generated) would be redeployed only for charitable means, Ronald Cohen, Chairman of Global Social Impact Investment Steering Group, has suggested.

“That's true across the world. In the UK and the US, you are not prevented from investing if things can get you a financial return. We want your foundations to grow", Cohen told BusinessLine here in an interview.

Currently, foreign foundations cannot invest in a social enterprise in India. They can only do so in non-profits through a grant.

“Grants are important, but it is yesterday's thinking", Cohen said.

Popularly known as father of the venture capital industry in the UK, Cohen is in India on a four-day, three-city visit to engage with multiple stakeholders on the impact investing eco-system.

Impact investing

Impact investors are financial investors who invest in social enterprises to deliver social (and environmental) impact to the poor (and under-served). They are focused on sectors, such as agriculture, financial inclusion, affordable education, healthcare and housing, water and sanitation, clean energy and livelihoods. In India, the impact investing space has witnessed around $2 billion of cumulative capital investment by over 50 funds in more than 300 social enterprises.

Impact investing with around $60 billion of global asset under management has the potential to catalyse private capital for development.

The Cohen-chaired steering group is an institutionalised initiative that started as a G8 committee. "Impact investment is outcome-based. You get paid if you achieve the outcome. Governments must realise that the world has shifted from measuring financial returns in the 19th century to measuring risk and return in the 20th century, and now to measuring risk, return and impact", he said.

Outcome funds

To grow the ‘impact investing' ecosystem, the Indian government must support the creation of ‘outcome funds' for social issues, such as skills, education and health, Cohen suggested.

Monies to these outcome funds should flow from corporate social responsibility (CSR) funds in big corporations.

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Published on March 20, 2016
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