When pension funds talk, private equity fund managers listen.
Ronald Cohen, one of the UK’s most prominent private equity and venture capital investors, knows how that works.
As institutional asset allocators make impact management and measurement a condition of investment mandates, Cohen tells ImpactAlpha in a wide-ranging interview. “The private equity investor can’t say: ‘I’m not interested’. He says, ‘Okay, we’ll measure.’”
Cohen is credited for bringing venture capital investing to the UK in the 1970s. He is a co-founder of Apax Partners, one of the country’s first VC firms, as well as Better Society Capital and Bridges Fund Management. Along the way, Cohen also helped invent social impact bonds and has served as an advisor on all things impact investing to British Prime Ministers from Gordon Brown to David Cameron and now Keir Starmer.
Born in Egypt to Syrian-Jewish parents, Cohen fled with his family to England in 1957. At 80, he has published an update to his book “Impact: Reshaping capitalism to drive real change,” strengthening his call for an impact revolution in government and finance.
With the developed world facing an economic and social crisis due to rising inequality, he’s helped develop an impact accounting system so companies and investors can report social and environmental performance in monetary terms, alongside profits. Social-impact bonds proved cumbersome, but Cohen still makes the case for outcomes-based public spending models to help cash-strapped governments mobilize private capital to deliver public services, and generate financial returns for investors.
Cohen said he no longer screens out defense investments from the portfolio at Apax Partners. “To be a pacifist in today’s world is madness,” he tells ImpactAlpha. “Defense today is arguably a necessary investment area for democracies.”
Cohen met with ImpactAlpha in his townhouse in Notting Hill, an affluent West London borough made famous by the eponymous Hollywood movie.
ImpactAlpha: Sir Ronnie, when you look ahead to 2026, are you an optimist or a pessimist? What keeps you awake at night? What gives you hope?
Sir Ronald Cohen: I’m determined. I’m trying to do everything I can to achieve the right outcomes.
The world is in a dangerous place. These periods of transitions in technology, geopolitics and in the use of media, the move to authoritarian governments, the weakening of brakes on what governments can do to the individual – these are all big warning signs.
Many people feel democracy just doesn’t work.
I made a speech in 2002 where I said: ‘If we don’t deal with the issue of poverty more effectively, a curtain of fire will come to separate the rich from the poor in our countries, in our regions, in our continents and so on’. You could see it then.
If you look at the multiple that a CEO salary represented 40 years ago to an average employee salary, it was 40 times. Today, it is 347 times. It is shaking the foundations of democracy because half the population has lost all trust it had in the effectiveness of democracies to look after them.
What worries me is the extremism, which may have been driven partly by social media, but is certainly driven also by economic frustrations…Antisemitism is one example. It’s appalling. We’re going back 100 years to the 1920s and 1930s, and it’s absolutely crazy.
So what’s going to stop the extremists? Well, within a democracy, you would hope an election would stop them, providing the government doesn’t corrupt the electoral system.
There is a big question about how democracies are going to fare. So I’m concerned. We have to do everything we can to fight back against attempts to take over democracy.
In a way, there is a clash between capitalism and democracy today. The clash is over how you share the benefits of capitalism and how capitalists are able to use money to influence elections.
ImpactAlpha: How do you see the current debate among European impact investors about investing in defense? While a number of leading Nordic pension funds have started to allocate towards defense, some impact investors oppose it and worry it may curb social and environmental spending.
Cohen: The problem with defense is, you can do good things with it, and you can do bad things with it. It’s like water. You can use it to irrigate and create food for people, or you can drown in it. It’s not the technology, generally speaking, that is the problem. It’s the use human beings make of the technology.
When we founded Apax, we didn’t invest in alcohol, we didn’t invest in tobacco, we didn’t invest in gambling, and we didn’t invest in defense. It was easy then. Today, you’d have to be foolish to say’ I’m a pacifist’. To be a pacifist in today’s world is madness. With Putin, you’re going to get run over.
Defense today is arguably a necessary investment area for democracies. You just have to make sure that you’re selling to the right people. So you have a board that decides which countries you should sell to, and which companies you should sell to and so on. You have to have governance internally, that qualifies who you can sell to.
ImpactAlpha: In your book, you argue for an economic system that integrates risk, return and impact. Given the current state of the world, can impact really fix the future? Measuring social impact is very hard. A lot of governments don’t want to go for social outcomes-based models. Investors prioritize profits.
Cohen: We couldn’t foresee that investor and consumer preferences would change, and they would change to favor companies that are doing good, putting it very simply.
So it led to ESG flows of $30 trillion, or 14% of the world’s investable assets. That’s a massive change in the financial system. The problem was that ESG didn’t measure its impact, and so it became very vulnerable to accusation that it was all green washing.
Now the world has moved on again, and partly through our efforts with impact accounting, we can express impacts in money terms. I can show you what an S&P or an MSCI index or a Bloomberg screen would look like with earnings projections that are weighted for the real impact environmentally, [such as] in emissions of water use and water pollution, waste, soil erosion or in the social area and living wages. I can even show you gender under-representation, or ethnic under-representation, and what it means in economic and financial terms. This effectively brings impacts into financial analysis.
It’s the economic system, stupid. You have to prevent the economic system from creating pollution, right? The only way to get the economic system to generate solutions instead of worsening our challenges is to measure impacts like we measure profits and provide incentives through taxation and tax credits for doing the right thing. If you do that, then investors and consumers have the transparency at the same time to be able to make decisions that take impact into account. There is no other way.
ImpactAlpha: You came to Britain as an 11-year-old refugee from Egypt with your parents in 1957. How did this experience shape you?
Cohen: We were lucky to be able to come here, and we were welcomed here…I found an unbelievable teacher who prepared me for the Oxford University entrance exam, and I got in thanks to him.
