2020

The Current State and Challengesof Impact Investing in Japan
FY2020 Survey

March 31, 2021

The Japan National Advisory Board, The Global Steering Group for Impact Investment(GSG- NAB Japan)

Introduction

About This Report
Report authors and survey team
Secretariat, GSG-NAB Japan / Japan Social Innovation and Investment Foundation (SIIF) Michiru Toda,
Noriko Tadate, Yukina Uchiyama, Satoshi Oda, Fumi Sugeno
About GSG-NAB JapanThe GSG is a global network, with 33 nations plus the EU as members, which aims at promoting impact
investing in partnership with ﬁnancial institutions, governments, international organizations, businesses,
and other entities around the world. GSG-NAB Japan was established in 2014 as GSGʼs national advisoryboard in Japan. It contributes to the development of the market and ecosystem for impact investing incollaboration with practitioners and experts in diverse ﬁelds, including ﬁnancial, business, social, andacademic institutions. GSG-NAB Japanʼs activities revolve around three pillars of: research and publication, awareness-raising, and networking.
Positioning of this report
This report summarizes the current state of impact investing in Japan for the purpose of promoting it
domestically. It has been published under the supervision of GSG-NAB Japan every year since 2016,
reporting the current state of impact investing in the country both online and in print.
The main part of the report presents the impact investment balance in Japan1 based on Questionnaire
Survey results. It also provides examples of institutions engaged in impact investing, along with trends inthe ﬁeld in Japan as derived from the questionnaire.
Acknowledgements
We would like to express our appreciation to everyone who cooperated in the questionnaire, interviews
and the preparation of this report, particularly to K-three Inc., which participated as an advisor, and to
Researchworks Corporation, the company that administered the collection of responses.
Sponsor and copyrights
This report was created by the Social Innovation and Investment Foundation under the supervision of the
GSG-NAB Japan. The copyrights of this report belong to the Japan Social Innovation and Investment
Foundation. This report may not be edited, duplicated, published, or reproduced without permission.

1 Please note that what is presented is based only on the results of the Questionnaire Survey; the ﬁgures are not strict market estimates.

1

2

Table of Contents

Table of Contents
Executive Summary

6

About GSG Headquarters and the GSG-NAB Japan18

About Consolidating Terms Related to Impact Investing

20

Chapter 1 : What Is Impact Investing?

22

Impact Investing Concept and Summary

22

Background and History of Impact Investing

24

Scale and Trends in International Impact Investing

27

Other Trends in Impact Investing

31

Column 1 : Impact Investing Information Hubs in Japan and Overseas

36

Chapter 2 : Impact Investing Market in Japan

38

Survey Method

38

Inclusion Criteria

39

Impact AUM

45

List of Institutions That Make Impact Investing and Investment Cases

46

Questionnaire Survey Result

48

Features of Organizations That Responded to the Questionnaire Survey

48

Progress and Challenges of Impact Investing in Japan

51

Japanʼs Impact Investing Activities

59

Status of Impact Measurement and Management in Japan

70

Return and Impact of Impact Investing77

Summary: Vision of Impact Investing in Japan Based on Questionnaire Survey Result

80

List of Organizations Which Responded to Questionnaire Survey

81

Potential of Japanʼs Impact Investing Market ‒ Estimated Maximum and Methodology ‒82

Column 2 : Introduction of International Impact Investing Surveys

86

Impact Investing Case Studies

87

Sumitomo Mitsui Trust Holdings, Inc. and Sumitomo Mitsui Trust Bank, Limited

87

Kamakura Investment Management Co., Ltd.

95

3

Contributed Articles : Topics in Impact Investing

100

Main Issues for Impact Investing in Japan

102

Impact Investing and IMM

107

Impact Investing from a Startupʼs Point of View

113

Afterword : Editorsʼ postscript

117

4

List of Figures

Figure 1

Spectrum of impact investing

Figure 2

Scale of impact investment balance

10

Figure 3

Stages of Japanʼs impact investing market evolution

11

Figure 4

Stages of the international impact investing market evolution

11

Figure 5

Motivation for engaging in impact investing

12

Figure 6

Progress of Japanʼs impact investing market over the past one year

13

Figure 7

Challenges facing businesses that aim to increase impact investing

14

Figure 8

Examples of case studies selected and reasons for their selection

15

Figure 9

Three-dimensional assessment of risk, return, and impact

22

Figure 10

Diﬀerence between ESG investing and impact investing

23

Figure 11

Flow of funds to SDGs

24

Figure 12

History of impact investing in the world and Japan

26

Figure 13

Share of impact investment balance by institution (end-2019)27

Figure 14

Investee share by region

28

Figure 15

Share of impact investment balance by asset class28

Figure 16

Sectors of investees

29

Figure 17

Examples of international principles for impact investing30

Figure 18

Trends in the establishment of new governmental study groups related to impact

31

6

investing since 2020
Figure 19

Awareness of impact investing

34

Figure 20

Actual interest in impact investing

34

Figure 21

Areas of interest for impact investing

35

Figure 22

Terms related to impact investing40

Figure 23

Scale of impact AUM

45

Figure 24

List of organizations that are engaged in investment equivalent to impact investing46

judged from the responses to the questionnaire survey
Figure 25

Number of institutions that responded to the survey in analysis subgroups (n) and48

their ratios to the total number of institutions that responded to the survey (%)
Figure 26

Industry type of all organizations that responded to the questionnaire survey

49

Figure 27

Industry type of organizations engaged in impact investing49

Figure 28

Year in which organizations began engaging in impact investing50

Figure 29

Motivation for engaging in impact investing51

Figure 30

Stages of Japanʼs impact investing market evolution

52

Figure 31

Stages of the international impact investing market evolution

52

Figure 32

Progress of Japanʼs impact investing market over the past one year

53

Figure 33

Challenges facing businesses that aim to increase impact investing55

Figure 34

Conditions that facilitate impact investing57

Figure 35

Changes within an organization from the year before in relation to impact investing59

Figure 36

Total impact AUM and asset manager AUM and the number of investments made60

5

Figure 37

Impact AUM, asset manager AUM and the number of investments made by repeat

60

responding institutions
Figure 38

Proportions of impact AUM and asset manager AUM

61

Figure 39

Proportions of the number of impact investing made61

Figure 40

Asset classes of impact investing62

Figure 41

Impact investments by asset class: International comparison

63

Figure 42

Impact investees by organization type63

Figure 43

Impact investees by stage of business

64

Figure 44

Impact investees by stage of business: International comparison

65

Figure 45

Impact investees by region

65

Figure 46

Impact investees by sector

66

Figure 47

Impact investees by sector: International comparison

67

Figure 48

Impact investing institutionsʼ plans for future impact investment

68

Figure 49

Impact investing institutionsʼ plans for future impact investment (by sector)

69

Figure 50

Tools and frameworks used in impact measurement

71

Figure 51

Purpose of using tools and frameworks

72

Figure 52

Types of measurement metrics adopted for implementation of impact investing72

Figure 53

Utilization method of impact measurement results

73

Figure 54

Information disclosure regarding impact investing73

Figure 55

Impact measurement linked to SDGs

74

Figure 56

Reasons for linking impact measurement with SDGs

75

Figure 57

Method of linking impact measurement with SDGs

75

Figure 58

Expected level of ﬁnancial returns

77

Figure 59

Rate of achievement of ﬁnancial returns

78

Figure 60

Rate of achievement of impact

79

Figure 61

List of organizations which responded to questionnaire survey

81

Figure 62

Scale of impact investment balance

82

Figure 63

Market estimate methodologies of GIIN and IFC (for reference)

85

Figure 64

Case study examples selected and reasons for selection

87

Figure 65

Global impact investment amount by asset class88

Figure 66

Eﬀorts of Sumitomo Mitsui Trust Holdings, Inc. for sustainability

89

Figure 67

Principles for positive impact ﬁnance

90

Figure 68

UNEP FI Impact Radar

92

Figure 69

Examples of information disclosed to investors by Kamakura Investment Management

98

Figure 70

Basic pattern of Impact Finance

103

Figure 71

From Oxford Impact Measurement Programme, Karim Harji

108

Figure 72

Operation principles for impact investing

109

Figure 73

Explanatory materials for the SDG impact standards

110

Figure 74

GSG vision of expansion and deepening of impact investing

112

6

Executive Summary

Executive Summary
This yearʼs report presents the current state of impact investing in Japan. It is for the purpose of sharing
information for the promotion of impact investing in the country and has been published under the supervision of GSG-NAB Japan.
“Chapter 1 : What Is Impact Investing” deﬁnes impact investing in general terms, goes over its history
globally, presents the background to its development in Japan, and summarizes challenges from recent years.
In accordance with the deﬁnition of the Global Impact Investing Network (GIIN), impact investing refers
to investing activity that is intended to generate a positive, measurable social and environmental impact
alongside ﬁnancial returns.

Figure 1. Spectrum of impact investing
Impact investment

ESG investment
Regular investment （Negative screening）
Financial Only

Responsible

Regular donation（Positive screening）

Sustainable

ImpactImpact Only

Investment in companies/projects capable ofgenerating market-competitive ﬁnancial returns
Providing investment and funding focused on ESG considerations and mitigating risk
Providing investment and funding for companies/
projects actively engaged in ESG initiatives
Providing investment and funding for companies/
projects for which social impact can be ascertained
for the purpose of solving social issues
With market-competitive
economic returns

Conventional
investment
style aimed at
economic
returns
No active
interest in
ESG

Investment stylefocused on ESG
considerations
and risk
mitigation fromthe standpointof not damaging
corporate value
and not only on
ﬁnancial returns

Investment
style thatemphasizes
he ESG fromthe standpointof increasing
value

Generating
market-competitive
economic
returns toinvestors while
simultaneously
providing social
impactWith economic returns
lower than market rates

Generating
economic returns
while simultaneously providing
social returns
Economic returns
may be below
regular market rates
in some cases

Source: Position Paper on Expanding Impact Investing 2019 (GSG-NAB Japan)

Generating
economic returns
while
simultaneously
providing social
returns
Economic returns
below regularmarket rates

Economic returns
not intended /Only social returns

Helping tosolve social
problems
Providingeconomic
returns toinvestors is not
the objective

7

The following are some of the notable trends observed in impact investing in Japan and overseas in 2020.
① More activities by governmental study groups related to impact investing (Financial Services Agency,
Ministry of the Environment, Ministry of Economy, Trade and Industry, etc.)② Major Japanese life insurer enters impact investing sector③ Issue of Japanʼs ﬁrst sustainability-linked bond
④ Japanese credit card company to begin impact investment in Southeast Asia
⑤ Keidanren (Japan Business Federation) announces new growth strategy with a basic philosophy ofsustainable capitalism.
⑥ Establishment of impact investing trust company by Big Society Capital and Schroders of the UK.
⑦ Creation of SDG Impact program“Chapter 2: Japanʼs Impact Investing Market” analyzes the responses to the Questionnaire Survey
regarding Impact Investment (2020); it is the main part of the report. It ﬁrst describes the survey methods
and the inclusion criteria used by the survey for whether an investment counts as impact investing. The
chapter then presents the impact investment balance in Japan based on the questionnaire and thecompiled results of the responses, and, lastly, summarizes the impact investing market in Japan, deﬁnes
its current state, and identiﬁes related challenges. The report includes a new initiative started this year. In
addition to the conventional questionnaire, a survey of market estimates based on public information has
been conducted to calculate the estimated maximum (potential) of Japanʼs impact investing market.
Details on the survey method are provided in the body of the report.

8

Executive Summary

Summary of survey method- The survey was conducted over the months from September to December 2020.
- 591 surveys were distributed and 75 were collected for a response rate of 12.7%. It was mainly distributed
to institutional investors and ﬁnancial institutions.

Deﬁnition of “impact investing” used by the questionnaire
The deﬁnition of “impact investing” used for the Questionnaire Survey and presented to respondents includes both of the following.
■ Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a ﬁnancial return (＊1）2＊1 Any ﬁnancial transactions, including investments (stocks and bonds), loans, leases, among others, that seek
monetary returns are collectively called “investments.” Donations, subsidies, and grants are excluded.

■ Impact measurement (＊2) is conducted before and after making investments (who does
the post-investment measurement does not matter)＊2 Impact measurement is designed to quantitatively and qualitatively identify social and environmental impacts to add

a value judgment to a business or activity (e.g., so that the judgment is used as a reference point for an investment
decision, regular monitoring and/or dialogue with each investee company during an investment period, and/or post-investment reporting).

Notes:• Not a strict market estimate
The survey results are the aggregate of responses to the questionnaire returned by mail or inelectronic form. They do not qualify as an estimate of the size of the impact investing market
in a proper sense.
• Responses are self-reported, in principle
Like the GIIN Annual Impact Investor Survey, responses are self-reported by the respondingorganization, and incomplete responses are supplemented with an additional interview (byemail or telephone).
• Data cleansing and accuracy
The survey team removed or corrected responses that contained an inconsistency or misunderstanding to the full extent possible and took great care to prevent double counting ofbalances. These eﬀorts, however, do not guarantee complete accuracy.

9

Inclusion criteria applied to impact investment balances
While the responses to the Questionnaire Survey were self-reported ones, impact investment balanceswere classiﬁed to be included or excluded based on responses to the questions that asked about criteria
for impact investing. The inclusion criteria, which have not changed since the FY 2019 Survey, consist of① to ③ below, and all of them must be met.

① The responding organization is a corporation based in Japan.
This Survey is on impact investing in Japan. Hence, responding organizations must be corporations based in Japan. Note that the investee companies may be located outside of Japan.
If a respondent is a multinational corporation, its responses must be about impact investing
activities by its incorporated Japan oﬃce.
② The responding organization uses output and/or outcomes as metrics for impact measurement.
This yearʼs Survey, just as the FY 2019 Survey, did not specify what must be measured abouta business, including whether the measurement of business outcomes was a requirement
and whether output measurement alone would do. Since there is no international standard
for metrics that all countries follow, what should be included in the measurement will continue to be explored.
③ The responding organization conducts impact measurement before making an investment decision and after making the investment.
Measurement before an investment decision is made must be conducted by the investor
organization, an investment manager, investment fund provider, or an outsourced third-party
assessment organization. Post-investment measurement may be conducted by any qualiﬁed
person, such as a ﬁnancial intermediary (e.g., a securities ﬁrm) other than those statedabove, bond issuer, or business operator that receives the investment or loan.

2 This expression has been revised from the 2019 survey in accordance with the GIIN Annual Impact Investor Survey 2020.

The GIIN questionnaire survey deﬁnes the term as “Impact investments are investments made with the intention to generate positive,

measurable social and environmental impact alongside a ﬁnancial return. They can be made across asset classes, in both emerging

and developed markets, and target a range of returns from below market to market rate, depending on the investorsʼ strategic goals.”
The underlined portion was presented on the questionnaire form and the remaining portion was included in the explanatory information included with the form.

The deﬁnition used for the FY 2019 survey was, “Impact investing refers to investment behavior that is intended to solve social and/or

environmental issues while pursuing ﬁnancial returns. It conducts impact assessments, including impact measurement, before andafter making investments.”

10

Executive Summary

Impact investment balance
The results of the Questionnaire Survey and the subsequent market estimate survey are compiled and thescale of Japanʼs impact investing presented quantitatively with three types of ﬁgures.
1. Impact investment balance, as ascertained by the Survey Questionnaire: 512.6 billion yen*This ﬁgure is calculated using the same method as previous yearsʼ surveys and reports.

The ﬁgure is the sum of the investment balances of the 26 organizations that responded to the Questionnaire Survey regarding Impact Investment (2020) and met the aforementioned inclusion criteria for impact
investments based on self-reporting. Which is to say, the ﬁgure represents the sum of investment balances for investments recognized as impact investing and for which impact measurement was conductedboth before and after investing.
2. Of the impact investment balance ascertained by the Questionnaire Survey, the balance of investments for which the impact measurement has been shared with investors: 328.7 billion yen
This ﬁgure is the sum of investment balances based on the Questionnaire Survey (1. above) for which
direct investment has been made by the investor or the measurement has been shared with the ﬁnal
investor by an intermediary. In order to ensure it is the intention of the ﬁnal investor to create an impact
in cases in which the intermediary is the one that makes the impact measurement, sharing the results ofthe measurement with the ﬁnal investor is thought to be necessary.
Reference ﬁgure: Marketʼs estimated maximum (potential): 2.64 trillion yen
This ﬁgure includes the sum of investments ascertained by the Questionnaire Survey and the sum of theamount of money originating in products for which the elements of impact measurement are embedded to
set impact KPIs and conduct the measurement before and after investing as found in publicly available
information. This ﬁgure does not necessarily indicate that investors intentionally implement as impact
investing. For details, refer to the “Market Estimate Survey” section below.
Figure 2. Scale of Impact Investment BalanceMarketʼs estimated maximum (potential)

Reference:
Marketʼs estimated maximum

2.64 trillion yen

1. Ascertained by
the questionnaire

Estimated maximum of potential impact investments. This ﬁgure includes thesum of investments ascertained by the Questionnaire Survey and the sum of
the amount of money originating in products for which the elements of impact
measurement are embedded to set impact KPIs and conduct the measurement before and after investing as found in publicly available information. Thisﬁgure does not necessarily indicate that investors intentionally implement as
impact investing.（Details are in the “Market Estimate Survey” section below）

Impact investing balance ascertained by the Questionnaire Survey

512.6 billion yen

Sum of investments that meet the inclusion criteria for impact investing basedon questionnaire responses; in other words, investments conﬁrmed as impact
investments for which impact measurement is conducted before and afterinvesting.（Details are in the “Questionnaire Survey” section below）

2. Sharing of
impactmeasurement

Impact investment balance derived from the questionnaire forwhich the impact measurement has been shared

328.7

billion yen

This ﬁgure is the sum of investment balances based on the Questionnaire
Survey for which direct investment has been made by the investor or forwhich the details of the impact measurement have been shared with the ﬁnal
investor by an intermediary.

11

According to the results of the Questionnaire Survey (FY 2020), the total of Japanʼs impact investment
balance and trust management balance as of the end of the immediately preceding ﬁscal year wasapproximately 512.6 billion yen. The impact investment balance as ascertained in the same survey theprevious ﬁscal year (FY 2019) was 317.9 billion yen, so major progress has been made. While at the sametime, with regard to the evolution of impact investing in Japan, a majority of institutions engaged in impact
investing see the market as “about to take oﬀ” (Figure 3). It was found then that compared to the international impact investing market, which is viewed as “growing steadily,” the growth is yet to come in Japan(Figure 4). The evolution of Japanʼs impact investing market was conﬁrmed to be a stage behind the international market and set for growth in the near future.

Figure 3. Stages of Japanʼs impact

Figure 4. Stages of the international

investing market evolution 3

impact investing market evolution

n=24
79%

21%

In its infancy

n=290

9%

About to take oﬀ

21%

Growing steadily

69%

Established/Mature

2%

Saturated

0.3%

Declining

Source: These ﬁgures have been created based on Questionnaire Survey regarding Impact Investment (2020)(GSG-NAB Japan) and GIIN Annual Impact Investor Survey 2020. ‒ Question: “D5. How do you see the state ofJapanʼs impact investing market? Please select the answer that most accurately describes your view. (Single
Answer, hereafter “SA”)”

3 Figure 3 shows the results of responses only from the organizations that have taken actions to meet the requirements for inclusion
in impact investing stated earlier. The organizations that provided no answer at all were not counted.

12

Executive Summary

Regarding the motivation for impact investing, the most common response was “We are responding to theclient demand,” and second was “They are part of our commitment as a responsible investor.” Thissuggests that Japanʼs impact investing market is poised for further growth going forward (Figure 5).
Figure 5. Motivation for engaging in impact investing 4■ Very important ■ Somewhat important ■ Not important78%

We are responding to client demand
They are part of our commitment

It is central to our mission to intentionallypursue impact through our investments
They are an eﬃcient way

to meet our impact goals

They contribute to a global agenda, such as

They are ﬁnancially attractive relative toother investment opportunities

They provide an opportunity to gain exposure
to growing sectors and geographies
They oﬀer diversiﬁcation

We do so to meet regulatory demands

59%

41%

22

55%

45%

22

17%

22

55%

44%

50%

6%

18

41%

55%

5%

22

31%

to our broader portfolio

18

33%

45%

the UN SDGs or the Paris Climate Accord

18

22%

67%

as a responsible investor

n=

50%
42%

19%
42%

16
12

Source: This ﬁgure has been created based on Questionnaire Survey regarding Impact Investment (2020)(GSG-NAB Japan) ‒ Question: “D4. How important are each of the following in terms of motivating your organization to engage in impact investing? (SA)”At the same time, while most respondents view Japanʼs impact investing market as having progressedover the past year in “actions inspired by the Principles for Responsible Investment, SDG Impact (UNDP),
and the Operating Principles for Impact Management (IFC),” among others, and in “the publicʼs awareness of and interest in impact investing” (Figure 6), “fragmentary and unsystematic approaches to impact
measurement and management” was cited as a challenge going forward both by institutions alreadyengaged in impact investing and those considering entering the market in the future (Figure 7). After
impact measurement and management, the next two most commonly cited challenges were “a limited
number of impact companies to invest in” and “limited availability of professionals capable of helping
impact companies make proﬁts and exit.” It can be assumed that the latter is also an underlying factor for
the former. The responses made it clear that Japan still has relatively few impact companies that investors
wish to invest in (Figure 7). Also, as the market grows, there is a danger that the essential nature of impact
investing will be lost and it will become “impact washing,” which is when regular investments are dressed

4 Figure 5 shows the results of responses only from the organizations that have taken actions to meet the requirements for inclusion in
impact investing stated earlier. The organizations that provided no answer at all were not counted.Some items do not sum to 100%due to the processing of decimal points.

