Cohen hopes for an Israeli social investment bank
Sir Ronald Cohen, founder of venture capital firm Apax Partners, plans to establish a social investment bank in Israel, which he hopes will revolutionise the non-profit sector.
Over the last few months he has convened meetings to discuss the plans under the auspices of the Portland Trust. Those involved include former Bank Leumi chief executive Galia Maor, deputy accountant general Yair Tal; former deputy attorney general Davida Lahman-Messer, Allan Barkat, founder of Dualis Israel Social Venture Fund, executive director of Israel Venture Network, Michal Simler and Cecile Blilious, managing partner of Impact First Investments.
The participants all share Cohen's vision to create "a social investment bank" in Israel to channel capital to businesses, which create measurable social value. Cohen believes that Israel has 32,000 not-for-profit organisations, many financed by foreign philanthropists, which operate in various social fields. In the past few years, because of the global economic crisis, the flow of donations to these organisations has largely dried up.
Another participant, Itzik Ben-Sheetrit, owner of Atuda Financial and Pension Consulting says: "Our concept says, 'don’t just give grants to this sector, but invest in it and get both a financial return and social value - a double bottom line.” He adds: "I am a strong believer in Ronald's vision, because if you demand a financial return, you're testing the investment with professional tools, and you will see the results. Just as a private equity fund is involved in the management and oversight of the activities of the companies it invests in, the social investment funds will do the same. If you can measure social value, you can also create income from it.”
He continues: "This is a kind of evolution by the non-profit sector. If a social venture has an idea, it has to constantly seek contributions or even government funding. At the same time, donations go to those who are able to raise more money, and not necessarily to those who create the most social value. The social investment fund message is, 'Don't spend all the time raising donations, but concentrate on achieving the social targets you're supposed to reach and develop your organisation.'"
During a round table debate, a participant expressed concern that for social investment to succeed in Israel, it must be wholly autonomous. In other words, politicians must be kept out of the decision-making. On the other hand, such an investment house could not be established without an amendment to legislation, which politicians would have to support.
Cohen knows that this is not an easy task. In Britain, the government agreed that independence was critical for the project's success but demanded a business plan. "The government can decide that this issue will transcend politics, that it will be part of policy, but not part of politics. We started the investment house under the Labour government, and when the Conservatives, under David Cameron, were elected, they adopted the policy and decided to position the venture outside the political arena. Can Israel succeed in positioning the venture outside the political arena? I don’t know. My guess is that it is possible."
Watch this space.