Ronald Cohen comes from speaking with Spanish businessmen in the morning and attending the opera in the afternoon. He is married to the Israeli film producer Sharon Harel-Cohen, and anything that smacks of tables and acting seems like a good plan to him, even though Spanish is not one of the five languages he speaks and deciphering the subtitles at the Teatro Real in Madrid requires an extra effort. His own life would fit well into a script: born in Egypt 77 years ago, at 11 he hurriedly fled the country with his family at the outbreak of the 1956 Suez Canal crisis, which pitted Britain, France and Israel against the Nasser regime. Her mother, British and Jewish, was doubly suspected, for which she was placed under house arrest and called to testify before a military court. His father was stripped of his nationality. They took refuge in London, where they arrived with 10 Egyptian pounds and without Cohen knowing English, a language that he still pronounces today tinged with a foreign accent.
The second act is a story of resurrection through academic excellence: a scholarship to study at Oxford, where he is studying Philosophy, Political Science and Economics and chairs the debate club; MBA at Harvard, and finally financial success with Apax Partners, today a giant that owns part of the Idealista portal and became interested in Ferrovial. He founded the venture capital firm in 1972, and left it more than three decades later to dedicate himself to a larger task in which he is still engaged today: reinventing capitalism to make it more socially and environmentally friendly through so-called impact investing, one that not only looks at benefits, but also seeks to redirect money towards companies that generate positive effects for society. A way of encouraging companies to follow a path that is kinder to the planet and its inhabitants whose thesis he applies through the GSG, and which he explained in the book Impact: Reshaping Capitalism to Drive Real Change. Based between Tel Aviv, London and New York. visits Madrid for three days as a guest at the Impact Week of the Impact Observatory created by the consultancy Transcendent and the law firm Ontier.
Ask. What have you told the businessmen?
Answer. I think many people are aware of the environmental and social challenges we face, how the gap between rich and poor threatens both our planet and our society and is leading to a clash between democracy and capitalism. We are seeing setbacks in both. And at the same time, we are starting to see a change in values. Thanks to technology, there is more transparency about the impact of companies. Capitalism hasn’t changed in over 200 years, but now it is. We are bringing the soul to the markets. We can no longer only optimize the risk-return binomial. You have to optimize the impact. And that has very profound implications for the way that investors invest and companies operate.
Q. Is it really getting better? Despite being considered very polluting, the benefits of oil companies and their shares on the Stock Market are at maximums.
R. I have spent my life in the investment business and sitting on the boards of large institutions. You have to distinguish the cycle from the trend. There is a very clear trend towards renewable energy and away from fossil fuels. Even fossil fuel producers are investing heavily in renewable energy. And then you have the Ukraine war, which creates its own cycle and affects oil prices. The two things cannot be confused. We are moving away from pollution because you can see the droughts, you can see the fires, you can see the famines, and you can see all the consequences of climate change very clearly. And consumers, particularly the younger generation, were the first to say: this can’t go on, we’re not going to buy the products of bad companies and we’re not going to work for them. They want something more than working in a company dedicated to an activity that does not improve people’s lives or the environment to earn a salary with which to survive. They want meaning for their lives. Just as my generation when I was at Dartmouth was idealistic, I think the current generation, the millennials and those who have followed them, are also.
Q. Have you been surprised by any success stories?
R. Let’s take the example of Tesla. If he had just come along and said, “I’m going to create a new car that’s going to go faster with a combustion engine.” Would he have had a chance to break into the auto industry? Zero chance. By making an impact, by saying, “I’m going to deliver a car to those who are concerned about the environment, a vehicle that won’t pollute and, by the way, will perform as well or better than the rest,” Elon Musk, with all his idiosyncrasies, created the company. The trillion-dollar stock market value that it reached in 20 years and made it worth more than its five competitors combined pushed the entire auto industry away from contamination. And we are going to see this happen again and again in all sectors. Wherever a company generates a negative environmental or social impact, competitors will outpace it with new technologies that do not generate these negative consequences. And the most valuable will be those that provide solutions to big problems. If we look at what is happening with renewables, their valuation is skyrocketing because they will be the future. Could it be hydrogen? Will they be nuclear? Is it a new form of solar energy and batteries that allow us to store water? The technology and impact that come together today will be as big a revolution as the one brought by the microchip.