13

up to resemble impact investments. In fact, Figure 12 in the GIIN Annual Impact Investor Survey 2020 5(GIIN Survey 2020 hereinafter) shows that a vast majority of impact investors cite impact washing as the
single most important issue that the impact investment market will face over the next ﬁve years.
Figure 6. Progress of Japanʼs impact investing market over the past one year 6■ Signiﬁcant progress ■ Some progress ■ No progress ■ Worsenedn=Actions inspired by the Principles for Responsible
Investment, SDG impact (UNDP), and the Operating
Principles for Impact Management (IFC), among others

5%

90%

5%

20

The publicʼs awareness of and interest in impact investing

5%

86%

9%

22

Top managementʼs interest in
and understanding of impact creation
Each companyʼs stakeholdersʼ interest and engagement(e.g., asset owners, shareholders, investors)

84%
5%

79%
69%

Incentive plans for start-ups(including impact companies)
Increasing impact investments
through venture capital (VC) and private equity (PE)Eﬃcient use of external resources for impact investing
Establishment of impact measurement and management
as rules and common practice
Establishment of companiesʼ internal systems
for impact investing

5%

16%

19
13
17

35%

42%

53%

19

47%

53%

15

37%

Greater availability of detailed information about impact
companies and investment products for impact investing

19

31%

65%
5%

16%

41%

58%

19

59%

17

Exit strategies and other means of exit than IPO
as common practice

33%

67%

15

Accumulating examples and data
about impacts and returns

33%

67%

15

Certiﬁcation/Labeling systems
by public/third-party institutions

27%

73%

15

Introduction of diverse investment methods and deals(e.g., listing class shares)

25%

75%

16

Philanthropy or public funds as an incentive
to encourage impact investing

21%

Greater availability of professionals capable of helping
impact companies make large proﬁts and exit

13%

Incentives for impact investing provided by
the government and/or municipalities (e.g., a tax break)

71%

7%

87%
100%

14
15
14

Source: This ﬁgure has been created based on Questionnaire Survey regarding Impact Investment (2020) (GSG-NAB
Japan) ‒ Question: “D12. How do you view the progress that Japanʼs impact investing market in general has made overthe past one year? (SA for each statement)”

5 GIIN Annual Impact Investor Survey 2020 (https://thegiin.org/research/publication/impinv-survey-2020) Unless otherwise noted
below, “GIIN Survey 2020” refers to this source.

6 Figure 6 shows the results of responses only from the organizations that have taken actions to meet the requirements for inclusion
in impact investing stated earlier. They are presented in descending order based on the combined percentage of “signiﬁcantprogress” and “some progress.” The organizations that provided the answer “We donʼt know/NA” or no answer at all were notcounted. Some items do not sum to 100% due to the processing of decimal points.

14

Executive Summary

Figure 7. Challenges facing businesses that aim to increase impact investments 7■ Of all respondents（n=69）■ Institutions engaged in impact investing（n=24）■ Institutions not engaged in impact investing（n=45）45%Fragmentary and unsystematic approaches to
impact measurement and management

63%

36%

Limited availability of professionals capable ofhelping impact companies make proﬁts and exit

32%
29%
33%

Limited data on potential impact investee companies
and investment products

32%
33%
31%

A limited number of impact companies to invest in

30%

21%

19%

Limited preferential treatment for impact investing16%

Lack of an eye for impact companies on
the part of fund providers(i.e., asset owners, asset management companies)

8%

Limited options for exit strategies that make itdiﬃcult to calculate expected return on investment

8%

18%
13%
6%
12%

7%

Limited returns considering the eﬀorts needed for
impact investing, which makes it diﬃcult to incorporate
the investing into a major part of performance evaluation

10%
8%
11%

0%

Diﬃculty of increasing impact investments
due to the constraints of ﬁduciary responsibility

0%

0%

25%

14%

Limited investment methods and means available
for impact investing

A limited number of impact companies
other than start-ups

36%

21%

6%
9%
3%
4%

10%

20%

30%

40%

50%

60%

70%

Source: This ﬁgure has been created based on Questionnaire Survey regarding Impact Investment (2020) (GSG-NAB
Japan) ‒ Question: “D6. What do you think is the problem when Japan plans to increase impact investing going
forward? (Multiple Answer, hereafter “MA”, up to 3)”“Impact Investing Case Studies” presents examples from institutions engaged in impact investingthat are indicative of recent trends. Refer to the body of the report for details.

7 Figure 7 does not include invalid responses that had selected four or more answers, as respondents were asked to select up to three.

15

Figure 8. Examples of case studies selected and reasons for their selection

Name of institution

Sumitomo Mitsui
Trust Holdings, Inc.
and
Sumitomo Mitsui
Trust Bank, Limited

Kamakura Investment
Management Co., Ltd.

MethodReason for selection• Suggests the potential of impact investing in
debt ﬁnancePositive Impact
Finance• Importance placed on creating a positive impact
in the companyʼ s stated purpose (reason forbeing, objectives) and management strategy(medium-term management plan, value creation
model)
Exchange-tradedfunds• Investment in listed stock tied to impact

There are two feature columns in this report. “Column 1: Impact investing information hubs inJapan and overseas” highlights organizations and networks that promote impact investing inside andoutside Japan, and “Column 2: Overview of international impact investing surveys” provides information on the two international impact investing surveys referred to in creating this report, GIIN
Annual Impact Investor Survey 2020 and IFC Growing Impact.
The “contributed articles” at the end of the report take up important topics related to the promotion of
impact investing in Japan and present the opinions of leading ﬁgures and specialists in various areas. The
opinions expressed in these articles belong to the contributors and interviewees; they do not represent theoﬃcial views of their aﬃliated organizations or the GSG-NAB Japan.

List of topics and contributors▶ PAGE 102

Main Issues for Impact Investing in Japan
Takeshi Mizuguchi, Professor, Faculty of Economics, Director and Vice-President, Takasaki City University of Economics

Professor Takeshi Mizuguchi chairs both the Study Group on Impact Investment, which is co-organized by
the Financial Services Agency and GSG-NAB Japan, and the Positive Impact Finance Task Force, established by the ESG High-Level Panel and administered by the Ministry of the Environment. In this article,
he identiﬁes key points of debate from among the issues discussed by both these groups and summarizes
them with reference to his personal views. Professor Mizuguchi also serves as chair of the Expert Panelon Sustainable Finance8 established by the Financial Services Agency.

8 https://www.fsa.go.jp/singi/sustainable̲ﬁnance/index.html

16

Executive Summary▶ PAGE 107

Impact investing and IMM
Katsuji Imata, President, Social Impact Management Initiative,
Co-CEO, Blue Marble Japan, Inc.

The article introduces impact measurement and management (IMM), a basic concept of impact investing,and explains why it is necessary in IMM to ask “why” and “what” before considering “how.” It also discusses the importance of intentionality and practical standards for impact investing and explains diﬀerent
approaches as the ﬁeld continues to evolve. Finally, Mr. Imata suggests promoting IMM as the best of themeasures that are needed to bring the thinking and practice of impact investing into the mainstream.
▶ PAGE 113

Impact investing from a startupʼs point of view
Yoshiaki Ishikawa, Director, CFO, and Impact Oﬃcer, Life is Tech, Inc.

This article summarizes Mr. Ishikawaʼs thoughts on impact investing and business practice from thestandpoint of an education startup that is promoting its business together with an impact investor. It
conveys the views of a frontline participant on the signiﬁcance of impact measurement as a form of R&D,
relationships with investors who are partners in impact generation, and prospects for the future of impact
investing as gleaned from interactions with the younger generation.

Summary conclusion
The coronavirus ran rampant through the year of this survey and report, FY 2020, but it also seems
simultaneously to have furthered understanding of the usefulness of impact investing. In fact, in thisyearʼs Questionnaire Survey, institutions engaged in impact investing were asked about the impact of
COVID-19 on impact investment activities. The question was open format, and the responses included comments such as “It has shined more light on the ʻsocialʼ factor, and conditions are becoming
more conducive to impact opportunities,” and “The emergence of social issues has made more people
aware of it.”
There is likely to be more discussion and practice of impact investing in Japan going forward, and webelieve that this report, a kind of ﬁxed-point observation of the current location of impact investing in
the country, can serve as a foundation for discussion while providing suggestions for practice.
We would like to again express our appreciation to all of the people and organizations that participated in the Questionnaire Survey regarding Impact Investment (2020).It is our hope that this reportcontributes to solving social issues through impact investing.

18

About GSG

About GSG Headquarters and the GSG-NAB Japan
About the Global Steering Group for Impact Investment
The Global Steering Group for Impact Investment (GSG) is a global network organization that promotes
impact investing having a better inﬂuence on people and the earth. The “G8 Impact Investment Taskforce,” which was established in 2013 driven by the call of the former UK Prime Minister David Cameron,the then chair of Group of Eight (G8) summit, changed its name to GSG in August 2015. Currently, member
nations and region (EU) in 33 countries worldwide have joined the taskforce as each countryʼs National
Advisory Board. Sir. Ronald Cohen, a pioneer in venture capitals in the UK chars the taskforce, and leaders
in diverse ﬁelds, such as ﬁnance, business and philanthropy, have participated in GSGʼs activities.
About GSG-NAB Japan
GSG-NAB Japan was established in 2014 as the Japan Branch of GSG. It contributes to the developmentof the market and ecosystem for impact investing in collaboration with practitioners and experts in diverse
ﬁelds, including ﬁnancial, business, social, and academic institutions. GSG-NAB Japanʼs activities revolvearound three pillars of: research and publication, awareness-raising, and networking.
List of members
As at the end of January 2020, GSG-NAB Japan consists of the following members.
Chairperson
Hiroshi Komiyama

Chairman, Mitsubishi Research Institute, Inc.

Vice-chairperson
Masataka Uo

Founder and CEO, Japan Fundraising Association

Members (in the order of the Japanese syllabary)
Mitsuaki Aoyagi

Vice-chair of Executive Committee,
The Social Innovation and Investment Foundation

Tadahiro Kaneko

General Manager, Sustainable Business Promotion Department,
Sumitomo Mitsui Banking Corporation

Ken Shibusawa

Chief Executive Oﬃcer, Shibusawa and Company, Inc.

Tomoya Shiraishi

Director, Social Investment Partners

Satoshi Suzuki

Executive Oﬃcer, Mizuho Bank Ltd.

Miyuki Zeniya

Fellow, Head of Sustainable Finance Investment Planning Dept.,
The Dai-ichi Life Insurance Company, Limited

Chunmei Huang

Senior Director, Impact Investment Team, Shinsei Corporate Investment Limited

Masataka Fukao

CEO, Plus Social Investment Co., Ltd.

19

Takehiro Fujimura

General Manager, Corporate Sustainability & CSR Department,
Mitsubishi Corporation

Hiroshi Mikitani

Representative Director, Japan Association of New Economy

Mutsuya Mori

Vice President, Japan International Corporation Agency

Secretariat organizations
The following organizations are in charge of practical operations as the secretariat, including contact
point operations, planning and operation of meetings and events, and research and transmission of information (in the order of the Japanese syllabary).
• Asian Venture Philanthropy Network (AVPN)• Kazetotsubasa Co., Ltd.
• K-three Inc.
• The Social Innovation and Investment Foundation (SIIF)• Japan Fundraising Association

20

Glossaries

About Consolidating Terms Related to Impact Investing
While “impact investing” itself is a relatively new term, we would like to consolidate terms related to
impact investing before getting to the main text of this report.
“Impact investing” is deﬁned in this report and Questionnaire Survey regarding Impact Investment (2020)
as investing that meets both of the following conditions. This term is synonymous with “Social Impact
Investment,” which was used by GSG-NAB Japan until 2019.

• Impact investments are investments made with the intention to generate positive,
measurable social and environmental impact alongside a ﬁnancial return 9• Impact measurement is conducted before and after making investments (who does thepost-investment measurement does not matter)

Deﬁnitions of other terms related to impact investing are, in this report, as follows:■ “Impact” refers to social and/or environmental change or eﬀect as a result of a business or activity,
whether it is long- or short-term.
■ “Impact measurement” is the act of quantitatively and qualitatively identifying a social and environmental impact in order to add a value judgment to a business or activity.
■ “Impact management” is management that aims to achieve a greater impact by incorporating impact
measurement into the process of business operation in order to make improvements on a business and to
make decisions based on acquired information. When referring to both “impact management” and “impact
measurement,” “impact measurement/management” is used.
■ An “impact company” refers to a company oriented to creation of impact.

9 Any ﬁnancial transactions, including investments (stocks and bonds), loans, leases, among others, that seek monetary returns arecollectively called “investments.” Donations, subsidies, and grants are excluded.

21

About division between “social impact evaluation” and “impact measurement”“Social impact evaluation” has not necessarily been discussed in accordance with the trends of impact
investing. In 2016, with the “Working Group on Social Impact Measurement 10 ” of the Cabinet OﬃceʼsCouncil for Promotion of the Society of Mutual Assistance acting as a trigger, utilization of social impact
measurement was discussed with an aim to attracting private funds to solve social issues. Then, together
with the introduction of impact investing into Japan, impact investing and social impact measurement
have come to be connected. On the other hand, a diﬀerent term “impact evaluation” as causal research
exists in the evaluation ﬁeld. On another front, in actual discussions about impact investing, “impact
evaluation,” with “social” removed, may also be used to imply environmental impact in order to avoid thelimited recognition only in the scope of “social” though “impact” in impact investing includes both socialand environmental ones. In order to avoid confusion with the term in the evaluation ﬁeld, GSG-NAB Japan
employs the expression “social impact measurement” at present (same as in this report of Japaneseversion, while the English version uses the term “Impact Measurement and Management” in align withinternational terminology).
About “Impact Measurement and Management, IMM”
In the global context, a term “Impact Measurement and Management (IMM)” is commonly used as theterm corresponding to “social impact evaluation” used in discussions about impact investing in Japan 11.
Although this term literally means “measurement and management of impact,” the deﬁnition by GIIN is
the “repetitive process that includes identiﬁcation and examination of both positive and negative impact
of business activities on people and the earth, and on that basis, ﬁnds and practices ways to reduce negative impact and maximize positive impact while being consistent with your own objective 12.” Consolidationof concepts and terms is expected to progress going forward as impact investing in Japan develops.

10 “Working Group on Social Impact Measurement” of the Cabinet Oﬃceʼs Council for Promotion of the Society of Mutual Assistance:
https://www.npo-homepage.go.jp/kaigi/kyoujo-shakai/work-kaisai-h27#wg̲1

11 GIIN and IMP are striving to familiarize this term: https://thegiin.org/imm/ and https://impactmanagementproject.com/

12 Explanation of IMM by GIIN: https://thegiin.org/imm/ (The translation was made by the writer.) The original text is “Impact measure-ment and management includes identifying and considering the positive and negative eﬀects oneʼs business actions have on people
and the planet, and then ﬁguring out ways to mitigate the negative and maximize the positive in alignment with oneʼs goals. Impact
measurement & management is iterative by nature.” Please visit the GIIN website for further explanation.

22

Chapter 1

Chapter 1 : What Is Impact Investing?
Impact Investing Concept and SummaryDeﬁnition of impact investing

Figure 9. Three-dimensional assessmentof risk, return, and impact

In accordance with the deﬁnition of the Global
Impact Investing Network (GIIN), impact investing

Returnrefers to investing activity that is intended to generate a positive, measurable social and environmental

Impactimpact alongside ﬁnancial returns.
Conventional investing judges value on the two
metrics of risk and return. Impact investing refers toinvestments that add a third metric, impact, andRisk

intentionally pursue both social returns and ﬁnancial returns.

Source: SIIF Annual Report 2019 (SIIF)13

GIINʼs four key elements of impact investing
GIIN stipulates four key elements of impact investing.

Four Key Elements of Impact Investing
Stated in “Core Characteristics of Impact Investing” (GIIN)① INTENTIONALITY
Impact investments intentionally contribute to social and environmental solutions. Thisdiﬀerentiates them from other strategies such as ESG investing, Responsible Investing, andscreening strategies.
② FINANCIAL RETURNS
Impact investments seek a ﬁnancial return on capital that can range from below market rate
to risk-adjusted market rate. This distinguishes them from philanthropy.
③ RANGE OF ASSET CLASSES
Impact investments can be made across asset classes.
④ IMPACT MEASUREMENT AND REPORTING
A hallmark of impact investing is the commitment of the investor to measure and report thesocial and environmental performance of underlying investments.

13 Created based on Doing well by doing good (UBS, 2016).

23

There is a strong emphasis here on intentionality and evaluation, and these elements were strictly
checked again in this yearʼs survey.

Diﬀerence between impact investing and ESG investing
Impact investing is sometimes taken to be the same as ESG investing or as a subcategory of ESG investing, but in the deﬁnition used here impact investing and ESG investing partially overlap with one another.

Figure 10. Diﬀerence between ESG investing and impact investing

Impact investment
ESG investment
Regular investment （Negative screening）
Financial Only

Responsible

Regular donation（Positive screening）

Sustainable

ImpactImpact Only

Investment in companies/projects capable ofgenerating market-competitive ﬁnancial returns
Providing investment and funding focused on ESG considerations and mitigating risk
Providing investment and funding for companies/
projects actively engaged in ESG initiatives
Providing investment and funding for companies/
projects for which social impact can be ascertained
for the purpose of solving social issues
With market-competitive
economic returns

Conventional
investment
style aimed at
economic
returns
No active
interest in
ESG

Investment stylefocused on ESG
considerations
and risk
mitigation fromthe standpointof not damaging
corporate value
and not only on
ﬁnancial returns

Investment
style thatemphasizes
he ESG fromthe standpointof increasing
value

Generating
market-competitive
economic
returns toinvestors while
simultaneously
providing social
impactWith economic returns
lower than market rates

Generating
economic returns
while simultaneously providing
social returns
Economic returns
may be below
regular market rates
in some cases

Source: Position Paper on Expanding Impact Investing 2019 (GSG-NAB Japan)

Generating
economic returns
while
simultaneously
providing social
returns
Economic returns
below regularmarket rates

Economic returns
not intended /Only social returns

Helping tosolve social
problems
Providingeconomic
returns toinvestors is not
the objective

24

Chapter 1

ESG investment aims to reduce long-term risk and maximize returns (two-dimensional), while impact investing has the clear intention of solving a speciﬁc social issue (three-dimensional). Impact investing is expected
to play a large role in helping achieve the SDGs, which will not be possible with ESG investment alone.

