Photo/IllutrationEgyptian-born British businessman and political figure Ronald Cohen speaks during an interview with The Asahi Shimbun in London on Jan. 22. (Photo by Akira Suemori)

Social impact investment is increasingly receiving attention as a valuable tool in resolving such difficult issues as education and poverty along with environmental and health-care issues.

Ronald Cohen, a pioneering venture capitalist who has been called "the father of social impact investment," believes that Japan should follow the lead of Britain in releasing unclaimed assets from banks to create "social investment banks."

Social impact investment would also provide support to entrepreneurs and nonprofit organizations that are working on such issues.

The significance of such investments as well as their effectiveness were among the questions Cohen was asked in a recent interview.

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Excerpts from the interview follow:

Question: Why did you become involved in social impact investment?

Ronald Cohen: Philanthropists are there to do good. Governments have a lot of other things to do. I realized that the philanthropic model had not really worked as well as we would have wanted. In 2000, I began to understand the issues better because the British government asked me to look at the issue of poverty in Britain and all the social issues that spring from poverty. And when I began to look into it, like many people are discovering since then, the system we have for dealing with the social issues is broken in several ways.

If you look around at charitable organizations everywhere in the world, they share two characteristics in common: one, they have no money and, two, they have no scale. And then, I decided that it should be possible to do what we did for the tech revolution to respond with a new way of connecting entrepreneurs, social entrepreneurs in this case, to the capital market.

In 2010 with the launch of the first Social Impact Bond (SiB), we achieved this ambition. We found a way of connecting someone who wants to improve the lives of others to investment capital, instead of donations.

There are now 100 SiBs in 20 countries dealing with more than a dozen social issues. And if you look at them, most of them are dealing with prevention--prevention of young people going back to prison, prevention of people dropping out from school or university. The cost of preventing that dropout is maybe a third of the cost in one year of paying for an unemployed person.

Q: But wasn't it the case that social responsibility efforts by companies until now involved sacrificing part of their profits?

A: We are beginning to see the millennial generation drive the change, a new breed of young person for whom just making money is not the only goal in life. So, a new form of business model, impact business if you like.

A new generation of entrepreneurs and CEOs are creating new business models where impact is at the core. The more you help to reduce carbon emissions, the more money you make. The more you help poor people to get out of debt, the more money you make. So, a new form of business model is coming up. Now, one example would be Tesla. I think the interesting thing about this renewal of the force generated by capitalism, which goes to optimizing risk-return and impact, is very significant for each one of the constituencies which comprise our society: entrepreneurs, investors, big companies, philanthropists and governments.

Q: What is necessary to heighten the effects from such investment?

A: Releasing unclaimed assets in Japan from banks, which is something that we were able to do in Britain in 2012, five years ago. And the figures in Japan are going to be a multiple of the figures in Britain. I understand that, in Japan, it will be $900 million (98.20 billion yen) a year. Release this money and create social investment banks to begin to develop the ways in which we innovate, not just in the not-for-profit sector, but also in the profit-with-purpose sector. I would be very interested to understand where Japan will place the balance between philanthropic grant making from this money and what I would call impact investment.

Q: Is it true that those involved in social impact investment have established as a goal making 2020 a major turning point for such investment?

A: I think what is going to help us achieve the goal is now the worldwide interest in achieving the U.N. SDGs (sustainable development goals), which have to be achieved by 2030. I think by 2020 we will have established at-scale some big outcome payment funds to pay out on SiBs. The International Red Cross set up a SiB. Potentially you could imagine impact bonds being used in health, education and employment in conflict zones. After the 1956 Suez Crisis, as refugees we came to Britain with a suitcase and 10 Egyptian pounds each. The refugees, yes, I empathize with that.

Q: What do you think about the relationship between money and happiness?

A: I think fulfillment comes from achieving a balance between what you do for yourself and what you do for others. I think our society has gone through a period where ... the purpose of business is to make money. And I think we are shifting. You know Adam Smith's "invisible hand of markets"? I like the phrase I coined which is the "invisible heart of markets" because we bring the invisible heart of markets to guide their invisible hand.

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Born in 1945 in Egypt, Ronald Cohen is chairman of the Global Steering Group on Impact Investing. Known as a pioneering venture capitalist, Cohen founded and serves as chairman of the British social investment bank Big Society Capital.

(This article is based on an interview by Asahi Shimbun London Bureau Chief and European Editor Tsutomu Ishiai.)