Q. That raises a question for me: does Musk create an electric car to improve the world or because he sees a niche to make more money? Although perhaps the result matters more than the reason.
R. I don’t know Musk. I have never talked with him. But you don’t do something like raise $150 million in venture capital just because you think it’s a way to make money. You do it because it is profit with a purpose. The two things cannot be dissociated. Musk wanted to show that you can have a green car and make money at the same time. And those are the new rules of the game. We are going to see it in finances. Banks have been growing over the centuries, but they don’t do the socially correct thing most of the time. Sometimes they charge more interest to the most vulnerable, simply because they are too weak to refuse, not because it is justified. So new digital platforms are coming in that say, okay, we’re going to provide credit at the right price. And this is how the banking model will change. Large companies that understand this change, embrace it, and start thinking about how entrepreneurs are going to threaten them, will be able to stay ahead. But those who don’t realize it will be outpaced by competitors, just as IBM was with Apple and Microsoft.
Q. Is the war in Ukraine a threat to that progress you are talking about?
R. The geopolitical risk that we are beginning to see makes me very uncomfortable. When you see the way that Russia has behaved towards Ukraine, the way that Iran seeks to have its own nuclear weapon and its desire to destroy Israel and, you know, use religious fundamentalism to guide its government policies. When you see China more or less aligning itself with Russia and Iran… I am uncomfortable with the stability of the world. And we are not living in a time when we have an abundance of great political leaders who are farsighted.
Q. He insists a lot on the importance of measuring impact.
R. Investors want profit and impact, but there is no transparency about the impact, and that will be the tipping point between the capitalism we have done so far and the capitalism that is coming. Because the impact will guide the behavior of companies, because transparency will allow consumers to make decisions that will affect the profitability of a company and will allow investors to make similar decisions. It will give governments the transparency to provide incentives and disincentives. We talk about the carbon tax because the data is available. We may also talk about tax credits for companies that are having a positive impact on society. Why shouldn’t we be able to finance someone who wants to improve their life in the same way that we finance someone who wants to make money? That got me going on the journey. That brings me here to Madrid today. It is a decisive moment, and investment in impact will help to close the social gaps, because many of them arise from the labor behavior of companies, be it with gender, ethnicity or salary.
Q. If the system does not change, is there a danger of a populist rise?
R. Democracy, like capitalism, is based on freedom. On the one hand, the freedom to lead your life as you want, and on the other, the freedom to compete with other companies within the law. But where democracy and capitalism collide is in the distribution of capital and work, which reaches more to the most educated. And this is a balance that we must restore. The salary of a CEO is 400 times that of an average employee in the US These gaps cannot be sustained. They create a feeling that democracy is not working for them. People rebel and believe the promises of populist leaders who tell them: “democracy doesn’t work for you, trust me as your protector, I’ll make sure you get your fair share”. That leads us to unscrupulous, undemocratic governments that do not distinguish between the truth and false hopes. We have already seen this in many countries around the world. For example, Donald Trump speaks the language of the electorate. Voters are looking for someone to look up to because he has been successful thus far. And so they blindly follow him, regardless of whether he complies or not. It’s like a soccer team. If you are a Barcelona fan, you must continue to be so through thick and thin. And social networks play a role in that.
Q. Let’s end with a jump to the future and another to the past. What advances can we see in this impact movement in the next decade?
R. I would say that before the end of this decade we will see many companies, perhaps most, publish an impact statement as part of their financial statements. That in its results the expenses, income and the operational impact on the environment, employment, people or supply chains will appear. And we’re going to see over the next two, seven or eight years, a lot of new companies with new technologies breaking through and threatening today’s business models that have negative impacts.
Q. Now let’s go back, in 2001 he was Knighted for being a pioneer of venture capital in Europe. How was the?
R. In 1957 I arrived as a refugee, and in 2001 I was being knighted. My father, unfortunately, had passed away, but for my mother it was a huge, huge thing. You go to the palace and they allow you to bring three people with you. My wife and two children came. There is a procession, with all the pomp you just saw at the coronation, but on a small scale. And then there’s a stool where you kneel in front of the Queen (at the time Elizabeth II), who knights you with a sword. And you care about your ears. (Laughs) Then, when she has already knighted you, you shake her hand and she has a few words with you. And then you leave. If you now ask me what the title did for me, I would answer that perhaps to get a slightly better table in the restaurant.
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