Figure 11. Flow of funds to SDGs

Goal

Investor

Impactinvestment

Investment
managementcompany

Company

Business

Regulation/
policyGovernment/international institution

Source: Created by SIIF

Background and History of Impact Investing
Origin of the term “impact investing”
The term “impact investing” goes back to an international conference held under the leadership of theRockefeller Foundation in 2007. The term itself is relatively recent, but the emergence of the concept
itself is related to the history of the US and Europe. This section introduces the background and historyof impact investing in the world, as well as major event and key issues.
Emergence and development of impact investing in Europe
In Europe, the concept of social ﬁnance emerged in the late 1960s. The main ﬁnancial institutions
involved were Triodos Bank of the Netherlands, GLS Bank of Germany, Banca Etica of Italy, and The
Co-operative Bank of the UK. Established with a strong focus on the social nature of ﬁnance, such ﬁnancial institutions played a leading role in subsequently promoting impact investing as well, providing funds
from an early stage.
Impact investing in Europe then has over 50 years of history, but a major impetus for its growth wasestablishment of the Social Investment Task Force in 2000 under the leadership of Sir Ronald Cohen. This
led to the launch of various new foundations, groups, corporations, and other organizations primarily in
the UK dedicated to expanding the impact investing market, and related activities increased.
In the UK, Bridges Venture (now Bridges Fund Management) was established in 2002, the countryʼs ﬁrst
impact investing fund (for unlisted stock) that pursues returns equivalent to market levels, community
development ﬁnancial institutions were introduced, drawing on the experience of the US, and social25

investment tax 14 relief was enacted. In 2008, the Dormant Accounts Act was enacted, and in 2012, Big
Society Capital was established as a wholesale fund that provides funds in dormant accounts to
private-sector funds involved in social investment.
Emergence and development of impact investing in the US
In the US, the civil rights movement that began in the 1960s brought attention to ﬁnancial inclusion andthe need to prevent ethnic minorities and people in poverty from being excluded from ﬁnancing, and anumber of community development ﬁnancial institutions were established in succession.
Building on this momentum, program related investment (PRI) was introduced, led by the Ford Foundation, in 1968. PRI is a mechanism by which a foundation uses part of its endowment to support programs
not through grants but through investment, loans and other such methods. Funds are provided for low-interest student loans, housing construction projects for low-income people and various other programs.
Through these activities, grant-making foundations and others in the philanthropic sector gained experience in providing assistance through investment and loans.
Since the Rockefeller Foundation began using the term “impact investing” in 2007, prompted by criticalreﬂections on the global ﬁnancial crisis of 2008, the necessity of investment to build a sound society
became widely acknowledged, and funds began ﬂowing in from the private sector at an accelerating rate.
For example, there were increased initiatives from the Gates Foundation and other IT entrepreneurs
based in the US as well as major ﬁnancial institutions such as Goldman Sachs and Morgan Stanley.
Launch of the GSG led by the UK and the global development of impact investing
Following these developments, the G8 Impact Investment Task Force was created as called for by theformer UK Prime Minister David Cameron at the 2013 G8 Summit hosted by the UK. Thereafter, in August
2015, ﬁve additional countries began participating and the task force was launched anew under a newname, The Global Steering Group for Impact Investment (GSG). As of February 2021, the GSG has National Advisory Boards in 33 countries and the EU that work to promote and raise awareness of impact investing in their respective countries.
In 2018, at the G20 Buenos Aires Summit, “impact investing” was included in the Leadersʼ Declaration,
and at the G20 Osaka Summit in 2019, the declaration recognized that “international public and private
ﬁnance for development as well as other innovative ﬁnancing mechanisms, including blended ﬁnance,
can play an important role in upscaling our collective eﬀorts,” as impact investment has increasingly
become a commonly known concept.
As stated above, impact investing is growing not only in developed countries in the West, as discussed
above, but also in emerging countries.

14 The UK government deﬁnes social investment as follows: “Social investment is the use of repayable ﬁnance invested into a socialorganisation to help it achieve its purpose and increase its impact on society.”(https://www.gov.uk/government/collections/social-investment)

26

Chapter 1

Figure 12. History of impact investing in the world and Japan

Overseas
The Rockefeller Foundation used the term
“impact investing” for the ﬁrst time andstarted to promote impact investing

2007

Global Impact Investing Network（GIIN）, a
global network of impact investors, wasestablished

2009

Japan

IRIS, a reporting standard for impact investing,began operating
The worldʼ s ﬁrst social impact bond waslaunched in the UK

2010

The US gave legal recognition to BeneﬁtCorporation, as a category for social enterprises
Big Society Capital, an impact investment
fund funded by dormant bank accounts, wasestablished in the UK

2012

Global Steering Group for Impact Investment（GSG）was established in the UK
IBG8 Impact Investment Task Force2013

The worldʼ s ﬁrst development impact bondwas launched in India

2014

2014

GSG National Advisory Board was established2015

GSG National Advisory Board proposed 7 keyrecommendations towards promotion of
impact investing
The promotion of impact investing is
mentioned for the ﬁrst time in thegovernmentʼ s growth strategies and inbasic policies for regional revitalization
The Government Pension Investment Fund(GPIF) signed the UN Principles of
Responsible Investment

2016

Social impact management Initiative wasestablishedThe Dormant Deposits Utilization Act wasenacted

TPG, a major private equity ﬁrm, establisheda JPY 200 billion Impact Investment fund

2017

2017

Japanʼ s ﬁrst social impact bond (SIB) was
launched“Impact investing” was included in the leadersʼ
declaration of G20 Buenos Aires Summit

2018

2018

Social impact bonds were included in theagenda for the PPP meeting of the Council
on Investments for the Future

Prime Minister Abe declares at the G20 Osaka 2019
Summit that Japan will lead the world ininnovative ﬁnancing schemes such as impact
investing and dormant bank accounts.

2019

Major Japanese bank launches Positive
Impact Finance, Japanʼ s ﬁrst ﬁnancial
product that conforms with UNEP FIʼ s
Principles for Positive Impact FinanceUKʼs Big Society Capital and a major private- 2020sector asset management institution partner toestablish an impact investment trust company

2020

Assistance for solving social issues using
dormant bank accounts commenced

Source: Created based on Current State of Social Impact Investing in Japan 2019

27

Scale and Trends in International Impact Investing
Scale of impact investing market based on GIIN survey
According to the Annual Impact Investors Survey 2020 (issued June 2020), impact investment balance(assets under management) as of the end of 2019 at the 294 impact investment institutions that responded to GIINʼs questionnaire stands at 404.0 billion dollars (approx. 44 trillion yen), and estimated assets
under management for impact investment overall is 715.0 billion dollars (approx. 79 trillion yen).
Asset management companies account for 54% of the impact investment balance, and most impact
investors utilize these companies.

Figure 13. Share of impact investment balance by institution (end-2019)

1%
3%

3%

0.3%
3%

36%

54%

■ 54%

Investment management companies■ 36%

Development ﬁnancial institutions■ 3%

Pension funds/insurance companies■ 3%

Banks/other ﬁnancial institutions■ 1%

Foundations■ 0.3%

Family oﬃces

■ 3%

Other

n=1,728

Source: GIIN Annual Impact Investor Survey 2020 (GIIN)

Geographic distribution of impact investments
Investees are broadly distributed regionally, and split nearly 50-50 between developed and developing
countries. The largest investment destination is the US and Canada (30%) on the basis of total assets
under management.

28

Chapter 1

Figure 14. Investee share by region% of AUM excluding outliers;% of respondents with any allocation to each geography;n = 289; AUM = USD 221 billionn = 294; respondents may allocate to multiple geographies

U.S. & Canada

30%

47%

WNS Europe

15%
12%

LAC

11%

SSA
6%

South Asia

6%

EECA

Percentage of assets

5%

Oceania

under management

5%

East Asia

3%

SE Asia

2%

MENA

5%

24%
35%
43%
29%
17%
8%

Percentage of
respondents

21%
26%
16%

Other

15%

Source: GIIN Annual Impact Investor Survey 2020 (GIIN)

Asset class
Investees are primarily unlisted companies, and private debt (21%) and private equity (17%) combined
account for roughly 40%. Investment and loans for listed companies has increased in recent years. Theirlisted stock accounts for 19% and publicly issued bonds, 17%.

Figure 15. Share of impact investment balance by asset class% of AUM excluding outliers;% of respondents with any allocation to each asset class;n = 289; AUM = USD 221 billionn = 294; respondents may allocate to multiple asset classes

21%

Private debt

19%

Public equity

17%

Private equity

17%

Real assets

17%

17%

Publicly oﬀered bonds

15%

Percentage of assets
under management
8%

58%
17%
70%

1%

Equity-like debt

1%

Deposits & cash equiv.

14%

Other

15%

Source: GIIN Annual Impact Investor Survey 2020 (GIIN)

21%

Percentage of
respondents

29

Sectors of impact investees
Looking at the impact investment balance by sector of impact investees, there is substantial investment in sectors closely related to the SDGs, including energy, ﬁnance (other than microﬁnance),
forestry, and food and agriculture.

Figure 16. Sectors of investees% of AUM excluding outliers;% of respondents with any allocation to each sector;

n = 289; AUM = USD 221 billionn = 294; respondents may allocate to multiple sectors.

Energy16%

Financial services

12%

Forestry

9%

Food and agriculture

8%

Microﬁnance8%

Housing

7%

Healthcare

6%

Water, sanitization & hygiene

under management

11%

39%

(excl. microﬁnance)

10%

Percentage of assets

46%

16%
57%
30%
39%
49%
23%

4%

Infrastructure

21%

3%

Manufacturing

22%

3%

ICT

3%

Education

0.1%

Arts and culture
Other

Source: GIIN Annual Impact Investor Survey 2020 (GIIN)

Percentage of
respondents

26%
41%
9%
49%

30

Chapter 1

Trends and issues in recent years: Necessity of clarifying the basic principles and requirements ofimpact investing.
As the ﬁeld has grown, concerns have been raised about investments disguised as impact investments, aphenomenon called “impact washing.” Eﬀorts are therefore underway to clarify basic principles andrequirements for impact investing in order to promote its sound development and prevent impact washing.

Figure 17. Examples of international principles for impact investingCore Characteristics of Impact Investing

Intentionally contribute to positive social

Use Evidence and Impact Data inand environmental impact through invest-

Investment Design

ment alongside a ﬁnancial return

Contribute to the Growth ofManage Impact Performance

Impact Investing

Operating Principles for Impact Management
Originating &Structuring

Strategic Intent

Portfolio
Management

1Deﬁne strategic
impact objective(s)consistent with theinvestment strategy.

3

Establish theManagerʼs contribution to achievementof impact.

2

Manage strategic
impact on a
portfolio basis.

4

Assess the expected
impact of each
investment, basedon a systematic
approach.

5

Assess, address, monitor, and manage potential
negative impacts on each investment.

6 Monitor the progressof each investment
in achieving impact
against expectations
and respond
appropriately.

Impact at Exit

7

Conduct exits
considering the eﬀect
on sustained impact.

8

Review, document,
and improve decisions
and processes basedon the achievement of
impact and lessons

Independent Veriﬁcation

9

Publicly disclose alignment with the Principles and provide regular independent veriﬁcation of the alignment.

Source: Created based on the GIIN website ( https://thegiin.org/characteristics) and Invest for Impact: Operating
Principles for Impact Management (IFC)31

Other Trends in Impact Investing
Noteworthy impact investing trends in 2020 in Japan and overseas① Activities by governmental study groups related to impact investing (since January 2020)
As far as is known, there have been six new study groups established within the government since January 2020. More study groups related to the environment have been formed in recent years as concern overglobal climate change has mounted.

Figure 18.

Trends in the establishment of new governmental study groups related to impact investing since 2020

Month/Year

Ministry of Economy,
Trade and Industry

February 2020

Study Group on
Environmental
Innovation Finance

Financial Services
AgencyMinistry of
the Environment

Positive Impact
Finance Task Force

April 2020

June 2020

Green Innovation
Strategy Meeting

Study Group on
Impact Investment

January 2021

Study Group on
Improving theEnvironment forTransition FinanceExpert Panel on
Sustainable FinanceSource: Created by SIIF from information released by government ministries and agencies

For example, the Ministry of the Environment, which previously had only mentioned ESG investment, has
explicitly indicated its interest in impact investing through establishment of the Positive Impact Finance
Task Force. The task force released the Concept Paper on Impact Finance in July 2020. It follows theUnited Nations Environment Programme Finance Initiative in advocating for the necessity of impact speciﬁcation, pre-assessment, monitoring, and disclosure.

32

Chapter 1② Major Japanese life insurer enters impact investing sector 15
One of Japanʼs major life insurers announced in July 2020 that it would enter the impact investing sector
by making investments following careful consideration of the investeeʼs degree of impact on society. It is
investing 2.0 billion yen in a US investment ﬁrm with a track record in the ﬁeld of impact investing, andapproximately 10.0 billion in Japanese startups working to solve social issues. After three years, thecompany plans to invest a total of around 30.0 billion yen annually.

③ Issue of Japanʼs ﬁrst sustainability-linked bond 16
A major real estate company issued Japanʼs ﬁrst sustainability-linked bond on October 15, 2020. The
bond links its issue terms to ESG targets. The issue amount was set at 10.0 billion yen with a 10-year
duration. Unlike green bonds, for example, sustainability-linked bonds do not place limits on how thefunds may be used.
Based on the Sustainability-Linked Bond Principles established by the International Capital Market Association (ICMA), when sustainability-linked bonds are issued, the issuer is required to stipulate key performance indicators (KPI), including impact indicators, and sustainability performance targets (SPT) in
advance. The principles also require the issuer to consider the level of their achievement after the fact,which can be interpreted as meeting this surveyʼs requirement for inclusion in impact investment balances that impact measurement be conducted before and after investing. It was therefore judged thatsustainability-linked bonds can be included in the category of impact investing.17④ Japanese credit card company to begin impact investing in Southeast Asia 18
A Japanese credit card company has set a goal of promoting ﬁnancial inclusion initiatives in the Asian
region. As a part of this, in December 2020, the company announced it will be starting an impact investing
program in Southeast Asia through its Singaporean subsidiary. Speciﬁcally, it will lend loan funds to local
ﬁnancial institutions and ﬁntech companies that provide ﬁnancial inclusion services to lower income
people and to micro, small, and medium-sized enterprises.

15 Company press release dated July 15, 2020 https://www.nissay.co.jp/news/2020/pdf/20200715.pdf
16 Company press release dated October 9, 2020 https://ssl4.eir-parts.net/doc/3003/tdnet/1888619/00.pdf
17 Sustainability-Linked Bond Principles (ICMA, June 2020)
https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/June-2020/Sustainability-Linked-Bond-Principles-June-2020171120.pdf
18 Company press release dated December 11, 2020
https://corporate.saisoncard.co.jp/wr̲html/news̲data/avmqks000000ba9x-att/20201211̲Release.pdf

33⑤ Keidanren (Japan Business Federation) announces new growth strategy with a basic philosophy ofsustainable capitalism 19
Keidanren (Japan Business Federation, “Keidanren” hereinafter) in November 2020 put an end to its
previous growth strategy and announced the organizationʼs new strategy (“. The New Growth Strategy”).
Keidanren has made sustainable capitalism, a new form of capitalism, its basic philosophy and put fortha growth strategy with emphasis on the following three challenges.
− Sustainable capitalism: Rectify disparities between nations, generations, occupations, and regions
to make capitalism sustainable− Future Vision for 2030: Focused expansion of investment in the future, including the education ofchildren and young people, support for families with young children and for young researchers,
and investment in next-generation technologies, in order to enable a future of sustainable growth.
− Action Toward 2030: Clarify important actions for the economy and society for 2030, the target year
for the growth strategy and SDGs.

⑥ Establishment of impact investing trust company by Big Society Capital and Schroders of the UK 20
Big Society Capital, a UK institution that distributes dormant funds, joined with Schroders, a major global
asset management ﬁrm, in December 2020 to establish a new investment trust, Schroder BSC Social
Impact Trust plc. Through an IPO, the new trust raised 100 million pounds (approx. 14.0 billion yen) thatwill be allocated to investment and loans for social companies involved, for example, in tackling the significant increase in homelessness, providing housing for survivors of domestic abuse, and improving accessto medical services.

⑦ UNDP announces SGD Impact program guidelines for private equity funds 21
Achievement of the Sustainable Development Goals (SDGs) will require large amounts of funds, and in
2018 the SDG Impact initiative was started under the United Nations Development Programme to establish standards for investments and projects that contribute to the SDGs and certify those that meet thestandards in order to expand the ﬂow of private-sector funds for the goalsʼ achievement.
SDG Impact has created three sets of standards: Standards for Private Equity Funds, Standards for
Bonds, and Standards for Enterprises, and in October 2020 the UNDP announced guidelines for theprivate equity standards. The standards are created by the UNDP, but certiﬁcation itself is conducted bythird-party certiﬁcation bodies.

19 Keidanren, Policy Proposal, November 17, 2020 https://www.keidanren.or.jp/policy/2020/108̲honbun.html
20 UKʼs Schroders plc press release dated December 3, 2020
https://www.schroders.com/en/media-relations/newsroom/all̲news̲releases/schroders-and-big-society-capital-to-launch-uk-s
ocial-impact-trust-to-improve-lives-of-those-in-need/
21 UNDP press release dated October 6, 2020
https://www.undp.org/content/undp/en/home/news-centre/news/2020/UNDP̲issues̲new̲guidance̲for̲private̲equity̲funds̲to̲look̲beyond̲bottom̲line.html

34

Chapter 1

Interest of general consumers in impact investing in JapanIn July 2020, SIIF conducted the General Consumer Awareness Survey on Impact Investment 22 to 3,098
consumers throughout Japan. The main ﬁndings of the survey are excerpted.
① Awareness of impact investing among general consumers
6.1% of respondents had either heard the term “impact investing” and have a ﬁrm understanding of its
meaning or had heard the term and have some understanding of the meaning. There are actually not very
many impact investing opportunities for the retail market. Therefore, increasing the awareness of general
consumers is an issue.

Figure 19. Awareness of impact investing
0%

1.7%

4.4%

n=3,098
10%

20%

30%

40%

50%

11.1%

60%

70%

80%

90%

100%

82.8%

Understandthe meaning tosome extent 6.1%

■ 1.7%Have heard the term “impact investing” and have a ﬁrm understanding of its meaning■ 4.4%Have heard the term “impact investing” and understand the meaning a little■ 11.1% Have heard the term “impact investing,” but donʼ t know what it means■ 82.8% Have not heard the term “impact investing”

Source: General Consumer Awareness Survey on Impact Investment 2020 (SIIF)② Interest of general consumers in purchasing impact investments
Just under 20% of people were interested in impact investing (19.1%). This is three times higher than thepercentage of respondents who knew the meaning of “impact investing” (6.1%), which shows that there
is a considerable segment interested in utilizing opportunities to solve social issues.

Figure 20. Actual interest in impact investing
0%

2.8%

n=3,098
10%

20%

30%

16.3%

Interested 19.1%

40%

27.6%

■ 2.8%

Very interested■ 23.7% Not very interested

50%

60%

70%

80%

23.7%

■ 16.3%29.6%

Somewhat interested■ 29.6%90%■ 27.6%

Not sure

Not interested at all

Source: General Consumer Awareness Survey on Impact Investment 2020 (SIIF)

22 General Consumer Awareness Survey on Impact Investment 2020 (SIIF) https://siif.or.jp/press̲release/2020101202/

100%

35

③ Social issues of interest to general consumers for impact investing
In response among those who are interested in impact investing to the question about the types of companies to invest in to solve social issues, there was strong interest in investments related to medicine, theenvironment, renewable energy, nursing care, and childcare. In light of COVID-19, there is strong interest in
medicine, but also in the environment, energy and other investment areas related to the SDGs within Japan.

Figure 21. Areas of interest for impact investing■ Very interested■ Somewhat interested■ Not sure

■ Not very interested■ Not interested at all

High interest in medicine, the environment, energy, nursing care, and parenting
Companies that provide high-quality medical and nursing care

29.8

services or work to reduce medical and nursing care costs

32.5

Companies that develop and provide renewable energy
Companies that provide products and services
Companies that provide products and services
Companies that provide products and services that contribute toCompanies that provide products and services
Companies that provide products and services
for quality education and parenting

Companies with working conditions conductive toproviding nursing care while continuing with oneʼ s job

Companies that provide products and services
for addressing and mitigating climate change

Companies that promote employee diversity, including women,internationals, people with disabilities, and seniors

Companies that work to reduce environmental impact
in corporate activities

Companies with working conditions conductive toraising children while continuing with oneʼ s job

Companies that provide products and services
for infrastructure and urban development

Companies that provide products and services
that help promote arts and culture

Microﬁnance institutions that provide ﬁnancial services,such as microﬁnance to people in poverty

Companies that provide aﬀordable, high-quality housing
Companies that provide products and services

that support small- and medium-sized enterprises
Companies that provide innovative ﬁnancial services using ﬁntech, etc.

4.9 1.0

46.2

15.6

4.4 1.4

17.1

4.1 1.0

16.4

4.7 1.0

47.9

26.9

solving social issues by applying IT and advanced technology

15.1

51.3

26.6

for sustainable agriculture

49.2

51.6

26.2

that contribute to environmental protection

for public sanitation and ensuring safe water resources

n=591

50.8

22.3

1.4

18.3

5.6

20.6

5.1 1.2

22.8

44.7

23.9

6.6

2.0

22.3

44.0

25.4

6.3

2.0

20.8

45.0

24.9

8.0

1.4

21.0

43.7

25.0

8.0

2.4

46.5

28.6

6.6

1.9

21.5

40.9

27.1

8.6

1.9

18.1

44.2

27.2

7.3

3.2

12.4

3.4

16.4

24.0

45.0

15.2

28.3

42.0

17.9

30.1

37.6

18.1
13.0

36.2

11.5

34.5

Source: General Consumer Awareness Survey on Impact Investment 2020 (SIIF)

34.7
36.2

10.2

1.7

11.0

3.2

12.5

3.6

14.6

3.2

36

Column #1

Column 1 : Impact Investing Information Hubs in Japan and Overseas
Organizations and networks promoting impact investing in Japan and overseas are introduced.

