The crash of 2008 undoubtedly cast financiers and bankers as the villains of society. Trust and confidence in financial institutions plummeted to an all time low.
But amidst the aftermath of the crash, we shouldn't forget that financial markets can be a force for good. There is a way in which we can harness the positive power of enterprise to benefit society. That idea is Social Impact Investment.
And you needn't take my word for it - the Pope, politicians and academics have come out to support Social Impact Investment as a means of leveraging new funds into projects which help the most vulnerable in our society. I believe there is, at the very least, an untapped $1 trillion of private sector impact investment, which can today start to be unleashed to tackle our social problems.
So this morning, UK Chancellor of the Exchequer, George Osborne, hosted the launch of the report in Downing Street. He supported its clear recommendations to enhance the ability of financial markets to act as a force for good and announced his desire to implement recommendations from the report. It lays out clear recommendations that will enhance the capacity of the financial markets to act as a force for good. It demonstrates how governments, foundations, financial institutions and the public can work together to employ the positive power of enterprise and entrepreneurship to benefit society.
Impact investing is a simple concept with the power to solve some of society's most pressing issues. Individuals or institutions can invest their money into organisations, be they charities or businesses, which then generate a measureable social outcome. The benefits to society result in better lives and lower spending, and some of that can be passed back to the investors. This model can help us care for children and the elderly, reduce ill-health, finance community regeneration and reduce reoffending and homelessness.
David Cameron, as President of the G8, made Social Impact Investment a top priority, and asked me to lead a Taskforce to find ways to create a global impact investment market. Over 200 experts from across the world came together. The result is a compelling document which shows that this is an idea whose time has come.
It is already happening across the world in developing as well as developed markets. Here in the UK, ThinkForward in Tower Hamlets provides coaching and support to almost 1000 vulnerable teenagers. With the help of Social Impact Investment, 60% of the group achieved five A*-C GCSES. By improving their employment prospects, social impact investment reduces the likelihood they will end up on unemployment benefits, which costs the State over £10,000 per claimant each year.
In Peterborough, the first ever Social Impact Bond, launched in 2010 with £5m of private money, has helped reduce offending amongst prisoners by 8.4% compared to national averages and will return its capital with interest. When youth offending costs £21,000 per prisoner each year, quite apart from the financial and emotional cost associated with crime, the savings add up quickly.
When I founded Apax Partners - one of the UK's first Venture Capital firms - I firmly believed in the power of innovation to change the world for the better. At the time, technological innovators were starting a revolution in communications and biotechnology that has since transformed the world we live in.
Today, an explosion in social entrepreneurship and innovation will provide the impetus for the next revolution in our society, using the power of finance to make a real difference to our society - turning money into real change.
Find out more at www.socialimpactinvestment.org
Sir Ronald Cohen is the Chairman of the G8 Taskforce on Social Impact InvestmentSuggest a correction