By Sir Ronald Cohen
The views expressed are his own.
The first part of this essay laid out the rationale for impact investing, whereby investors can simultaneously create social impact and achieve financial returns. How can we bring it about? First, we need an enabling environment. In the 1970s and 1980s, the venture capital community argued successfully for changes in taxation and the regulation of financial institutions to foster investment in venture funds. Governments were lobbied to improve the climate for start-up and early-stage ventures. Markets to raise equity and trade stocks in pre-profit companies were introduced in the US (Nasdaq in 1970) and in the UK (USM in 1979). Rates of direct, personal taxation were reduced. And, in 1978, amendments to the USA’s ERISA legislation were specifically designed to foster venture investment by U.S. corporate pension funds. Such liberalizing measures were adopted first in the USA, which, as it turned out, reaped most of the benefit of the high-tech revolution, largely funded through venture capital.