GLOBAL
Global Impact Investing Network (GIIN) https://thegiin.org
An organization conceived and created by the Rockefeller Foundation and other investors to further activate
impact investing. Has built a global network of impact investors and conducts standardization of indicators for
impact measurement. GIIN also issues the Annual Impact Investor Survey each year and has created IRIS, acatalog of impact investment indicators that is has updated over a number of years. Most recently, in May 2019,the organization released IRIS+, a tool set for impact investors to measure and manage their impact included asa part of the IRIS group of indicators.
Publications, events, etc.: Issues GIIN Annual Impact Investor Survey (annual), holds GIIN Investor Forum (generally held every year; next forum scheduled for 2022)

Impact Management Project (IMP) https://impactmanagementproject.com
An initiative that encompasses over 2,000 organizations started in 2016 by Bridges Fund Management andothers. Works to build a global consensus on the methods for measuring, managing, and reporting impacts
related to sustainability.
Publications, events, etc.: Impact-Financial Integration: A Handbook for Investors, etc.

Operating Principles for Impact Management https://www.impactprinciples.org
Operating principles for impact management formulated in April 2019 led by the International Finance Corporation (IFC). The principles are comprised of nine sections and provide a framework for investors to integrate theimpact of their investments. As of March 2021, 116 institutional investors in 29 countries have signed on.
Publications, events, etc.: Investing for Impact: Operating Principles for Impact Management

SDG Impact, United Nations Development Programme https://sdgimpact.undp.org
Established in 2018 by the UNDP with the cooperation of IMP members. Provides standards, tools, and networking opportunities, etc. to enable eﬀective investment for achievement of the SDGs adopted by the United
Nations in 2016.
Publications, events, etc.: Publication of SDG Impact Standards

United Nations Environment Programme Finance Initiative(UNEP FI) https://www.unepﬁ.org
Partnership between UNEP and the global ﬁnancial sector. Goal of mobilizing private-sector ﬁnance for sustainable development. The organization supports the creation of a ﬁnancial sector that serves people and the globe
while making a positive impact with the cooperation of over 350 member banks, insurance companies, andinvestors and over 100 supporting institutions.
Publications, events, etc.: Holds Global Roundtable (every other year)

37

Harvard Business School Impact-Weighted Accounts Initiative(IWAI)
https://www.hbs.edu/impact-weighted-accounts/Pages/default.aspx
A project of Harvard Business School. Promotes the creation of ﬁnancial accounting that reﬂects the ﬁnancial,social, and environmental performance of companies in order to transparently grasp external impact by promoting decision-making by investors and corporate executives.
Publications, events, etc.: Impact-Weighted Financial Accounts: The Missing Piece for an Impact Economy, etc.

JAPAN
GSG-NAB Japan https://impactinvestment.jp
Established in 2014 as the GSGʼs branch in Japan. It contributes to the development of the market and ecosystem for impact investing in collaboration with practitioners and experts in diverse ﬁelds, including ﬁnancial,business, social, and academic institutions. GSG-NAB Japanʼs activities revolve around three pillars of: researchand publication, awareness-raising, and networking.
Publications, events, etc.: Publishes The Current State and Challenges of Impact Investing (annual) and holds the
Impact Investing Forum (annually in the fall)Social Impact Management Initiative (SIMI) https://simi.or.jp
SIMI is a multi-sector initiative for promoting impact management in Japan through the coordination of its
diverse members, including business operators, capital providers, intermediaries, government agencies,
intermediate support organizations and think tanks, assessors, and researchers, succeeding the original organization founded in 2016 (formerly called the Social Impact Measurement Initiative). There are over 160 member
organizations as of January 2020.
Publications, events, etc.: Social Impact Management Guidelines, etc.

Impact Investment Study Group (co-sponsored by Financial Services Agency and GSG-NAB Japan)
https://impactinvestment.jp/activities/fsa-study.html
Organizes the Impact Investment Study Group for ﬁnancial market professionals and government personnel, etc.
Goal of deepening understanding between ﬁnancial market professionals and the government with respect toimpact investing, clarifying the signiﬁcance of impact investing initiatives for solving social issues in Japan andoverseas, as well as related issues, and discussing how to promote impact investing for the sustained development of Japanʼs ﬁnancial industry.

Positive Impact Finance Task Force (Ministry of the Environment)
http://greenﬁnanceportal.env.go.jp/policy̲budget/esg̲highlevelpanel/pif̲taskforce.html
Sponsored by the Ministry of the Environment and made up of ﬁnancial market professionals and others, thetask force compiles basic approaches to positive impacting ﬁnance and holds discussions aimed at establishinga guide to green impact measurement.

38

Chapter 2

Chapter 2 : Impact Investing Market in Japan
Chapter 2 provides an overview of the impact investing market in Japan based on responses to the Questionnaire Survey regarding Impact Investment (2020), presenting the current situation and challenges
surrounding the market. The Chapter ﬁrst describes the survey method and the inclusion criteria of impact
investing. It then presents the impact investment asset under management (“impact AUM”) in Japan thathave been identiﬁed through the survey, along with the results of responses to the survey.

Survey Method■ Summary of the method• A questionnaire survey. The respondents selected a survey form either in print or Microsoft
Excel to provide their answers.
• Survey period: September 2020 - December 2020
• Number of collected survey forms: 75 organizations / number of distributed survey forms: 591
organizations (collection rate: 12.7%)‒ To survey institutions that may be connected to impact investing, this Survey, just as in FY2019, covereda wide range of institutions, including those that have declared compliance with the Principles for
Responsible Investment and the Principles for Financial Action for the 21st Century, among others.
‒ This Survey consulted the GIIN Annual Impact Investor Survey, which deﬁnes qualiﬁed respondents
as those who “manage at least 10 million dollars in impact investing assets and/or have made atleast ﬁve impact investments.” Given that Japanʼs impact investing market is still in an early stage,
this Survey does not specify any qualiﬁcations.
‒ ResearchWorks Corporation provided assistance in conducting the Survey and collecting the forms.

• Target period for the Survey: As of the end of FY2019 (“the last ﬁscal year-end” on the surveyform) and the plans and forecasts for FY2020 (“this ﬁscal year” on the survey form).
■ Design of the survey form
To make the analysis comparable with trends in international impact investing markets, thesurvey form for the GIIN Annual Impact Investor Survey 2020 23 was used as a reference in orderto make major changes to the last yearʼs survey form. The fully updated form also includes
certain details in the Questionnaire Survey regarding Impact Investment (2019) 24.
Structure of the survey form:‒ Attributes of the responding organizations (e.g., business category)‒ Results and plans of the impact investing (e.g., investeeʼs sectors, types of organizations, asset classes, regions)‒ Status of impact measurement and management‒ Present state of the impact investing market in Japan and perceived challenges

23 GIIN Annual Impact Investor Survey 2020 (Global Impact Investing Network, GIIN) :https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf

24 The survey forms used for the past Questionnaire Surveys, including that for FY2019, were also created using details in the GIIN
Annual Impact Investor Survey as a reference.

39

Notes:• The Survey is not meant to make an accurate market estimate.
The Survey results are the accumulation of responses to the questionnaire returned by mail or in electronic form. They are not meant to provide an estimated size of the impact investing market in a strict sense.

• Responses are essentially self-reported
The results are based on self-reported answers from the responding organizations, just as the GIIN
Annual Impact Investor Survey. That said, when any response about the state of impact investing waspartial or incomplete, or when any inconsistent responses were found, a follow-up interview was conducted with the organization by email or phone to have a complete and accurate answer.

• Data cleaning and accuracy
The survey team removed or corrected responses that contain inconsistency or misunderstanding to the full
extent possible and took great care to prevent a double-counting of AUM. These eﬀorts, however, do notguarantee complete accuracy. As for some of the weighted results of impact AUM, the responding organizations with assets under management that make up a high percentage of the overall impact AUM are treatedas “outliers” to be excluded because they would comprise a huge proportion of the weighted results.

Inclusion Criteria
Deﬁnition of “impact investing” used by the questionnaire
The deﬁnition of “impact investing” used for the Questionnaire Survey and presented to respondents includes both of the following.
■ Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a ﬁnancial return (＊1) 25＊1 Any ﬁnancial transactions, including investments (stocks and bonds), loans, leases, among others, that seek
monetary returns are collectively called “investments.” Donations, subsidies, and grants are excluded.

■ Impact measurement (＊2) is conducted before and after making investments (who does
the post-investment measurement does not matter)＊2 Impact measurement is designed to quantitatively and qualitatively identify social and environmental impacts to add

a value judgment to a business or activity (e.g., so that the judgment is used as a reference point for an investment
decision, regular monitoring and/or dialogue with each investee company during an investment period, and/or post-investment reporting).

25 The description was changed from the one used for the 2019 Survey by applying the words in the GIIN Annual Impact Investor Survey 2020.
The GIIN questionnaire survey deﬁnes the term as “Impact investments are investments made with the intention to generate positive,

measurable social and environmental impact alongside a ﬁnancial return. They can be made across asset classes, in both emerging anddeveloped markets, and target a range of returns from below market to market rate, depending on the investorsʼ strategic goals.” The
underlined sentence is presented in the survey form, and the remaining portion in the letter sent with the survey form.

The deﬁnition used for the 2019 Survey was, “Impact investing refers to investment behavior that is intended to solve social and/or
environmental issues while pursuing ﬁnancial returns. An impact investing organization conducts impact assessment, which includes
social impact measurement, before and after making an investment.”

40

Chapter 2Deﬁnitions of related terms
The Questionnaire Survey presented the deﬁnitions of terms related to impact investing as below:
Figure 22. Terms related to Impact InvestingTermDeﬁnition

ImpactSocial and/or environmental change or eﬀect as a result of a business or activity, whether it is long- or short-term

Impactmeasurement

The act of quantitatively and qualitatively identifying a social and environmental impact in order to add a value judgment to a business or activity

Impactmanagement

Management that aims to achieve a greater impact by incorporating impact
measurement into the process of business operation in order to make improvements on a business and to make decisions based on acquired information

Inclusion criteria applied to impact AUM
While the responses to the Questionnaire Survey were self-reported ones, impact AUM were classiﬁed
to be included or excluded based on responses to the questions that asked about criteria for impact
investing. The inclusion criteria, which remains the same as those speciﬁed in the FY 2019 Survey,
consist of ①-③ below, and all of them must be met.

① The responding organization is a corporation based in Japan.
This Survey is on impact investing in Japan. Hence, responding organizations must be corporations based in Japan. Note that the investee companies may be located outside of Japan.
If a respondent is a multinational corporation, its responses must be about impact investing
activities by its incorporated Japan oﬃce.
② The responding organization uses output 26 and/or outcomes 27 as metrics for impact
measurement.
This yearʼs Survey, just as the FY 2019 Survey, did not specify what must be measured abouta business, including whether the measurement of business outcomes was a requirement
and whether output measurement alone would do. Since there is no international standard
for metrics that all countries follow, what should be included in the measurement will continue to be explored.

26 “Output” refers to direct results of organizational or business activities such as products and services. E.g., the number of times theactivities have been done; the duration of activities; the number of participants.

41③ The responding organization conducts impact measurement before making an investment decision and after making the investment.
Measurement before an investment decision is made must be conducted by the investor
organization, an investment manager, investment fund provider, or an outsourced third-party
assessment organization. Post-investment measurement may be conducted by any qualiﬁed
person, such as a ﬁnancial intermediary (e.g., a securities ﬁrm) other than those statedabove, bond issuer, or business operator that receives the investment or loan.

For consideration of inclusion criteria
This Survey conforms to internationally used criteria for impact investing that have the four key elements
listed below. The GIIN presents these key elements as Core Characteristics of Impact Investing 28. Notethat the GIIN Annual Impact Investor Survey does not state these key elements. Instead, it presents only
the deﬁnition presented in the footnote on the previous page and asks for self-reported responses.

Four Key Elements of Impact Investing
Stated in “Core Characteristics of Impact Investing” (GIIN)❶ INTENTIONALITY
Impact investments intentionally contribute to social and environmental solutions. Thisdiﬀerentiates them from other strategies such as ESG investing, Responsible Investing, andscreening strategies.
❷ FINANCIAL RETURNS
Impact investments seek a ﬁnancial return on capital that can range from below market rate
to risk-adjusted market rate. This distinguishes them from philanthropy.
❸ RANGE OF ASSET CLASSES
Impact investments can be made across asset classes.
❹ IMPACT MEASUREMENT AND REPORTING
A hallmark of impact investing is the commitment of the investor to measure and report thesocial and environmental performance of underlying investments.

27 “Outcomes” refer to changes and beneﬁts as a result of the output of a business or project. These changes are brought to beneﬁciaries as the eﬀects of a program or activity that has been carried out. E.g., vocational skills that have been acquired, a positive mental
attitude, new employment.

28 Core Characteristics of Impact Investing (GIIN) https://thegiin.org/assets/Core%20Characteristics̲webﬁle.pdf

42

Chapter 2

These GIINʼs four key elements above were considered when the questions (questions for screening) that
asked about inclusion criteria of impact investing in this Questionnaire Survey were designed.
❶ INTENTIONALITY: Impact investments intentionally contribute to social and environmental
solutions.
Since it is diﬃcult to judge in a tangible way whether the “intention” exists, the Survey only presented adeﬁnition, instead of giving questions about the intention.
❷ FINANCIAL RETURNS: Impact investments seek a ﬁnancial return on capital that can range frombelow market rate to risk-adjusted market rate.
The answers that the Survey asked for were solely about investments (not about donations, subsidies, or
grants) that seek returns, as mentioned in the footnote on the deﬁnition. The questions in the Questionnaire were designed to ask about expected values of returns.
❸ RANGE OF ASSET CLASSES: Impact investments can be made across asset classes.
Just as ❷, the Survey asked solely about investments that seek returns, and the questions in the Questionnaire were designed to ask about asset classes.
❹ IMPACT MEASUREMENT: A hallmark of impact investing is the commitment of the investor tomeasure and report the social and environmental performance of underlying investments.
As explained in “Inclusion criteria applied to impact AUM” above, the questions were designed to ask
about the types of metrics for measurement and the timing of the measurement (at the time of making an
investment decision and after making an investment).

Key points for consideration of future inclusion criteria
The angles detailed below were not included as inclusion criteria for this yearʼs Questionnaire Survey andthe market estimate survey discussed later. However, they may serve as central focuses in the process offacilitating improvements on impact investing in Japan. We may further explore these possible focus
points and, while considering practical issues and actions, incorporate them into the inclusion criteria
from the next ﬁscal year onward, or discuss them as eﬀorts that should be encouraged if they are notincluded in the criteria.

1) How to conﬁrm a (ﬁnal) investorʼs “intentionality”
1-1) Sharing the details of impact measurement
In the case of impact investing that uses an intermediary (asset manager or investment fund provider)between the ﬁnal investor and an investee, the details of the impact measurement conducted by the intermediary must have been shared with the ﬁnal investor in order to determine that the ﬁnal investor, institutional or individual, has had “the intention to generate an impact” and made “a decision based on theimpact.” Note that this does not apply if the ﬁnal investor has conducted impact measurement on its own,even when an intermediary is used.

431-2) Focusing on the “marketability(commodiﬁcation)” of impact investing
During an interview with an overseas expert in the process of this Survey, a discussion took place as towhich term should be used, “impact investing (by impact investors)” or “impact investment,” when thesubject of the inclusion criteria of impact investing was covered. The gerund “impact investing” focuseson the entity that performs the act of investing and on the entityʼs intention, while the noun “impact
investment” focuses more on the act of investment itself and the marketability of each investment. The
ﬁrst of the four key elements of impact investing that the GIIN presents is “the intention to generate an
impact.” Currently, the calculation of impact AUM based on the Questionnaire Survey focuses on an investorʼs intention, while the maximum estimate in the market also considers the “marketability” of the investment. As the deﬁnition of impact investing is premised on an investorʼs intention, discussion for conﬁrming the criteria of impact investing is required again.

2) Quality of impact measurement2-1) Types of metrics to use and causal relationships between output and impact/outcome
This yearʼs Survey includes impact investing that uses “output only” as metrics. However, given that
impact investing essentially aims to realize an impact in the form of a social and environmental change oreﬀect as a result of a business or activity, outcome should probably be set as metrics. However, if a causal
relationship is proven between the output and the hoped-for impact or outcome, using “output only” as
metrics may be acceptable.
2-2) Range of impact investing: time and space
For impact investing to serve as a means of fundamentally solving social issues going forward, speciﬁc
details of an “impact” as metrics should be clariﬁed in accordance with the IMP framework, that is, howlong it takes for an “impact” to emerge (time), and to what extent the metrics cover geographical regions,society, and the global environment (space).
If emergence over a shorter period as a KPI of an impact, that would be similar to output and approximate
to a mere KPI of an investee organizationʼs business. If an impact is limited to that of an investor or on
direct stakeholders of an investor, the investing would approximate to an activity for its own companyʼssurvival, rather than for the sustainability of a region, society, or the global environment. And in somecases, a new product or service that is a mere result of changes in consumer needs or preferences may
be linked to the model to a social impact by making a logic model. In the stage where an investor is asked
to clarify what social/environmental issue an impact should be meant and who the beneﬁciaries will be,
the details of the metrics set at the impact investing should also be examined.

44

Chapter 22-3) Setting target values for metrics
If setting and monitoring impact metrics is inadequate as a drive to generate an impact, setting a target
value for metrics may become standard. Studying how much has been achieved toward a target value
would provide an investor with a good indication of whether an impact investing has been successful ornot.

3) Relations with ESG investing3-1) Comprehensiveness of impact measurement and management“Comprehensiveness” here refers to two actions: (1) Pursuing both of the creation of a positive impact
and reduction in a negative impact, and (2) Comprehensively assessing, for example, corporate activities
across supply chain, rather than individual projects run by an investee company.
Principle 1 of the Principles for Positive Impact Finance presented by the United Nations Environment
Program Finance Initiative (UNEP FI) states, “It is that which serves to deliver a positive contribution to
one or more of the three pillars of sustainable development (economic, environmental and social), once
any potential negative impacts to any of the pillars have been duly identiﬁed and mitigated.” The “positive
contribution” in this statement can probably be understood as the “positive impact” in the deﬁnition of
impact investing presented by the GIIN.
However, it would be practically extremely diﬃcult that “potential negative impacts to any of the pillars”
are “duly identiﬁed and mitigated,” and that “a positive contribution” is delivered to “at least one of thethree pillars of sustainable development (economic, environmental and social),” in each project launchedby an individual investee company.
Let us suppose that impact investing has the following two aspects:① Internalization of positive market externalities② Internalization of negative externalities
Even with these two aspects, in order to mitigate negative impacts through the internalization of negative
externalities as stated in ②, and make a positive contribution, impact investing is expected to set impact
metrics for comprehensiveness of the corporate activities by each investee company, rather than for asingle project by the investee company.
3-2) Additionality of an impact
It is important to conﬁrm that an additional impact is generated through impact investing. “Additionality”
refers to how much the impact investing has contributed to the creation of an additional positive impact,
or to reduction in a negative impact, on the pre-investment condition (baseline), when the case in which
the impact investing is not made (counterfactual) is compared with the case in which the impact investingis made. It is required that a net impact generated by an impact investing is strictly measured.

45

Impact AUM
As the results of the Questionnaire Survey and the market estimate survey described later, the scale of the
impact investing is presented with three types of ﬁgures.
1. Impact AUM, as ascertained by the Survey Questionnaire: 512.6 billion yen*This ﬁgure is calculated in this yearʼs report using the same method as previous yearsʼ reports.

The ﬁgure is the sum of the investment balances of the 26 organizations that responded to the Questionnaire Survey regarding Impact Investment (2020) and met the aforementioned inclusion criteria for impact
investing based on self-reporting. Which is to say, after the investing is recognized as impact investing,the ﬁgure represents the sum of investment balances for which impact measurement was conducted both
before and after the investing.
2. Of the impact AUM ascertained by the Questionnaire Survey, the AUM for which the impact measurement has been shared with investors: 328.7 billion yen
The ﬁgure is the sum of the AUM based on the AUM in the Questionnaire Survey (1. above) for which
direct investment has been made by the investor or the measurement has been shared with the ﬁnal
investor by the intermediary. In order to ensure that it is the “intention (to generate an impact)” of the ﬁnal
investor, in cases in which the intermediary is the one that makes the impact measurement, it should benecessary to share the details of the measurement with the ﬁnal investor.
Reference ﬁgure: Maximum estimate (potential) in the market: 2.64 trillion yen
This ﬁgure includes the sum of investments ascertained by the Questionnaire Survey and the sum of theamount of money originating in products for which the elements of impact measurement are embedded to
set impact KPIs and conduct the measurement before and after investing as found in publicly available
information. This ﬁgure does not necessarily indicate that investors intentionally implement as impact
investing. For details, refer to the “Market Estimate Survey” section below.
Figure 23. Scale of Impact Investment BalanceMarketʼs estimated maximum (potential)

Reference:
Marketʼs estimated maximum

2.64 trillion yen

1. Ascertained by
the questionnaire

Estimated maximum of potential impact investments. This ﬁgure includes thesum of investments ascertained by the Questionnaire Survey and the sum of
the amount of money originating in products for which the elements of impact
measurement are embedded to set impact KPIs and conduct the measurement before and after investing as found in publicly available information. Thisﬁgure does not necessarily indicate that investors intentionally implement as
impact investing.（Details are in the “Market Estimate Survey” section below）

Impact investing balance ascertained by the Questionnaire Survey

512.6 billion yen

Sum of investments that meet the inclusion criteria for impact investing basedon questionnaire responses; in other words, investments conﬁrmed as impact
investments for which impact measurement is conducted before and afterinvesting.（Details are in the “Questionnaire Survey” section below）

2. Sharing of
impactmeasurement

Impact investment balance derived from the questionnaire forwhich the impact measurement has been shared

328.7

billion yen

This ﬁgure is the sum of investment balances based on the Questionnaire
Survey for which direct investment has been made by the investor or forwhich the details of the impact measurement have been shared with the ﬁnal
investor by an intermediary.

