In Jerusalem, Sir Ronald Cohen ties impact investing to solving Israeli-Palestinian conflict

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It was a hot morning down the street from the Knesset. With a backdrop of Jerusalem’s Malcha Technology Park to the left and minister-busing choppers flying to the left, and a blistering sun overhead, Forbes brought dozens of entrepreneurs from around the world to listen to leaders of co-creation and co-existence organizations discuss social entrepreneurship, conflict resolution, and startup pivoting.

When I showed up to cover the event, I expected Forbes to use social entrepreneurship as an excuse to focus on the Israeli-Palestinian conflict for the day. If you only came to hear Sir Ronald Cohen, you wouldn’t have had that impression at all.

Sir Ronald Cohen is the chair of the social investment bank Big Society and a pioneer in a concept called the “social impact bond” (SIB), a bond like any other except that it pays out money not based on interest collected, but based on the measure of social impact a business’s products or services have had in a given community. Launching with an emphasis on the spirit of innovation that younger entrepreneurs can bring to communities, he described the bond’s novel concept.

“The social impact bond enables a social entrepreneur to raise millions of dollars just like a business would and get paid out by foundations or a government after 5 to 7 years according to the improvement being made to people’s lives or in the environment.”

It was the fourth day of a week-long string of events between Israel’s national and financial capitals, Jerusalem and Tel Aviv. For Jerusalem, highlighting collaboration between Israelis and Palestinians took on much of the day.

On a morning littered with actors, charismatic entrepreneurs and even Monica Lewinsky moderating a panel on civil dialogue, Cohen was probably the most poignant presenter of the day.

Born in Egypt, he and his Jewish family fled to England when he was 11 following the Suez War between Egypt and an Israeli-Franco-British alliance back in 1956. His family had to start over, leaving a small fortune behind. He built his English skills from scratch, eventually earning a scholarship to Oxford and becoming president of the school’s student union. He moved onto Harvard Business School and worked for McKinsey & Company.

Since 2000, he has been known for his participation with the Social Investment Task Force in the UK and co-founding Bridges Ventures to fund social impact investing. Bridges currently has £600 million in assets under management.

“Now 59 social impact bonds dealing with more than a dozen social issues . . . and so that concept has now morphed into a much more developed thought. If in the 19th century and before we measured financial return, in the 20th risk and return, today already measuring risk, return and impact.”

For-profits as stronger facilitators of social impact

Cohen’s SIBs have targeted causes like reintegrating prisoners into society, inhibiting chronic homelessness and facilitating foster care. They have gotten backing by local and state governments in the U.S., UK and Australia.

They offer no fixed rate of return, though they operate on a fixed schedule like classic bonds. The SIB has been used as a model for so-called development impact bonds (DIB) which focuses on, you guessed it, underdeveloped countries. The concept is essentially the same.

The potential for these sorts of financing schemes, Cohen said, was in their ability to influence for-profit strategies to accomplish what non-profits have typically considered their domain.

“[We] have the opportunity to do that at a scale we’ve never seen before either through running non-profits (NPO) and running money through instruments like social impact bonds or by raising capital that expects you to deliver innovation and growth both in delivering financial returns and delivering social and financial returns,” Cohen said from the stage, implying that the pressures of your bottom line add an extra incentive to succeed that NPOs don’t have.

The economic side of the Israeli-Palestinian conflict

As I said in my introduction, the Jerusalem scene gave organizers a chance to address the conflict that dominates international headlines. While other panels brought social entrepreneurs to speak about that, Cohen drew on his own experience to address what he called a “triple helix” in the genetics of the fight: politics, security and his main concern, economics.

“The economy is capable of doing a lot better. But your efforts over the next couple days can make a contribution helping the economic vector and helping the contact between the two sides.”

Drawing on his own childhood, he can see the contours for collaboration in old Egypt.

“Before nationalist leaders like Nasser came to power, everyone went to each other’s religious places,” Cohen described, with Jews, Christians and Muslims visiting each other’s synagogues, churches and mosques and celebrating each other’s festivals — at least in the cultural sense. There was also clear integration in the economy and business facilitated those cross-cultural contacts. Palestinians and Israelis have a chance to fix the foundations for that, too.

“[There is] a fantastic opportunity to solve this conflict. Palestinians have an economy capable of 10% growth every year. It aspires to have entrepreneurs who operate on a global scale. It looks at Israel as a benchmark.”

Cohen has worked on two projects in the region: one to develop the Palestinian private sector and the other to alleviate poverty in certain social segments of Israel. He closed just as he opened: emphasizing the need to inject a spirit of entrepreneurship into the world of charity. The drive of an entrepreneur is a critical component often missing in the non-profit sector.

“It should be possible to innovate, because until we can connect social entrepreneurs to capital and investment instead of just grants and donations, we’ll never be able to deal with social issues the way that we want.”

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