My education was paid for by the state. Oxford completely changed me, and my ability to think. It creates a sense of wanting to give back. You’ve been helped, and it’s fair that we should help others. Separately from that, my Jewish background was that if ever anything good happens to you, then you do something for the poor.
So if you put these two things together with the idealism that existed at Oxford in the 1960s, then you end up saying: ‘There has to be greater meaning in my life than just making money’.
But I also knew I would have to make money, because of my parents. They didn’t have pensions, so I supported them.
(After graduating from Oxford, Cohen went to Harvard Business School on a fellowship, where he obtained an MBA and discovered venture capital. In 1972, he founded Apax Partners, which has become one of the world’s biggest private equity firms with $77 billion in assets under management. He left Apax 20 years ago to focus on social investment.)
For me, venture capitalism was a way of creating jobs. I also had an obligation to bring something of value to the UK, because of the [Harvard] fellowship I had been awarded. I brought back venture capital at a time of high unemployment here. I didn’t want to just be another employee in a big company. I wanted to try to make a social contribution, as well as making a livelihood.
ImpactAlpha: President Trump is doing the exact opposite of what you are recommending governments should do in terms of social and environmental outcomes. He also doesn’t seem to believe in climate change.
Cohen: Climate isn’t going to improve just because we deny that it’s worsening. Three years from now, when Trump comes up for election again, we can expect a worsened climate situation, not an improved one. The pressure, then, depending on who gets elected, will be to accelerate measures. China is doing it already, which is another reason to accelerate.
The issue with the changed environment because of Trump is to emphasize that this is actually a better way of doing business, that this is a risk management tool. It’s a tool to improve the resilience of companies and make them future proof.
If you don’t take into account a potential disruption of your supply chain because of a flood in a country where you’re manufacturing goods, you’re going to see a drop in your earnings. So I don’t think companies are just going to change and say: ‘We can forget about climate now’. They will talk of risk management and resilience.
ImpactAlpha: Have you ever met President Trump or the people around him?
Cohen: No, but private equity is very familiar to him. I think he would like the part of the agenda that says this is a way for government to spend better. This is a way for businesses to improve their risk management and their resilience.
ImpactAlpha: A quarter of all adult Britons, and one in three children, are currently living in poverty, which is the highest this century. Given the UK’s pioneering role in impact investing in the last 25 years, are you surprised it hasn’t been able to solve this problem? In fact, poverty has become a lot worse in the past few years.
Cohen: My surprise, contrary to my expectation, is that government and philanthropy haven’t really grabbed impact investment in the way they should. Financial markets grabbed the opportunity. There’s a trillion-dollar pool now of sustainability-linked bonds and loans inspired by the social impact bond. If you achieve social or environmental targets, your interest rate goes down. As a company, you pay less. Same sort of idea, but government didn’t grab hold of it, they didn’t scale it.
ImpactAlpha: What impact has Brexit had on the UK in terms of impact investing?
Cohen: First, it distracted the government for nearly a decade. And now the government that has come in has a sharpened focus on, how do we deal with the social gaps? It’s not acceptable in the 21st century. So how does the government deal with that if you have no money? Well, the answer is, it does so by attracting investment.
(In the past year, the UK government created the £500 million ($675 million) Better Futures Fund to support vulnerable children and families and established the Office of the Impact Economy. Cohen said he has worked with Darren Jones, Starmer’s chief secretary, on both.)
ImpactAlpha: In what way are the Better Futures Fund and the Impact Office going to help people living in poverty in Britain right now?
Cohen: In the UK Treasury, which is typically very conservative, there is greater interest in this because part of the reason is that it costs half as much to deliver a positive outcome as it does just to pay upfront an organization and say, go visit this prisoner or this child three times or whatever, for so many months, and nothing comes out of that.
How could the Office of the Impact Economy improve the lives of children? If today you have £500 million ($675 million) from the government and matching finance of £500 million ($675 million) to pay for outcomes achieved, that’s £1 billion ($1.4 billion). And one day, it could be £10 billion ($13.5 billion).
If government doesn’t have the money to spend, bringing investment is a way for it to continue to make progress.
ImpactAlpha: So is the idea behind the Office of the Impact Economy is to reduce public spending?
Cohen: Not to reduce public spending, but to spend it better and to access outside capital to achieve social improvement in the same way that venture capital funded tech entrepreneurs, and funds social entrepreneurs.
ImpactAlpha: Are private investors willing to come in?
Cohen: Yes. There is $1 trillion in sustainability-linked bonds and loans right now. If you take some of the issues, such as prisoner re-offending, unemployed people or homeless people, very often, if you get them into work, there’s an improvement in revenue for the government at the time when it pays for the outcome. So you get a reduction in unemployment benefits and a sliver of taxation on income.
A lot of pension funds have pressure from their trustees to get involved in impact investment. Local authority pension funds, CalPERS, CalSTRS, some of the Canadian pension funds – they put pressure on their investment managers.
It’s not an accident that the private equity industry is one of the places where impact measurement is coming in first, before public companies. Why? When a private equity fund goes to a pension fund, and says: ‘Will you invest $100 million or $500 million in my next fund?’ and the fund says: ‘Yes, but I want you to worry about impact. I want you to avoid investing in companies doing harm, and to measure the impact of the companies in your portfolio’, the private equity investor can’t say: ‘I’m not interested’. He says, ‘Okay, we’ll measure’.
The last time I looked, you had more than 100 private equity impact funds and venture capital, of which 25 had more than $1 billion of capital. So there is pressure from trustees. Just look at the Netherlands, where the healthcare workers pension fund got out of fossil fuels and cigarettes and so on.