46

Chapter 2

We will introduce the ﬁgures of global impact AUM for the purpose of comparison with the scale of impact
AUM in Japan. See “Column 2: Introduction of International Impact Investing Surveys” for these impact
investing surveys.

According to the GIIN Annual Impact Investor Survey 2020 29 (GIIN),− The impact AUM grasped in the questionnaire survey equivalent to 1. above was 404.0 billion dollars(approx. 44 trillion yen).
− The impact AUM equivalent to the Reference ﬁgure above as the marketʼs maximum was 715.0
billion dollars (approx. 79 trillion yen).
According to the “Growing Impact - New Insights into the Practice of Impact Investing” 30 (IFC),− The impact AUM equivalent to the Reference ﬁgure above as the marketʼs maximum was 505.0
billion dollars (approx. 56 trillion yen).

List of institutions that make impact investing and investment cases
Figure 24. List of organizations that are engaged in investment equivalent to impact investing
judged from the responses to the questionnaire survey 31

Industry

Asset managers

Organizational nameExample of impact investing

Asset Management One
Co., Ltd.

Management of portfolio of impact investing in
exchange-traded stocks in Japan

Kamakura Investment
Management Co., Ltd.

“Yui 2101” (investment in traded and privately heldcompanies through public investment trusts)

Nomura AssetManagement Co., Ltd.

Nomura ACI Advanced Medical Impact Fund, Global
Food-related Equity Open “Smart Food” (investment inlisted stocks through public investment trusts)

Sumitomo Mitsui Trust
Asset Management Co., Ltd.

Impact investing funds investing in exchange-tradedstocks in Japan

Mitsubishi Corp. - UBS
Realty Inc.

Real estate investment trusts and asset management
for investment corporation

29 (Reposted) GIIN Annual Impact Investor Survey 2020 (Global Impact Investing Network, GIIN):
https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf

30 Growing Impact - New Insights into the Practice of Impact Investing (International Finance Corporation):

https://www.ifc.org/wps/wcm/connect/8b8a0e92-6a8d-4df5-9db4-c888888b464e/2020-Growing-Impact.pdf?MOD=AJPERES&CVID=naZESt9

31 Upon preparation of the list, we extracted only those organizations (part) that satisfy the aforementioned impact investing require-ment and agreed to be mentioned in this report. Therefore, the list does not cover all actions included in the impact AUM. We
referred to the content of the responses to the relevant questions in the questionnaire upon classiﬁcation of industry.

32 SIB denotes social impact bonds and it is a type of performance-linked private sector consignment contracts. A private entity towhich the administration outsourced the project to raise funds from ﬁnancial institutions and investors and repays return dependingon the amount paid (consignment fees) linked to the results by the administration.

47

Industry

Organizational nameEnergy & Environment
Investment, Inc.

Venture capitals

Shinsei Corporate
Investment Limited

Future Venture CapitalCo., Ltd.

Example of impact investing
EEI Fund 4 Innovation and Impact Investing Limited
Partnership (private equity impact investing fund)Japan Impact Investment I Limited Partnership “Child-care

Support Fund,” Japan Impact Investment II Limited Partnership“HATARAKU FUND” (private equity impact investment fund)Osaka Social Issue Solving Fund in collaboration with Osaka
Shinkin Bank (private equity impact investment fund)Insurance companies

The Dai-ichi Life Insurance
Company, Limited

Impact investing(private equity, listed stocks, PE funds),SIB projects

Government-run
development agencies
and ﬁnancial institutions

Japan International
Cooperation Agency

Overseas loans and investments

Mizuho Bank, Ltd.

Banks and trust banks

Japan Impact Investment II Limited Partnership “HATARAKU
FUND” (private equity impact investment fund), SIB projects 32

Sumitomo Mitsui Banking
Corporation

SDGs loans, SIB projects

Sumitomo Mitsui Trust
Bank, Limited

Positive Impact Finance

Credit associations,credit unions

Dai-ichi Kangyo Credit
Cooperative

Social business support loans

Securities companies

Daiwa Securities Group
Inc.

World Impact Investment Fund “Better World” (investment in listed stocks through public investment trusts)

KIBOW Foundation

KIBOW Impact Investment Fund (private equity impact investment fund)Kyoeki Investment FundJapan

Investment in common beneﬁt projects related to disaster recovery support (private equity investment, private placement bonds)

The Sasakawa Peace
Foundation

Blue Orchard Micro Finance Fund (BOMF), Japan ASEAN Women
Empowerment Fund (JAWEF) (loans, government and corporate bonds)

The Social Innovation and
Investment Foundation

Various SIB (Kobe City, Hachioji City, Okayama City, Toyonaka City,
Hiroshima Prefecture, etc.), Japan Impact Investment II Limited Partnership “HATARAKU FUND” (private equity impact investment fund), direct
investment in Plus Social Investment Co., Ltd. and ADDress

Crowd Credit, Inc.

Microﬁnancing, ﬁnancing, solar power generation, and social
lending to projects by female entrepreneurs, etc. in Central andSouth America, Africa, Asia, and Middle East, etc.

Digisearch & Advertising
Inc.

Angel investment, silent partnerships, share funds, SIB projects

Plus Social Investment
Co., Ltd.

SIB projects (Saijo City, Higashiomi City, Okayama City, etc.),
Komatagawa Hydroelectric Power Plant upgrade project (silent
partnership)

Sophia School Corporation

Japan International Cooperation Agency bonds, African Development
Bank bonds, bonds issued by the University of Tokyo (social bonds),
Latin American microﬁnancing funds, Impact investment funds in India,
Global Green Bond Fund, Private global stock impact investment funds,
U.K. oﬀshore wind power project, Low-carbon index-linked funds

Foundations

Other organizations

48

Chapter 2

Questionnaire Survey Result
From next page, we introduce the result of the Questionnaire Survey regarding Impact Investment (2020). In
addition to the aggregation of the number of all the responding institutions (n=75), we also performedsome analysis based on the two types of subgroups described below.
Subgroup ① institutions engaged in impact investing / institutions not engaged in impact investing
The questionnaire survey also targets institutions that may engage in impact investing in the future, sosome responding institutions have not engaged in impact investing as of the writing of this report. Organizations that met the aforementioned inclusion criteria for impact investing based on self-reporting are
categorized as “institutions engaged in impact investing,” while those which did not submit self-report or
did not meet the criteria are categorized as “institutions not engaged in impact investing.”
Subgroup ② equity-focused / debt-focused
The organizations categorized as “institutions engaged in impact investing” in subgroup ① were categorized into equity-focused and debt-focused based on their industry categorization. Of the “institutions
engaged in impact investing,” the ratio of the investment balances of the two organizations is high among
all institutions engaged in impact investing, and they are treated as outliers and excluded from the analysis of subgroup ②. For this reason, the sum of equity-focused organizations and debt-focused organizations do not match count n of the “institutions engaged in impact investing.”
Figure 25. Number of responding institutions in analysis subgroups (n) and the ratio to the total
number of the respondents (%)

Analysisaxis ①Analysisaxis ②ｎ％Total number of respondents

75

100%

Institutions engaged in impact investing

26

Institutions not engaged in impact investing

49

35%
65%

ｎ

％

Institutions engaged in impact investing

26

100%

Equity-focused17

Debt-focused

7

65%
27%

*As described earlier, the two organizations treated as outliers were excluded from analysis axis ②, and the sum of count n does not match the total.

Features of Organizations That Responded to the Questionnaire Survey
This section conﬁrms when and how the “institutions engaged in impact investing” (impact investing
institutions) that meet the aforementioned inclusion criteria began working on impact investing andwith what motivation, upon conﬁrming the industry type of the institutions that responded to theQuestionnaire Survey regarding Impact Investment (2020).

49

Industry type of all organizations that responded to the questionnaire survey• Of all organizations that responded to the questionnaire survey, those who answered “banks, trust banks,
credit associations, credit unions” answered were the largest (27%) followed by “asset managers” (14%).
Figure 26. Industry type of all organizations that responded to the questionnaire survey
1.3%

1.3%

13.3%

4.0%

26.7%

4.0%
5.3%

13.3%

6.7%
12.0%
n=75

12.0%

■ 26.7%Banks, trust banks, credit associations, credit unions■ 13.3%

Asset management companies■ 12.0%Venture capitals (including corporate VCs)

■ 12.0%

Leasing companies, non-bank ﬁnancial institutions■ 6.7%

Foundations■ 5.3%

Government-run development agencies and ﬁnancial institutions■ 4.0%

Insurance companies■ 4.0%■ 1.3%

Pension funds■ 1.3%

Listed companies

0.0%

Private equity■ 13.3%

Other organizations■ 0.0%

Securities companies

Unknown

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board) ‒Question: “2. Please select one answer that most accurately describes your industry (Single Answer, hereafter “SA”).”

Industry type of institutions engaged in impact investing• When the organizations that met the aforementioned inclusion criteria for impact investing alone are
extracted, those who answered “banks, trust banks, credit associations, credit unions” were the largest(23%) followed by “asset managers” (19%).
• In Figure 1 of the GIIN Annual Impact Investor Survey 2020 33 (hereinafter referred to as “GIIN Survey
2020”), the answer “Asset managers: for-proﬁt” (51%) accounted for the majority of the organizations
that responded to the survey (n=294).
Figure 27. Industry type of organizations engaged in impact investing 34

15.4%

3.8%
3.8%

23.1%

7.7%
11.5%
n=26

19.2%
15.4%

■ 23.1%Banks, trust banks, credit associations, credit unions■ 19.2%

Asset management companies■ 15.4%

Foundations■ 11.5%

Venture capitals (including corporate VCs)

■ 7.7%

Securities companies■ 3.8%

Government-run development agencies and ﬁnancial institutions■ 3.8%

Insurance companies■ 0.0%

Leasing companies, non-bank ﬁnancial institutions■ 0.0%

Pension funds■ 15.4%

Other organizations■ 0.0%
0.0%■ 0.0%

Listed companies
Private equity
Unknown

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board) ‒Question: “2. Please select one answer that most accurately describes your industry (SA).”33 GIIN Annual Impact Investor Survey 2020 (https://thegiin.org/research/publication/impinv-survey-2020) Unless otherwise noted
below, the GIIN Survey 2020 refers to this source.

34 Figure 27 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria.

50

Chapter 2

Year in which organizations began engaging in impact investing• Year 2008 was the earliest when one of the organizations began engaging in impact investing and manyorganizations started it in 2017 (seven organizations).
• In the GIIN Survey 2020 (Figure 4), 64 organizations of the responded organizations (n=294) werealready engaged in impact investing before 2000. Also, almost 40% of the total were already engaged in
impact investing as of 2007.
• The global comparison above showed that there was about 10 years of delay in development of impact
investing in Japan.

Figure 28. Year in which organizations began engaging in impact investing 35
n=26

8

32

7

7

28

6

24

5
4

3

3
2
1
0

20

4

2
1

1

1

2009

12

2
1

1

0
2008

16

3

0
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

8
4
0

■ Number of organizations that began impact investing (each year)
ー Number of organizations that began impact investing (cumulative)
Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory
Board) ‒ Question: “A1. Please answer the year in which you began engaging in impact investing. (Numerical
Answer, hereafter “NA”)”

Motivation for engaging in impact investing• As a motivation for engaging in impact investing, the highest ratio of respondents considered “responding to client demand” (78%) as “very important” motivations, followed by “their commitment as responsible investors” (67%).
• In the GIIN Survey 2020 (Figure 6), the highest ratio of respondents considered both “impact being
central to their mission” and “their commitment as responsible investorsʼ as “very important” motivations (both 87%).
• The above global comparison revealed that impact investors in Japan tended to cite “more customer
oriented” and responding to customersʼ demand as their motivations for engaging in impact investing.

35 Figure 28 shows the results of responses only from the organizations that are engaged in impact investing and meet the
aforementioned inclusion criteria.

51

Figure 29. Motivation for engaging in impact investing 36■ Very important ■ Somewhat important ■ Not important78%

We are responding to client demand
They are part of our commitment

It is central to our mission to intentionallypursue impact through our investments
They are an eﬃcient way

to meet our impact goals

They contribute to a global agenda, such as

They are ﬁnancially attractive relative toother investment opportunities

They provide an opportunity to gain exposure

to growing sectors and geographies
They oﬀer diversiﬁcation

We do so to meet regulatory demands

59%

41%

22

55%

45%

22
22

55%

44%

50%

6%

18

41%

55%

5%

22

31%

to our broader portfolio

18

33%

45%

the UN SDGs or the Paris Climate Accord

18

22%

67%

as a responsible investor

n=

17%

50%
42%

19%
42%

16
12

Source: This ﬁgure has been created based on Questionnaire Survey regarding Impact Investment (2020) (GSG-NAB
Japan) ‒ Question: “D4. How important are each of the following in terms of motivating your organization to engage
in impact investing? (SA)”Progress and Challenges of Impact Investing in Japan
This section provides an overview of the progress of Japanʼs impact investing market and the challenges facing
the country going forward based on responses to the Questionnaire Survey regarding Impact Investment (2020).
Stages of Japanʼs impact investing market evolution• Regarding the stages of Japanʼs impact investing market evolution, a clear majority of respondents considered that the market is “about to take oﬀ” (79%), and some considered the market is “in its infancy” (21%).
• To the question about the stages of the international impact investing market evolution in the GIIN
Survey 2020 (Figure 9), a clear majority of respondents answered that the market is “growing steadily”(69%), and some answered that the market is “about to take oﬀ” (21%).
• As mentioned in “Year of ﬁrst impact investing (Figure 28),” this Survey conﬁrmed that Japan is one
stage behind in the evolution of the impact investing market when internationally compared, and its
market is about to take oﬀ.

36 Figure 29 shows the results only from the responding organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. Some items do not sum to 100% due to theprocessing of decimal points.

52

Chapter 2

Figure 30. Stages of Japanʼs impact

Figure 31. Stages of the international

investing market evolution

impact investing market evolution

n=24

37

21%

79%

In its infancy

n=290

9%

About to take oﬀ

21%

Growing steadily

69%

Established/Mature

2%

Saturated

0.3%

Declining

Source: These ﬁgures have been created based on Questionnaire Survey regarding Impact Investment (2020)(GSG-NAB Japan) and GIIN Annual Impact Investor Survey 2020. ‒ Question: “D5. How do you see the state ofJapanʼs impact investing market? Please select the answer that most accurately describes your view. (Single
Answer, hereafter “SA”)”

Progress of Japanʼs impact investing market over the past one year
• The majority of respondents responded that Japanʼs impact investing market had progressed over the
past one year in “actions inspired by the Principles for Responsible Investment, SDG impact (UNDP),
and the Operating Principles for Impact Management (IFC), etc.” (“signiﬁcant progress”: 5%; “someprogress”: 90%), followed by the response that progress had been made in “the publicʼs awareness ofand interest in impact investing” (“signiﬁcant progress”: 5%; “some progress”: 86%).
• In the GIIN Survey 2020 (Figure10), many respondents noted that progress had been made over the past
one year in “research on market activity, trends, performance, and practice” (“signiﬁcant progress”: 42%;“some progress”: 55%) and “sophistication of impact measurement and management practice” (“signiﬁcant progress”: 39%; “some progress”: 59%)38• Respondents in the international markets noted “research on market activity and practice” and “sophistication of impact measurement and management” as the areas of progress over the past one year. It is
expected that Japanʼs market may make progress in impact investing and measurement coupled withthe sophistication of impact management practice going forward.

37 Figure 30 shows the results of responses only from the organizations that are engaged in impact investing and meet the
aforementioned inclusion criteria. The organizations that provided no answer were excluded.

38 We referred the survey form for the GIIN Survey 2020 to make the Questionnaire Survey regarding Impact Investment (2020)(GSG National Advisory Board) as comparable with the GIIN Survey 2020 as possible. Considering the level of the growth ofJapanʼs impact investing market, however, we did not use exactly the same wording in this question as that in its nearest
equivalent in the GIIN Survey 2020.

53

Figure 32. Progress of Japanʼs impact investing market over the past one year 39■ Signiﬁcant progress ■ Some progress ■ No progress ■ Worsenedn=Actions inspired by the Principles for Responsible
Investment, SDG impact (UNDP), and the Operating
Principles for Impact Management (IFC), among others

5%

90%

5%

20

The publicʼs awareness of and interest in impact investing

5%

86%

9%

22

Top managementʼs interest in
and understanding of impact creation
Each companyʼs stakeholdersʼ interest and engagement(e.g., asset owners, shareholders, investors)

84%
5%

79%
69%

Incentive plans for start-ups(including impact companies)
Increasing impact investments
through venture capital (VC) and private equity (PE)Eﬃcient use of external resources for impact investing
Establishment of impact measurement and management
as rules and common practice
Establishment of companiesʼ internal systems
for impact investing

5%

16%

19
13
17

35%

42%

53%

19

47%

53%

15

37%

Greater availability of detailed information about impact
companies and investment products for impact investing

19

31%

65%
5%

16%

41%

58%

19

59%

17

Exit strategies and other means of exit than IPO
as common practice

33%

67%

15

Accumulating examples and data
about impacts and returns

33%

67%

15

Certiﬁcation/Labeling systems
by public/third-party institutions

27%

73%

15

Introduction of diverse investment methods and deals(e.g., listing class shares)

25%

75%

16

Philanthropy or public funds as an incentive
to encourage impact investing

21%

Greater availability of professionals capable of helping
impact companies make large proﬁts and exit

13%

Incentives for impact investing provided by
the government and/or municipalities (e.g., a tax break)

71%
87%
100%

7%

14
15
14

Source: This ﬁgure has been created based on Questionnaire Survey regarding Impact Investment (2020) (GSG-NAB Japan) ‒ Question: “D12.
How do you view the progress that Japanʼs impact investing market in general has made over the past one year? (SA for each statement)”

Progress of Japanʼs impact investing market 40
The Survey asked impact investing institutions to comment on “the progress of Japanʼs impact investing
market over the past one year.” Some of the responses to this open-ended question are provided below.
These comments indicate that, while recognition and acknowledge of impact investing is becoming
expanding and deepening, the number of the sharing of practical examples is small, including successful
cases, and the whole industry will need to continue gaining practical knowledge.
39 Figure 32 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided the answer “We donʼt know/NA” or no answer were excluded. Some items
do not sum to 100% due to the processing of decimal points.

40 Some of the responses to Question D12 SQ1. “Please write your comment about the progress (of Japanʼs impact investing market overthe past one year)” were edited and excerpted without changing their meanings. The underlines were added by the writer. These
comments are the respondentsʼ personal or organizational views and do not represent the view of the GSG National Advisory Board.

54

Chapter 2“

We consider that, while impact investing is increasingly known and there have been interestingdevelopments across the globe, including moves to create new markets and searches for ways to”exit impact investing, companies are unable to start impact investing with enough conﬁdence about
making proﬁts because there have been only a limited number of shared “successful examples.”“We think impact measurement should be standardized and companies should disclose detailed“

Businesses have signiﬁcantly deepened their understanding of impact investing over the past one

information about impacts so that impact investing will become more common.

year. Now, impact measurement should be incorporated into practical business processes to””accelerate the eﬀorts for impact investing. In some cases, impacts are measured as investment
results in the process of investments that focus on the pursuit of ﬁnancial returns. Impact investing can be promoted and facilitated by ﬂexibly selecting good practices from cases that may not be
considered impact investing in a strict sense.

“

Some progress has been made in the dissemination of information about impact investing byvarious media, listed companies, and asset managers in Japan. Nevertheless, we have the feeling”that a complete cycle of impact investing has not yet established across the investment chain.

“

The involvement of the Financial Services Agency and the Ministry of the Environment has served as amajor driving force, and we expect that their support will continue as part of the governmentʼs policy.

”

Challenges facing businesses that aim to increase impact investing• The majority of responding organizations in the Questionnaire Survey perceive that the challenge facing
businesses that aim to increase impact investing is “fragmentary and unsystematic approaches to
impact measurement and management” (45%), followed by “limited availability of professionals capableof helping impact companies make proﬁts and exit” and “limited data on potential impact investee
companies and investment products” (32% each).
• The majority of responding impact investing institutions believe that the challenge is “fragmentary andunsystematic approaches to impact measurement and management” (63%), followed by “limited dataon potential impact investee companies and investment products” (33%).
• The majority of responding non-impact investing institutions responded that the challenges are “fragmentary and unsystematic approaches to impact measurement and management” and “a limited
number of impact companies to invest in” (36% each).
• This means that “a limited number of impact companies to invest in” may be one of the major reasons
why these companies have not started impact investing.
• When we sort responses into the groups of “all responding organizations,” “impact investing institutions,” and “non-impact investing institutions,” we see that “fragmentary and unsystematic approaches
to impact measurement and management” is noted across all groups as a challenge facing businesses
that aim to increase impact investing. This indicates that systematic impact measurement and management will be needed so that institutions that are already making impact investing will invest more, andthat more institutions will begin impact investing.

55• Following the issue of impact measurement and management as the biggest challenge, the following
three responses were selected as second response: “limited availability of professionals capable ofhelping impact companies make proﬁts and exit,” “limited data on potential impact investee companies
and investment products,” and “a limited number of impact companies to invest in.” This means that alimited number of impact companies in Japan is also a major issue in impact investing in Japan.
Figure 33. Challenges facing businesses that aim to increase impact investing 41■ Of all respondents（n=69） ■ Institutions engaged in impact investing（n=24）■ Institutions not engaged in impact investing（n=45）45%Fragmentary and unsystematic approaches to
impact measurement and management

63%

36%

Limited availability of professionals capable ofhelping impact companies make proﬁts and exit

32%
29%
33%

Limited data on potential impact investee companies
and investment products

32%
33%
31%

A limited number of impact companies to invest in

30%

21%

19%

Limited preferential treatment for impact investing16%

Lack of an eye for impact companies on
the part of fund providers(i.e., asset owners, asset management companies)

8%

Limited options for exit strategies that make itdiﬃcult to calculate expected return on investment

8%

18%
13%
6%
12%

7%

Limited returns considering the eﬀorts needed for
impact investing, which makes it diﬃcult to incorporate
the investing into a major part of performance evaluation

10%
8%
11%

0%

Diﬃculty of increasing impact investments
due to the constraints of ﬁduciary responsibility

0%

0%

25%

14%

Limited investment methods and means available
for impact investing

A limited number of impact companies
other than start-ups

36%

21%

6%
9%
3%
4%

10%

20%

30%

40%

50%

60%

70%

Source: This ﬁgure has been created based on Questionnaire Survey regarding Impact Investment (2020) (GSG-NAB
Japan) ‒ Question: “D6. What do you think is the problem when Japan plans to increase impact investing going
forward? (Multiple Answer, hereafter “MA”, up to 3)”

41 Figure 33 exclude invalid responses that had selected four or more answers, as respondents were asked to select up to three.

56

Chapter 2

Conditions that facilitate impact investing• The majority of responding organizations responded that “the publicʼs awareness of and interest in
impact investing” (48%) would facilitate impact investing, followed by “incentives for impact investing
provided by the government and/or municipalities” (31%).
• The majority of responding impact investing institutions selected the answer “incentives for impact
investing provided by the government and/or municipalities” (52%), followed by “top managementʼsinterest in and understanding of impact creation,” and “each companyʼs stakeholdersʼ interest andengagement (e.g., asset owners, shareholders, investors)” (33% each).
• Many responding non-impact investing institutions selected the answer “the publicʼs awareness of andinterest in impact investing” (58%), followed by “examples related to impacts and returns coupled withaccumulated data” (28%).
• These responses indicate that, to urge companies to enter the impact investing market, impact investingshould be more widely known to attract more interest, and that organizations already making impact
investing will need incentives provided by the government or other relevant institutions.

57

Figure 34. Conditions that facilitate impact investing 42■ Of all respondents (n=64) ■ Institutions engaged in impact investing (n=21)■ Institutions not engaged in impact investing (n=43)
The publicʼ s awareness ofand interest in impact investing
Incentives for impact investing provided by thegovernment and/or municipalities (e.g., a tax break)

58%

31%

52%

21%

Top managementʼ s interest in
and understanding of impact creation

27%
23%

Each companyʼ s stakeholdersʼ interest and engagement (e.g., asset owners, shareholders, investors)

21%

Greater availability of detailed information about impact
companies and investment products for impact investing

23%
19%
26%

25%

Accumulating examples and data about
impacts and returns

Certiﬁcation/Labeling systems
by public/third-party institutions

17%
14%
19%

22%

19%

14%
12%

Incentive plans for start-ups(including impact companies)

6%

19%

14%

2%

Increasing impact investments throughventure capital (VC) and private equity (PE)

29%

16%

10%

Greater availability of professionals capable of helping
impact companies make large proﬁts and exit

33%

28%

19%

Establishment of companiesʼ internal systems
for impact investing

33%

23%

14%

Establishment of impact measurement andmanagement as rules and common practice

Actions inspired by the Principles for Responsible
Investment, SDG impact (UNDP), and the Operating
Principles for Impact Management (IFC),among others

48%

29%

6%

10%

5%
5%

0%

7%
5%
5%
5%

Exit strategies and other means of exit than IPO
as common practice
Philanthropy or public funds as an incentive
to encourage impact investing0%

Introduction of diverse investment methods
and deals (e.g., listing class shares)

2%
0%
2%

Eﬃcient use of external resources
for impact investing

2%
0%
2%

3%

0%

10%

10%

20%

30%

40%

50%

60%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory
Board) ‒ Question: “D10. What do you think would facilitate more impact investing? (MA, up to 3)”

42 Figure 34 excluded invalid responses that had selected four or more answers, as respondents were asked to select up to three.

70%

58

Chapter 2

Conditions that facilitate impact investing 43
The Survey asked the responding institutions to describe” what they think would facilitate impact investing”
in the open-ended question, and the following responses were obtained. In addition to incentives and preferential treatment oﬀered by the government, there should be accumulation of examples and elaborate impact
measurement and management, which will require cost and labor be added to conventional processes.

“

It is necessary that the government urges asset owners and asset managers to include impacts ininvestment evaluation, and listed companies to disclose information about impacts, and that”

common guidelines are provided in order to facilitate measurement and disclosure of impacts byasset owners, asset managers, and listed companies.

“

A methodology for impact measurement should be established so that data about measured returnon investments will be accumulated to show that a business can make an impact while earning”

return on investment.

“

The cost and human resources that would be required more than that of conventional investment“

Impact investing does not always yield monetary returns that are worth the risks involved. Non-mon-

methods should be reduced.

etary returns earned through certiﬁcation or labeling, and preferential treatment that provides inves-””

tors with monetary rewards for impact creation leading to contribution to society, may serve as
investment incentives.

“

The impact investing market needs diverse investors, including mainstream ones. The following areneeded to encourage their entry into the market: (1) Successful examples to present, (2) Talent”development within investment team to avoid impact investing with no substance (i.e., a balance
between economic eﬃciency and social beneﬁts, know-how for impact measurement, and a network
for collecting and spreading information), (3) Support from administration (e.g., a tax break for ﬁnancial institutions, branding and marketing), (4) Deep understanding by management coupled with theability to design and promote practical and feasible initiatives on the part of capital providers.

“

We think that impact investing will increasingly replace conventional investments if municipalities,
regional banks, local ﬁnancial institutions (e.g., credit unions), and organizations for public beneﬁt”(e.g., educational corporations and healthcare corporations) have restrictions on investments ingovernment bonds and investment trusts, and if the current investment approaches that focus on
ﬁnancial returns are visualized and evaluated.

Changes within an organization from the year before in relation to impact investing• To the question about changes within an organization from the year before in relation to impact investing, the majority of responding impact investing institutions note that their organizations “increasingly
support impact investing” (76%), and many also answered that their organizations “plan and make more
impact investing” (57%).
43 Some of the responses to Question D11. “Please describe what you think is needed to facilitate more impact investing” were edited
and excerpted without changing their meanings. The underlines were added by the writer. These comments are the respondentsʼ
personal or organizational views and do not represent the view of the GSG National Advisory Board.

59• When responses are compared to the 2019 Survey (last year), fewer respondents perceived that theirorganizations “plan and make more impact investing,” and that “it became easier to convince relevantinternal staﬀ of beneﬁts of impact investing” 44(Reference)

Figure 35. Changes within an organization from the year before in relation to impact investing 45■ 2020 Survey (n=26)■ 2019 Survey (n=11)

The organization increasingly supports

76%

impact investing57%

The organization plans and makesmore impact investing
It has become easier to convince

82%

48%

relevant internal staﬀ for impact investing

The organizationʼ s attitude toward impact investing shifted

43%

from “why we should do it” to “how we should do it.”

The organization is now strongly committed to
The organizationʼ s key decision-makers are0%less motivated to make impact investing

0％

73%

55%

43%

27%

impact management

82%

9%

10％

20％

30％

40％

50％

60％

70％

80％

90％

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2019and 2020) (GSG National Advisory Board) ‒ Question: “D2. What changes do you observe within your organization compared to a year ago? Please select all that apply. (MA)”Japanʼs Impact Investing Activities
This section provides an overview of how “impact investing institutions” that are engaged in impact
investing and meet the aforementioned inclusion criteria are doing in their impact investing based on
the responses to the Questionnaire Survey regarding Impact Investment (2020).
Impact AUM and the number of investments made in Japan based on responses to the Questionnaire Survey• The total of impact AUM and asset manager AUM in Japan was approximately 512.6 billion yen (asshown in Figure 23 (1) in the previous section) as of the last ﬁscal year-end, based on the respondentsof this Survey (FY2020). The total impact AUM calculated from the last yearʼs Questionnaire Survey(FY2019) was 317.9 billion yen.
• The number of impact investing made as of the last ﬁscal year-end was 183.

44 The 2019 Survey had fewer number of samples, and the 2020 Survey had more new respondents. Hence, comparisons between
these two surveys are made only as a reference.

45 Figure 35 shows the results of responses only from the organizations that are engaged in impact investing and meet the
aforementioned inclusion criteria. The organizations that provided no answer were excluded.

60

Chapter 2

Figure 36. Total impact AUM and asset manager AUM and the number of investments made 46

Last Fiscal Year-end

AUM (n=22)

Number of Investments Made (n=19)

Median1.471 billion yen

7

Average23.3 billion yen

10

512.608 billion yen

183

Total

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2019 and2020) (GSG National Advisory Board) ‒ Question: “A2 (2). Please provide your organizationʼs impact AUM and thesize of asset manager AUM as of the last ﬁscal year-end. (NA)” and “A3 (2). Please provide the number of impact
investing your organizations made as of the last ﬁscal year-end. (NA)”

Changes in AUM held by impact investing institutions that participated in the 2019 and 2020 surveys• 13 organizations responded to the 2019 and 2020 surveys. The impact AUM calculated from the 2019
Survey were approx. 307.7 billion yen, and those from the 2020 Survey were approx. 425.2 billion yen.
• The year-on-year growth rate was 138%, and 5 of the 13 organizations had increased their impact AUM.
• These results conﬁrmed that the institutions that have long been making impact investing further
increased the investments.

Figure 37. Impact AUM, asset manager AUM and the number of investments made by repeat
responding institutions 47
Repeat Respondents to
the Questionnaire Survey(n=13)FY2019FY2020

Impact AUM and

307.683425.243

Asset Manager AUM

billion yen

billion yen

Growth Rate

Count of Growth(YoY)(Number of institutions that
had year-over-year growth)

138%

5

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2019 and2020) (GSG National Advisory Board) ‒ Question: “A2 (2). Please provide your organizationʼs impact AUM and the sizeof asset manager AUM as of the last ﬁscal year-end. (NA)”46 Figure 36 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned
inclusion criteria. As for investment assets, responses from four organizations whose impact AUM were also counted as other respondingorganizationsʼ AUM (double-counting) were excluded. This means that the responses from 22 organizations out of the impact investing
institutions (n = 26) were counted. The number of investments made excludes responses from organizations that provided no answer.

47 The amounts from the 2019 and 2020 surveys in Figure 37 show the results of responses only from the organizations that are

engaged in impact investing and meet the aforementioned inclusion criteria. Responses from responded organizations that provided
no answers or whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

61

Proportions of impact AUM and asset manager AUM• 50% of the impact investing institutions had impact AUM of less than 1.0 billion yen as of the last ﬁscal
year-end, based on the respondents to this Survey.
• A clear minority (9%) of these institutions had impact AUM of at least 100 billion yen.

9%

Figure 38.
Proportions of impact AUM
and asset manager AUM 48

27%

50%

14%

■ 50%

Less than 1.0■ 14%

1.0 - less than 10.0

■ 27%

10.0 - less than 100.0■ 9%

100.0 -

n=22, Billions of yen

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “A2 (2). Please provide your organizationʼs impact AUM and the size of asset manager AUM as of the lastﬁscal year-end. (NA)”

Proportions of the numbers of impact investing made
• 63% of the impact investing institutions had made less than 10 impact investing as of the last ﬁscal
year-end, based on the respondents to this Survey.
• A clear minority (11%) of these institutions made at least 20 impact investing.

11%

Figure 39.
Proportions of the number ofimpact investing made 49

26%
63%

■ 63%

Fewer than 10■ 26%

11 - fewer than 20

■ 11%

20 -

n=19

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board) ‒ “A3(2). Please provide the number of impact investing your organization made as of the last ﬁscal year-end. (NA)”48 Figure 38 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. Responses from organizations that provided no answers or whose impact AUM were also counted as other
responding organizationsʼ AUM (double-counting) were excluded.

49 Figure 39 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. Responses from organizations that provided no answers or whose impact AUM were also counted as other
responding organizationsʼ AUM (double-counting) were excluded.

62

Chapter 2

Asset classes of impact investing• To the question about the asset classes of impact investing, many responding institutions answered thatthey allocate their impact investing to “private equity” (40%), followed by “public equity” (28%).
• On the other hand, the majority of impact Asset under Management (AUM) are “private debt” (52%),
followed by “public equity” (33%).
• These results conﬁrmed that impact investing is widely allocated to the asset class of equity (especiallyprivate equity), while most of the impact AUM are allocated to the classes of private debt or public equity.

Figure 40. Asset classes of impact investing 50
Private equity

40%

12%

Public equity

28%

33%

Private debt

24%

52%

(other than public and corporate bonds)

Beneﬁcial interest

1%

Public and corporate bonds

2%

Equity-like debt

0.04%

Crowdfunding

0.07%

Real assets

0%

20%
12%
4%

■ Of responding institutions（n=25）

4%
0%

12%(e.g., convertible debt)

Other■ Of impact AUM（AUM=195.662 billion yen）

0.21%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)– Question: “A5 (5) Investment methods (MA)”

Impact investments by asset class: International comparison• The results of the GIIN Survey 2020 (Figure 30) used for international comparison show that the majorityof responding institutions allocate their impact investments to “private equity” (70%), followed by“private debt” (58%).
• These results conﬁrmed that private equity is internationally more common as an asset class of impact
investing than in Japan.

50 Figure 40 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned
inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

51 Figure 41 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers
and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting)were excluded. The chart shows only comparable items from the GIIN Survey.

63

Figure 41. Impact investing by asset class: International comparison 51

Private equity

70%

40%

Private debt (other than public and corporate bonds)

58%

24%

Equity-like debt (e.g., convertible debt)

21%

4%

Public equity

17%

Real assets

17%

0%

Public and corporate bonds

15%
12%

Other

15%
12%

0%

10%

20%

28%

■ GIIN Survey 2020 (n=289)■ Impact investing institutions（n=25）
30%

40%

50%

60%

70%

80%

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. ‒ Question: “A5 (5) Investment methods (MA)”

Impact investees by organization type
• As for the impact investees by organization type, a clear majority of responding institutions answeredthat they invest in “(direct investments) private companies” (56%), followed by “(direct investments)
publicly traded companies” (32%).
• On the other hand, the majority of impact AUM are allocated to “(direct investments) publicly traded
companies” (80%), followed by “(direct investments) private companies” (13%).
• These results conﬁrmed that impact investing is widely made in private companies in line with asset
allocation, while most of the impact AUM are allocated to publicly traded companies to which massive
loans are given and whose stocks are listed.
Figure 42. Impact investees by organization type 52[Direct investment] Private companies

56%[Direct investment] Other

0.05%

8%

[Direct investment] Nonproﬁts

0.04%

8%

[For intermediaries] Asset managers

8%[For intermediaries] VC and PE

0.01%

4%

[For intermediaries] Government sector

0.62%

4%

[For intermediaries] Other

16%

institutions（n=25）

80%[Direct investment] Publicly traded companies

32%■ Of responding

13%

6%

■ Of impact AUM（AUM=195.662 billion yen）

0%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “A5 (3) Types of investee organizations (MA)”52 Figure 42 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers
and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting)were excluded.

64

Chapter 2

Impact investees by stage of business• As for the growth stages of the impact investees, a clear majority of responding institutions answeredthat the impact investees are at the “growth-stage (generating revenues)” (65%), followed by the“venture-stage (not yet generating revenues)” (57%).
• On the other hand, a clear majority of impact AUM are allocated to companies at the “later-stage (publicly traded companies that earn good proﬁts and have good size)” (70%), followed by the “later-stage(private companies that earn good proﬁts and are of a suﬃcient size)” (19%).
• These results conﬁrmed that certain percentages of impact investing are evenly made in companies at
diﬀerent stages of business, while most of the impact AUM are allocated to publicly traded companies
at a later stage.
Figure 43. Impact investees by stage of business 53■ Of impact AUM■ Of responding institutions（n=23）（AUM=191.522 billion yen）
Growth-stage

65%

5%

(generating revenues)

Venture-stage

57%

5%

(not yet generating revenues)

Later-stage

48%(private companies that earn good proﬁts
and are of a suﬃcient size)

48%(listed companies that earn good proﬁts
and are of good size)

19%

Later-stage

26%

Seed-stage(only the beginning, e.g., just an idea)

70%

2%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “A5 (4) Stages (MA)”

Impact investees by stage of business: International comparison• The results of the GIIN Survey 2020 (Figure 33) used for international comparison show that the majorityof responding institutions invest in companies at the “growth-stage (generating revenues)” (76%),
followed by the “venture-stage (not yet generating revenues)” (63%).
• These results conﬁrmed that impact investing institutions around the world more commonly invest in
private companies across at the growth, venture, and seed stages than their counterparts in Japan.

53 Figure 43 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned
inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

54 Figure 44 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers
and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting)were excluded. The chart shows only comparable items from the GIIN Survey.

65

Figure 44. Impact investees by stage of business: International comparison 54■ GIIN Survey 2020 (n=232)■ Impact investing institutions（n=23）

Growth-stage

65%(generating revenues)

Venture-stage

57%(not yet generating revenues)

Later-stage

38%(private companies that earn good proﬁts and are of a suﬃcient size)

Seed-stage

26%(only the beginning, e.g., just an idea)

Later-stage

0％

10％

20％

63%

48%

36%

15%

(listed companies that earn good proﬁts and are of good size)

76%

48%

30％

40％

50％

60％

70％

80％

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. - Question: “A5 (4) Stages (MA)”

Impact investees by region• As for investees by region, the majority of responding institutions answered “Japan” (83%). The majorityof impact AUM are also allocated to companies in Japan (52%).
• Secondly, as high as 29% of responding institutions noted “Asia” (excluding Japan) and 25% “North America.”• Following Japan, as high as 32% of impact AUM are allocated to companies in Europe.
• The results of the GIIN Survey 2020 (Figure 26) show that the majority of responding institutions invest
in companies in the United States and Canada (47%), followed by Sub-Saharan Africa (43%). The majority of impact AUM are allocated to companies in the United States and Canada (30%), followed by
Europe (excluding Eastern Europe) (15%).
• These results conﬁrmed that, while many respondents noted Japan as the region where their impact
investing go partly because this Survey is intended for companies in Japan, almost half of impact AUM
are allocated to overseas businesses.
Figure 45. Impact investees by region 55
Japan

83%

Europe17%

9%Asia (excluding Japan)

29%

institutions（n=24）

32%

North America

25%■ Of responding

52%

6%

13%

Latin America

1%

13%

Africa1%

Oceania0%4%■ Of impact AUM（AUM=165.858 billion yen）

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory
Board) ‒ Question: “A8. Please provide a breakdown of impact AUM by region, with all assets being 100.” (NA)”55 Figure 45 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned
inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

66

Chapter 2

Impact investees by sector• As for the impact investeesʼ sectors, a clear majority of responding institutions answered that they invest
in “quality education” (70%), followed by “health/healthcare” (65%).
• The majority of impact AUM are allocated to “addressing and mitigating climate change” (26%), followedby “renewable energy (19%).
• As for the impact investeesʼ themes, respondents noted the themes to address serious social issues inJapan, including the declining birthrate, aging population and gender inequality. In terms of impact AUM
basis, however, the Survey conﬁrmed that most of their impact AUM focused on global issues such as
climate change and renewable energy to address the crisis.
Figure 46. Impact investees by sector 56■ Of responding institutions（n=23）■ Of impact AUM（AUM=45.937 billion yen）
Quality education and parenting

70%

3%

Health/healthcare

65%

13%

Promotion of active female participation

61%
39%

Renewable energy

39%

Infrastructure/urban development

19%
7%

IT and advanced technology

35%

Environmental protection

30%

Financial services

30%(other than microﬁnance)

5%
2%
1%

Housing5%26%

Microﬁnance

3%

26%

Food security/sustainable agriculture

2%

26%

Support for small & medium-sized businesses

1%

30%

Addressing and mitigating climate change

22%

35%

11%

26%

13%

Arts and culture

0%

13%

Water resource security/hygiene

0%

Other

2%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “A7. Please provide whether you make impact investing by sector, and a breakdown of impact AUM by
sector, with all assets being 100.” (SA, NA)”

56 Figure 46 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned
inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact AUM, outliers and responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

67

Impact investees by sector: International comparison• The results of the GIIN Survey 2020 (Figure 28) used for international comparison show that a clear
majority of responding institutions invest in “food security/sustainable agriculture” (57%), followed by“health/healthcare” (49%).
• There was a considerable diﬀerence between these international respondents and respondents in Japanin percentage points for “food security/sustainable agriculture” (31 points, international > Japan), and“quality education and parenting” (29 points, Japan > international).
Figure 47. Impact investees by sector: International comparison 57■ GIIN Survey 2020 (n=289)

Food security/sustainable agriculture■ Impact investing institutions（n=23）

57%

26%
49%

Health/healthcare
Renewable energy

39%

65%

46%

41%

Quality education and parenting
Financial services（(other than microﬁnance)

30%

Housing30%

Microﬁnance

30%
26%
26%

IT and advanced technology
Water resource security/hygiene

21%
9%Arts and culture

39%
39%

35%

23%

13%

Infrastructure/urban development

39%

13%

Other

35%
0％

10％

70%

20％

30％

40％

49%

50％

60％

70％

80％

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. ‒ Question: “A7. Please provide whether you
make impact investing by sector, and a breakdown of impact AUM by sector, with all assets being 100.” (SA, NA)”

57 Figure 47 shows the results of responses only from the organizations that are engaged in impact investing and meet the
aforementioned inclusion criteria. The organizations that provided no answer were excluded. As for responses based on impact

AUM, outliers and responses from organizations whose impact AUM were also counted as other responding organizationsʼAUM (double-counting) were excluded. The chart shows only comparable items from the GIIN Survey.

68

Chapter 2

Impact investing institutionsʼ plans for future impact investment• A clear majority of impact investing institutions answered that they plan to “increase” (75%) impact
investing. None of the institutions plan to “decrease.”• 15% of non-impact investing institutions plan to “increase (/start)” impact investing, and 57% are“considering” impact investing ( =46).
• Three-fourths of the impact investing institutions plan to increase impact investing, which indicates thatthe market will likely grow.

Figure 48. Impact investing institutionsʼ plans for future impact investment 58
4%
17%
4%
75%

■ 75%

Increase■ 4%

Maintain■ 0%

Decrease■ 17%

Considering impact investing

■ 4%

Other

n=24

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “D8. Please select one of the following that is closest to your plan for future impact investment. (SA)”

Impact investing institutionsʼ plans for future impact investment (by sector)• The majority of these impact investing institutions plan to “increase” impact investing in “renewableenergy” (88%), followed by “quality education and parenting” and “addressing and mitigating climatechange” (83% each).
• In the GIIN Survey 2020 (Figure 29), the majority of respondents plan to “increase” impact investing in“food and agriculture” (54%), followed by “renewable energy” (53%).
• These results conﬁrmed that these institutionsʼ plans show the similar trends to those in “impact investees by sector (Figure 46)” at present.

58 Figure 48 shows the results of responses only from the organizations that are engaged in impact investing and meet the
aforementioned inclusion criteria. The organizations that provided no answer were excluded.

69

Figure 49. Impact investing institutionsʼ plans for future impact investment (by sector) 59■ Increase■ Maintain■ Decrease■ Considering impact investingn=Renewable energy

88%

13%

16

Quality education and parenting

83%

6% 11%

18

Addressing and mitigating climate change

83%

17%

18

Promotion of active female participation

82%

18%

17

Food security/sustainable agriculture

80%

20%

15

Health/healthcare

76%

12%

12%

17

Financial services (other than microﬁnance)

75%

8%

17%

12

13%

15

IT and advanced technology

73%

13%

Microﬁnance

73%

9%

Environmental protection

71%

29%

17

Support for small & medium-sized businesses

69%

31%

16

Water resource security/hygiene

64%

Arts and culture

63%

18%

21%

14

25%

8

14%
13%

11

Infrastructure/urban development

56%

6%

38%

16

Housing

54%

8%

38%

13

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “D9. Please circle your answer for each sector based on your plan for future impact investments. (SA)”

Ideas and eﬀorts applied to the planning, implementation, and measurement of impact investing 60
The Survey asked impact investing institutions to describe “ideas and eﬀorts applied to the planning,
implementation, and measurement of impact investing.” Some of the responses to this open-ended question are provided below. These answers show how the respondents use creativity to incorporate impact
measurement and management, which diﬀerentiate impact investing from conventional investment methods, into the process.

59 Figure 49 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. Some items do not sum to 100% due to theprocessing of decimal points.

60 Some of the responses to Question D3. “Please describe ideas or eﬀorts that your organization applies to the process of impact
investing from planning and implementation to post-investment measurement, if any” were edited and excerpted without changing
their meanings. The underlines were added by the writer. These comments are the respondentsʼ personal or organizational views
and do not represent the view of the GSG National Advisory Board.

70

Chapter 2“

Incorporating impact measurement into communication with potential investee companies deepens our understanding of their businesses, and so we use the measurement to examine proﬁtabili-”

ty and social beneﬁts more thoroughly. We now apply the angles of IMPʼs ﬁve dimensions and
IRIS+ more consciously to the impact measurement models we create for due diligence on potential investee companies.

“

We studied precedents in other countries and contacted impact investing communities around the“We keep in mind that we should discuss not only the societal values our company is aware of, but“

We take time to agree about what sets impact investing apart from the exit strategies that current

world to analyze issues and opportunities involved in impact investing.

whether we are missing any societal values.

investments and venture capital aim for, what impact investing intends to achieve, and what bene-”””

ﬁts it oﬀers for investee companies.

“

We participate in on-the-ground research and attend board meetings to keep ourselves updated
on the status of our investments and discuss it in order to ensure that the initially planned impact”

will be achieved.

“

We provide opportunities for investors and asset managers, or investors and investee companies,
to develop mutual trust (e.g., meetings of beneﬁciaries (our own brieﬁng sessions on investments),”

visits to investee companies, and speaking engagements by investee companiesʼ management).

“

We have asked investee companies to disclose the impacts and related KPIs.

”

Status of Impact Measurement and Management in Japan
This section provides an overview of impact measurement and management, which diﬀerentiates
between impact investing and conventional investment, primarily by “impact investing institutions” thatare engaged in impact investing and meet the aforementioned inclusion criteria, based on responses to
the Questionnaire Survey regarding Impact Investment (2020).

Tools and frameworks utilized in impact measurement• The most respondents answered “Sustainable Development Goals (SDGs)” (94%) as tools and frameworks utilized in impact measurement, followed by “IRIS Catalog of Metrics” and “IRIS+ Core Metrics
Sets” (38% each).
• In the GIIN Survey 2020 (Figure 36) also, the most respondents answered “Sustainable Development
Goals (SDGs)” (73%).
• This conﬁrmed that SDGs are being utilized widely in Japan as well as globally. The IRIS and IMP tool
sets, which are becoming a standard among impact investing institutions are used less frequently thanSDGs, but were utilized at about the same level in Japan as globally.

71

Figure 50. Tools and frameworks used in impact measurement 61■ GIIN Survey 2020 (n=294)■ Impact investing institutions（n=16）73%

UN Sustainable Development Goals（SDGs）
IRIS Catalog of Metrics

38%

IRIS+ Core Metrics Sets

36%
38%

18%
19%

Operating Principles for Impact Management
9%

Sustainability Accounting Standards Board (SASB)

19%

Global Reporting Initiative (GRI)

11%
13%

UN Principles for Responsible Investment (UNPRI)

13%

Aeris CDFI Rating System

46%

32%
31%

5 dimensions of impact of
Impact Management Project (IMP)B Analytics, GIIRS

94%

18%

0%
0%

29%

11%
17%

Other

25%

11%

Do not use external tools or frameworks

0%

10%

20%

38%
30%

40%

50%

60%

70%

80%

90% 100%

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. ‒ Question: “C1. Do you use the following
tools and frameworks for measuring impact of your impact investing activities? Please select all that apply. (MA)”

Purpose of using tools and frameworks• The largest number of respondents answered “setting goals” (88%) as the purpose of using “Sustainable
Development Goals (SDGs),” which is most frequently used for measurement of impact, followed by“measuring results” (63%) and “reporting results” (38%).
• The tool sets of IRIS (IRIS Catalog of Metrics and Core Metrics Sets) were used for setting goals andmeasuring results.

61 Figure 50 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded.

72

Chapter 2

Figure 51. Purpose of using tools and frameworks 62

n=16

UN Sustainable Development Goals（SDGs）

38%

IRIS Catalog of Metrics

38%
38%

25%

IRIS+ Core Metrics Sets

88%

63%

38%
38%

25%
31%

5 dimensions of impact of
Impact Management Project (IMP)19%

Operating Principles for Impact Management

19%
19%

■ To set goals

19%■ To report results

13%

Sustainability Accounting Standards Board (SASB)
0%

Global Reporting Initiative (GRI)0%

UN Principles for Responsible Investment (UNPRI)

6%

6%

6%

0%

25%

■ To measure results

13%

13%
13%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “C1. Do you use the following tools and frameworks for measuring impact of your impact investing activities? Please select all that apply. (MA)”Types of impact metrics• “Both output and outcome” (40%) was cited the most as a pattern among the impact metrics types,
followed by “all of output, outcome, and negative impact” (32%).
• At the same time, there was a small number of respondents selecting “output alone” (12%).
Figure 52. Types of measurement metrics adopted for implementation of impact investing 63

8%

8%
40%

12%

32%

■ 40%

Both output and outcome■ 32%

All of output, outcome, negative impact■ 12%

Output alone■ 8%

Outcome alone■ 8%

Outcome and negative impact alone

n=25

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory
Board) ‒ Question: “A5(7). Type of measurement metrics (MA)”62 Figure 51 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded.

63 Figure 52 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded.

73

Utilization method of impact measurement results• Some 63% of impact investing institutions replied that they “share the measurement results with impact
investees” as a method of utilizing impact measurement results.
• Upon sharing the result, some 50% of the respondents said they “jointly consider how to improve thebusiness,” while 42% were limited to “interviewing how to improve the business.”• At the same time, although few, some responded that they “do not share the measurement results with
the impact investees” (13%).
Figure 53. Utilization method of impact measurement results 64

n=24

Share measurement results with investees

63%

Share measurement results with investees andjointly consider how to improve the project50%

Share measurement results with investees andinterview how to improve the project

42%
17%

Other
Do not share the measurement results with the investees

13%

0

10%

20%

30%

40%

50%

60%

70%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “C3. Please select all that apply as the methods of utilizing the impact measurement results. (MA)”Information disclosure regarding impact investing• Some 50% of the impact investing institutions said they “publicly disclose” the information regarding
impact investing. Some 29% said they “disclose information to some investors in a limited manner (donot publicly disclose it)” and 25% said they “do not disclose.”
Figure 54. Information disclosure regarding impact investing 65
n=24

Publicly disclose it

50%

Disclose information to some investors in a limited manner29%(do not publicly disclose it)25%

Do not disclose it
0％

10％

20％

30％

40％

50％

60％

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “C4. Do you make any sort of disclosure regarding impact investing? Please select all that apply. (MA)”64 Figure 53 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded.

65 Figure 54 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded.

74

Chapter 2

SDGs-linked impact measurement• Regarding the implementation status of SDGs-linked impact measurement, 39% of the impact investing
institutions said they “link all impact measurement with SDGs.” Some 30% said they “link some of
impact measurement with SDGs” and 13% replied that they “currently do not link them with SDGs but
plan to do so in the future.”• In comparison with the survey in FY2019 (the previous ﬁscal year), the ratio of those who answered thatthey “link some impact measurement with SDGs” increased (0% in FY2019 -> 30% in FY2020 66.

Figure 55. Impact measurement linked to SDGs 67
0％10％

FY2020 Survey（n=23）

20％

30％

40％

50％

39%

FY2019 Survey（n=12）

70％

30%

42%

■ Link all impact measurement with SDGs

60％

80％
13%

42%

90％

100％

13%

4%

17%

■ Link some impact measurement with SDGs

■ Currently do not link them with SDGs but plan to do so in the future■ Currently do not link them with SDGs and do not plan to do so in the future■ Other

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “C5. Are you carrying out impact measurement linked to Sustainable Development Goals (SDGs)? Please
select all that apply. (MA)”

Reasons for linking impact measurement with SDGs
• As a reason for linking impact measurement and SDGs, the largest number of the respondents said “it isa framework that is widely recognized and it is helpful when explaining impact investing externally”(100%), followed by “it is important to link with international development paradigm for an impact investor” (63%).
• As SDGs are widely utilized globally (Figure 50), the trend of institutions considering the link with SDGs
as eﬀective also for linking and collaborating with global impact investing initiatives was conﬁrmed fromthe responses to the top two questions.

66 The 2019 Survey had fewer number of samples, and the 2020 Survey had more new respondents. Hence, comparisons between these
two surveys are made only as a reference.

67 Figure 55 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. Some items do not sum to 100% due to theprocessing of decimal points.

68 Figure 56 targets the impact investing institutions that said they “link all or some social impact measurement with SDGs” in Question
C5. “Theory of Change” in the ﬁgure denotes the theory that systematically sorts out the causal relationship by grasping steps
towards ﬁnal outcome and missions that the institutions aim to achieve.

75

Figure 56. Reasons for linking impact measurement with SDGs 68

n=16

It is a framework that is widely recognized and
it is helpful when explaining impact investing externally100%

It is important to link with the international
development paradigm, as an impact investor

63%

It makes it possible to attract investors

44%(it helps to acquire investors)

It makes it possible to attract investees

38%(it helps to develop investee organizations)

It helps to upgrade the Theory of Change andset forth appropriate impact goals and targets

31%

It helps to come up with new investment strategies
and investment opportunities

31%

It helps to identify joint investors
and joint investment opportunities

6%0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory Board)‒ Question: “C5SQ1. Please select all that apply as a reason for which you link SDGs with social impact measurement. (MA)”

Method of linking impact measurement with SDGs
• As a method of linking impact measurement and SDGs, the largest number of institutions answered thatthey “mapped existing portfolio on SDGs” (56%), followed by they “measure impact by setting metrics
for measuring contributions to SDGs” (38%).
• It was conﬁrmed that SDGs are frequently utilized for ensuring consistency with the existing initiatives.
Figure 57. Method of linking impact measurement with SDGs 69
n=16

Mapped existing portfolio on SDGs

56%

Measure impact by setting indicators
or measuring contributions to SDG

38%

Procured new funds by clearly targeting SDGs

25%

Incorporated SDGs in impact management
and management system

25%

Incorporated alignment with SDGs as a ﬁlter for selecting investments

19%

Set SDGs targeting as a core factor of investment strategy

13%

0%

10%

20%

30%

40%

50%

60%

Source: Created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG National Advisory
Board) ‒ Question: “C5SQ2. How did you link impact investing with SDGs? Please select all that apply. (MA)”69 Figure 57 targets the impact investing institutions that said they “link all or some social impact measurement with SDGs” in Question

C5. “Social impact management” in the ﬁgure is management that aims to achieve a greater impact by incorporating social impact
measurement into the process of business operation in order to make improvements in a business and to make decisions based on
acquired information.

76

Chapter 2

Impact measuring method and process 70
The Survey asked the impact investing institutions to comment on “impact measuring method andprocess” in the open-ended question. Some of the responses are provided below. The impact investing
institutions appeared to be going through trial and error in incorporating the impact measurement andmonitoring.

“

In the phase prior to investment implementation, we set forth impact goals and monitoring indicators through meetings with investee companies. Subsequently, we deliberate on adequacy of the”

impact goals and monitoring indicators at in-house meetings. Once investment is implemented, we
conﬁrm the progress of achievement of the established monitoring indicators on a regular basis.

“

We contemplate implementation of impact measurement and management of funds and investees.
In particular, we work together with the management of investees on preparation of impact”

measurement models and selection of measurement indicators from the stage of due diligence(DD). While we utilize IMPʼs 5 dimensions, IRIS+, SDGs, etc., we follow up on recent trends on B
analytics, impact management principle, SASB, impact-weighted accounts, etc.

“

We comprehensively extract positive and negative impacts resulting from a companyʼs business,
products, service, and activities, categorize them using UNEP FIʼs Impact Radar, and identify the”

impacts that are especially important for realizing sustainability of the company, society, andenvironment. If it is diﬃcult to measure an impact directly, we utilize logic models and appropriate
frameworks and set forth an impact or alternative indicator for the impact.

“

We set forth KPI based on logic models, etc. that are set before making investment. Based on this,“We measure the impact by taking objectivity into consideration such as third-party evaluation and“

We use our own ESG Score Card and SDGs Indicator to support growth of our investees andwe conﬁrm the impact status along with ﬁnancial status at the monthly board meeting.

standards regarding the content, etc. disclosed by the investment targets.

measure SDGs impacts. Our investment staﬀ carry out prior review and evaluation, and then the”””ﬁnal evaluation is made at the investment committee where investment decisions are made.

“We measure impacts from the disclosed contents of impact reports by the issuers and asset
managers (ﬁnancial institutions).

”

70 We edited and excerpted part of answers of Question C2. “Please describe the impact measuring method and process as much as
possible.” without changing the meaning. The underlines were added by the writer. These comments are the respondentsʼ personalor organizational views and do not represent the view of the GSG National Advisory Board.

77

Return and Impact of Impact InvestingThis section conﬁrms expected level of returns by institutions that are engaged in impact investing andmeet the aforementioned inclusion criteria as well as the rate of achievement of the actual return impact
based on responses to the Questionnaire Survey regarding Impact Investment (2020).
Expected levels of ﬁnancial returns in impact investing• Concerning expected levels of ﬁnancial returns, the largest number of the impact investing institutions
said “return exceeding the market level after adjusting risks” (60%), while there were certain number of
institutions that said “below the return of market level (however, it is closer to the market level)” (12%)
and “below the market level (however, it is closer to investment principal preservation)” (8%).
• More equity-focused investment institutions said they would allow “below the return of market level”
compared with the overall institutions.
• Meanwhile, many of debt-focused investment institutions answered “return exceeding the market level
after adjusting risks” (83%)71.
• In the GIIN Survey 2020 (Figure 5), the ratio of respondents answering “return exceeding the market level
after adjusting risks” was at 67%, which is about the same level as in Japan, but the ratio of thoseanswered “below the market level (however, it is closer to investment principal preservation)” (15%)
tended to be more than in Japan.
Figure 58. Expected level of ﬁnancial returns 72
0%

GIIN Survey 2020（n=294）

10%

20%

30%

40%

50%

60%

70%

67%

Impact investing institutions（n=25）60%

Equity-focused（n=17）

59%

Debt-focused（n=6）

80%
18%

12%

100%

15%

8%

18%

90%

20%

12%

83%

12%
17%

■ Return exceeding the market level after adjusting risks■ Below the return of market level (however, it is closer to the return of the market level)■ Below the return of market level (however, it is closer to investment principal preservation)■ Other

Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. ‒ Question: “A9. What level is your goal forﬁnancial returns of impact investing? Please select one answer that most accurately describes your view. (SA)”71 The sample count of debt-focused investment institutions is small, so they are treated as a reference.

72 Figure 58 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. In the sub-analysis of equity-focused anddebt-focused investment institutions, the sum of count n does not match the total number because two institutions falling under
outliers are excluded. Some items do not sum to 100% due to the processing of decimal points.

78

Chapter 2

Rate of achievement of ﬁnancial returns in impact investing• Regarding the rate of achievement of ﬁnancial returns, the largest number of impact investing institutions said it was “in line with expectations” (56%), but there were certain numbers of institutions
answering “not sure” (24%), “more than expected” (16%), and “below expectations” (4%).
• More equity-focused investment institutions said the returns were “more than expected” (24%) comparedwith the overall institutions.
• Meanwhile, many debt-focused investment institutions said the returns were “in line with expectations”(50%)73.
• In the GIIN Survey 2020 (Figure 47), those who answered “in line with expectations” was also the highest(68%), but those who answered “more than expected” (20%) accounted for more than in Japan. Compared with the global survey, impact investing initiatives in Japan have just begun and the survey result
showed that there has been not enough track record of ﬁnancial returns being accumulated 74.

Figure 59. Rate of achievement of ﬁnancial returns 75
0%GIIN Survey 2020（n=282）

Impact investing institutions（n=25）

Equity-focused（n=17）

10%

20%

30%

40%

20%

60%

70%

80%

90%

68%

16%

56%

24%

Debt-focused（n=6）

50%

12%

4%

59%
50%

100%

24%

6%

12%

50%

■ More than expected ■ As expected ■ Less than expected ■ Not sure
Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. ‒ Question: “A10. How much ﬁnancial
returns and impact in impact investing have been achieved compared with the expectations? Please select one answer
that most accurately describes your view. (SA)”73 The sample count of debt-focused investment institutions is small, so they are treated as a reference.

74 It is necessary to pay attention to the fact that the GIIN Survey 2020 excludes “not sure” in aggregation of this question. In this report,
we also considered excluding “not sure” from the aggregation, but we decided to adopt the treatment shown in Figure 59 taking into

consideration that a certain number of respondents answering “not sure” gives some suggestions in the current stage in Japan,
where impact investing is expected to develop from now on.

75 Figure 59 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. In the sub-analysis of equity-focused anddebt-focused investment institutions, the sum of the count n does not match the total because two institutions falling under outliers
are excluded. Some items do not sum to 100% due to the processing of decimal points.

79

Rate of achievement of impact in impact investing• Regarding the rate of achievement of impact, the largest number of impact investing institutions as awhole answered that it was “in line with expectations” (50%), but there were certain numbers of institutions answering “not sure” (33%), “more than expected” (8%), and “below expectations” (8%).
• More equity-focused investment institutions said the returns were “more than expected” (12%)
compared with the overall institutions.
• Meanwhile, many debt-focused investment institutions replied “not sure” (60%) 76.
• In the GIIN Survey 2020 (Figure 47), those who answered “in line with expectations” was also the highest(78%), but those who replied “more than expected” (21%) accounted for more than in Japan.
• Compared with the global survey, impact investing initiatives in Japan have just begun and the survey
results showed that there has been not enough track record of impact generation being accumulated 77.

Figure 60. Rate of achievement of impact 78
10%0%

GIIN Survey 2020（n=274）

Impact investing institutions（n=24）

Equity-focused（n=17）
Debt-focused（n=5）

20%

30%

40%

50%

21%

8%

70%

80%

90%

100%

78%

50%

12%
20%

60%

1%

8%

33%

59%
20%

6%

24%

60%

■ More than expected ■ As expected ■ Less than expected ■ Not sure
Source: These ﬁgures have been created based on the Questionnaire Survey regarding Impact Investment (2020) (GSG
National Advisory Board) and the GIIN Annual Impact Investor Survey 2020. ‒ Question: “A10. How much ﬁnancial
returns and impact in impact investing have been achieved compared with the expectations? Please select one answer
that most accurately describes your view. (SA)”76 The sample count of debt-focused investment institutions is small, so they are treated as a reference.

77 It is necessary to pay attention to the fact that the GIIN Survey 2020 excludes “not sure” in aggregation of this question. In this report,
we also considered excluding “not sure” from the aggregation, but we decided to adopt the treatment shown in Figure 60, taking into
consideration that a certain number of respondents answering “not sure” gives some suggestions in the current stage in Japan,
where impact investing is expected to develop from now on.

78 Figure 60 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. The organizations that provided no answer were excluded. In the sub-analysis of equity-focused anddebt-focused investment institutions, the sum of the count n does not match the total because two institutions falling under outliers
are excluded. Some items do not sum to 100% due to the processing of decimal points.

80

Chapter 2

Summary : Vision of Impact Investing in Japan Based on Questionnaire Survey
ResultAccording to the results of the Questionnaire Survey (FY2020), the total of Japanʼs impact AUM and asset manager
AUM as of the last ﬁscal year-end was approximately 512.6 billion yen. The impact AUM as ascertained in the same
survey the previous ﬁscal year (FY2019) was 317.9 billion yen, so major progress has been made. At the same time,with regard to the evolution of impact investing in Japan, a majority of impact investing institutions see the market
as “about to take oﬀ” (Figure 30). It was also found that, compared to the international impact investing market,
which is viewed as “growing steadily,” Japan is still at the stage immediately preceding growth (Figure 31).
Regarding the motivation for impact investing, the most common response was “in order to meet the needs ofclients,” and second was “itʼs part of the commitment of a responsible investor.” This suggests that Japanʼs
impact investing market is poised for further growth going forward (Figure 29).
On the other hand, while most respondents view Japanʼs impact investing market as having progressed over the
past year in “actions inspired by the Principles for Responsible Investment, SDG Impact (UNDP), and the Operating
Principles for Impact Management (IFC),” among others, and in “the publicʼs awareness of and interest in impact
investing” (Figure 32), “fragmentary and unsystematic approaches to impact measurement and management” wascited as a challenge going forward both by institutions already engaged in impact investing and those considering
entering the market in the future (Figure 33). After impact measurement and management, the next two mostcommonly cited challenges were “a limited number of impact companies to invest in” and “limited availability ofprofessionals capable of helping impact companies make proﬁts and exit.” It can be assumed that the latter is also
an underlying factor for the former. The responses made it clear that Japan still has relatively few impact companies
that investors wish to invest in (Figure 33). And, as the market grows, there is a concern of ʻimpact washingʼ (regularinvestments are dressed up to resemble impact investing) which may lose the essence of impact investing. In fact,
the GIIN Survey 2020 (Figure 12) shows that a vast majority of impact investors cite impact washing as the single
most important issue that the impact investing market will face over the next ﬁve years.
The spread of the coronavirus, which ran rampant in 2020, the year of this survey, seems to have furthered understanding of the usefulness of impact investing. In fact, in this Questionnaire Survey, impact investing institutions
were asked about “the impact of COVID-19 on impact investing activities” in the open-ended question, and the
responses included comments such as “It has shined more light on the ʻsocialʼ element and conditions are becoming
more conducive to impact opportunities,” and “The emergence of social issues has made more people aware of it 79.”
There is likely to be more discussion and practice of impact investing in Japan going forward, and we believe that
this report, a kind of ﬁxed-point observation of the current location of impact investing in Japan, can serve as afoundation for discussion while providing suggestions for practice.
We would like to again express our appreciation to all of the people and organizations that participated in the
Questionnaire Survey regarding Impact Investment (2020).
It is our hope that this report contributes to solving social issues through impact investing.

79 We edited and excerpted part of answers of Question D7: “Please describe the impact (both negative and positive) of the spread of
the novel coronavirus infection on your impact investing, if any, ” without changing the meaning. The underlines were added by thewriter. These comments are the respondentsʼ personal or organizational views and do not represent the view of the GSG National
Advisory Board.

81

List of Organizations Which Responded to Questionnaire Survey
The list shows the 75 organizations that responded to the Questionnaire Survey regarding Impact Investment (including 17 organizations which declined to disclose the name; in a Japanese alphabetical order).
Nevertheless, not all organizations who responded to the survey listed below are engaged in impact
investing as of the preparation of this report.

Figure 61. List of Organizations Which Responded to Questionnaire Survey• Asset Management One Co., Ltd.

• Digisearch & Advertising Inc.

• SMBC Trust Bank Ltd.

• Tokyo CPB• Ehime Bank, Ltd.

• The Tottori Bank, Ltd.

• Oita Venture Capital Co., Ltd.

• The Toyota Foundation• Kamakura Investment Management Co., Ltd.

• Nagoyalease Co., Ltd.

• Energy & Environment Investment, Inc.

• Nomura Asset Management Co., Ltd.

• KIBOW Foundation• Nomura Real Estate Asset Management Co., Ltd.

• Kyoeki Investment Fund Japan• BNP Paribas Asset Management Japan Ltd.

• The Kyoto Shinkin Bank

• Hida Credit Cooperative• Crowd Credit, Inc.

• Fidea Lease Co., Ltd.

• Credit Suisse Securities (Japan) Limited, Credit• Fukoku Capital Management, Inc.

Suisse Tokyo Branch• Fukoku Mutual Life Insurance Company• Global Brain Corporation• Future Venture Capital Co., Ltd.

• Japan International Cooperation Agency• Plus Social Investment Co., Ltd.

• Japan Bank for International Cooperation• Breakpoint Co., Ltd.

• The Sasakawa Peace Foundation• Hokuriku Labour Bank

• Sun Messe Co., Ltd.

• Hokkaido Rokin Bank

• CSR Design Green Investment Advisory, Co., Ltd.

• Mizuho Bank, Ltd.

• Shizuoka Yaizu Shinkin Bank

• Mitsui Sumitomo Insurance Co., Ltd.

• The Social Innovation and Investment Foundation• Sumitomo Mitsui Banking Corporation• Sophia School Corporation• Sumitomo Mitsui Trust Bank, Limited• Shonan Shinkin Bank

• Sumitomo Mitsui Trust Asset Management Co., Ltd.

• Shinsei Corporate Investment Limited• Mitsubishi Corp. - UBS Realty Inc.

• Social Investment Partners• Mitsubishi UFJ Trust and Banking Corporation• Dai-ichi Kangyo Credit Cooperative• Mutosu Iida Citizenʼs Fund

• The Dai-ichi Life Insurance Company, Limited• Meiji Yasuda Asset Management Company Ltd.

• The Takamatsu Shinkin Bank

• Yamaguchi Capital• Takayama Shinkin Bank

• Daiwa Securities Group Inc.

• Regional Future Energy Nara

• The Rokinren Bank

• TNP Partners Corporation• 17 organizations declined to disclose their names.

82

Chapter 2

Potential of Japanʼs impact investing market− Estimated maximum and methodology −As stated earlier, along with the annual Questionnaire Survey, this ﬁscal year a market estimate survey
based on publicly available information was also conducted to ascertain aspects of the current state of
impact investing that cannot be grasped from the survey responses alone. The estimated maximum(potential) of Japanʼs impact investing market is as shown below. This section introduces the methodology used for the market estimate survey, which was conducted on a trial basis for the ﬁrst time this ﬁscal
year. It also summarizes the methodologies used by GIIN and IFC respectively for the market estimate
surveys that these organizations have led the way in conducting globally.
(Reposted) Marketʼs estimated maximum (potential): 2.64 trillion yen
This ﬁgure includes the sum of investments ascertained by the Questionnaire Survey and the sum of theamount of money originating in products for which the elements of impact measurement are embedded to set
impact KPIs and conduct the measurement before and after investing as found in publicly available information. This ﬁgure does not necessarily indicate that investors intentionally implement as impact investing.
As stated earlier, the estimated maximum of the market based on the GIIN Annual Impact Investor Survey
2020 80 was 715.0 billion dollars (approx. 79 trillion yen). The estimated maximum of the market based on
Growing Impact - New Insights into the Practice of Impact Investing 81 (IFC) was 505.0 billion dollars (approx.
56 trillion yen).
(Reposted) Figure 62. Scale of Impact Investment BalanceMarketʼs estimated maximum (potential)

Reference:
Marketʼs estimated maximum

2.64 trillion yen

1. Ascertained by
the questionnaire

Estimated maximum of potential impact investments. This ﬁgure includes thesum of investments ascertained by the Questionnaire Survey and the sum of
the amount of money originating in products for which the elements of impact
measurement are embedded to set impact KPIs and conduct the measurement before and after investing as found in publicly available information. Thisﬁgure does not necessarily indicate that investors intentionally implement as
impact investing.（Details are in the “Market Estimate Survey” section below）

Impact investing balance ascertained by the Questionnaire Survey

512.6 billion yen

Sum of investments that meet the inclusion criteria for impact investing basedon questionnaire responses; in other words, investments conﬁrmed as impact
investments for which impact measurement is conducted before and afterinvesting.（Details are in the “Questionnaire Survey” section below）

2. Sharing of
impactmeasurement

Impact investment balance derived from the questionnaire forwhich the impact measurement has been shared

328.7

billion yen

This ﬁgure is the sum of investment balances based on the Questionnaire
Survey for which direct investment has been made by the investor or forwhich the details of the impact measurement have been shared with the ﬁnal
investor by an intermediary.

80 (Reposted) GIIN Annual Impact Investor Survey 2020 (Global Impact Investing Network, GIIN):
https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf

81 Growing Impact - New Insights into the Practice of Impact Investing(International Finance Corporation, IFC):

https://www.ifc.org/wps/wcm/connect/8b8a0e92-6a8d-4df5-9db4-c888888b464e/2020-Growing-Impact.pdf?MOD=AJPERES&CV
ID=naZESt9

83

The following is a simpliﬁed explanation of the methods used by these two global market estimate
surveys. The GIIN survey makes it estimates based on disclosure data from institutional investors by
combining a database it created based on its annual questionnaire and the impact investor databases ofother companies. On another front, the IFC survey creates its estimate by relying on reporting of impact
investment balances by development ﬁnancial institutions as well as unlisted impact investing funds.
Our survey uses a method that makes reference to both GIIN and IFC. Speciﬁcally, the sum of the self-reported balances of impact investments by institutions engaged in impact investing as compiled in the
Questionnaire Survey on Impact Investment (2020) is combined with the amount of money originated from
(impact investing) products for which the elements of impact measurement are embedded to set impact
KPIs and conduct the measurement before and after investing as found in publicly available information,and this total amount is set as the marketʼs estimated maximum (potential).
The speciﬁc steps in this method of estimation are stated below. Like the market estimate surveys of GIIN
and the IFC, the estimate methodology will be reviewed going forward in order to raise the precision ofmarket estimates. Along with this, points to consider regarding inclusion criteria going forward (“Inclusion
criteria” at the beginning of Chapter 2) are also discussed in connection with revisions to the estimate
methodology.

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Chapter 2

Methodology of the market estimate survey ‒ Combined approach on investor and product basis ‒Step 1. Summary responses to FY 2019 and FY 2020 Questionnaire Survey regarding Impact Investment
The impact investment balance of institutions engaged in impact investing has been compiled based on
the responses to past yearsʼ Questionnaire Survey on Impact Investment (FY 2019 and FY 2020 after
updating inclusion criteria). Regarding impact investing through an investment management institution orother intermediary, double-counting with the investment balance of ﬁnal investors was eliminated to theextent possible.
Step 2-1. Specify product categories for which the elements of impact measurement are embedded,
based on the principles and guidelines of each product category
The principles and guidelines for each ﬁnancial product category (bonds, loans, etc.) were conﬁrmed andproduct groups identiﬁed for which the elements of impact measurement are embedded to set impact
KPIs and conduct the measurement before and after investing (sustainability-linked loans, positive
impact ﬁnance, sustainability-linked bonds, impact investment funds, etc.). Conﬁrmed whether impact
indicators were set when the product was arranged and whether conducting impact measurement before
and after investing is explicitly stated in principles and guidelines.
Step 2-2. Specify individual products for which impact measurement is embedded
Of Step 2-1, individual ﬁnancial products and funds for which the elements of impact measurement areembedded to set impact KPIs and conduct the measurement before and after investing, based on public
information and questionnaire ﬁndings (questions on ﬁnancial product basis), etc. were identiﬁed. Specifically, a list was made of individual ﬁnancial products for which impact measurement has been established based on corresponding information (measurement reports, press releases, etc.) published bythird-party measurement institutes, institutional investors, and ﬁnancial institutions, etc.
One of the following patterns is assumed.
• Belongs to a category speciﬁed in Step 2-1 and complies with corresponding principles and guidelines.
• Even if the product does not belong to a category speciﬁed in Step 2-2, it can be conﬁrmed that impact
indicators have been set and measurement conducted before and after as separate initiatives (somesustainability bonds, bond products, etc.).
Step 3. Estimated maximum (potential) of the Japanese market
Compiled after eliminating double-counting from Step 1 and Step 2-2 to the extent possible.
As an assumption, regarding Step 2-2, unlike information ascertained through the questionnaire, whether
ﬁnal investors investing in products that could constitute impact investing make their investments after
conﬁrming that it does constitute impact investing, and whether the investors themselves conduct theirown version of impact measurement are not known, so it diﬀers from the impact investing balancegrasped via the questionnaire survey. On this point, it will be necessary to consider revising the methodology going forward based on whether or not to make the intentionality of ﬁnal investors a requirement forinclusion in impact investment as discussed in the points to consider regarding inclusion criteria going
forward (“Inclusion criteria” at the beginning of Chapter 2).

85

The following summarizes the respective methodologies used by GIIN and IFC, so for details on the calculation method used, refer to the original reports indicated in the footnotes.
Figure 63. Market estimate methodologies of GIIN and IFC (for reference)
GIIN Investor-based approach 82
Step1. Integrate impact investor databases
Integrated the investor database managed by GIIN and other organizationsʼ databases (ImpactAssets, Phoenix
Capital, signatories to IFC Principles) and created an integrated database of institutional investors practicing
impact investing (1728 organizations).

Step2. Gather data on impact investing balance
For 865 of these organizations, impact investing balances from the most recent term-end (end- 2019) had beenreported, as per the integrated database, so these were compiled. For organizations for which there is only
investment balance data as of the end of 2018, their balances have been multiplied by a coeﬃcient, the averageannual growth rate in impact investing balances from the GIIN survey.

Step3. Calculate impact investment balance after excluding double-counting
The data in Step 2 is a mixture of the impact investment balances of asset owners and asset managers, so to
avoid double-counting, impact investment balances from asset owners through asset managers were removed.

Step4. Estimate impact investment balances for organizations for which the balance is unclear
Regarding the 863 organizations for which the impact investment balance is unclear, the average investment
balance by business category (excluding outliers) from past GIIN surveys, etc. is used as the estimate.

Step 5. Estimate overall market
Impact investment balances judged by the GIIN survey team to not be included in Step 3 and 4 were also included
and the overall estimate calculated.

IFC Financial product + organization-based approach 83
Step 1. Compile sum of unlisted impact investment funds
Investment funds are categorized as 1) conventional, 2) impact intention, and 3) impact intention + impact measurement, and the total of assets under management of the funds are tabulated from multiple databases, including the Global Impact Platform (GIP), an online impacting investing database provided by Phoenix Capital. Funds
in the second and third categories are judged to be impact investment and tabulated.

Step 2. Compile sum of development ﬁnancial institutions that have signed on to HIPSO 84
For development ﬁnancial institutions that have signed on to HIPSO, both multilateral (14 institutions) and bilateral(13 institutions), their investment in the private sector was compiled from public statements and other information.

Step 3. Estimate overall market
Step 1 and Step 2 were summed.

82 GIIN Annual Impact Investor Survey 2020 (Global Impact Investing Network, GIIN), pp. 40-43

83 Growing Impact - New Insights into the Practice of Impact Investing (International Finance Corporation, IFC), pp. 88-89
84 Harmonized Indicators for Private Sector Operations

86

Case Studies

Column 2: Introduction of International Impact Investing Surveys
GIIN Annual Impact Investor Survey 2020
Annual survey (2020 edition) on impact investors conducted by the
Global Impact Investing Network. There were 294 institutions that
responded to the questionnaire, and the total of impact investment
assets under management was 404.0 billion dollars. The survey ﬁndings
reﬂect investment activities in 2019, plans for 2020, views on developments over the past 10 years, and the views of respondents on futureissues facing the market. Moreover, this report analyzes chronologicalchanges based on responses from 79 institutions that participated inboth this survey and the survey in 2016. Also, GIIN additionally asked
investors participating in the survey about the impact of COVID-19, soviews on its impact on future asset allocation and risk assessment from 122 institutions have been
compiled. In addition, based on a database of impact investors with over 1,720 institutions, the scale ofthe impact investment market is projected to be an estimated 715.0 billion dollars.
Link :

https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf
Summary in Japanese :http://impactinvestment.jp//user/media/resources-pdf/theGIIN̲2020̲JPN̲FIN.pdf

IFC Growing Impact
Survey on impact investing conducted by the International FinanceCorporation. This survey on the scale and makeup of the impact investing
market estimates that impact investment assets under management in
the private-sector market could be as much as 2.1 trillion dollars, butcounting only those investments for which both development impact andﬁnancial return can be measured, it estimates the market at 505.0 billion
dollars. The report also contains trends in impact investing, survey
ﬁndings on investor practices, and 32 case studies on how signatories to
the Operating Principles for Impact Management (IFC) are practicing
impact investing.
Link :
https://www.ifc.org/wps/wcm/connect/publications̲ext̲content/ifc̲external̲publication̲site/publ
ications̲listing̲page/growing+impact

87

Impact investing case studies
This chapter takes up two examples of institutions engaged in impact investment from the chart below ascase studies to shed light on the most recent trends in the ﬁeld.

Figure 64. Case study examples selected and reasons for selection

Name of institution

Sumitomo Mitsui
Trust Holdings, Inc.
and
Sumitomo Mitsui
Trust Bank, Limited

Kamakura Investment
Management Co., Ltd.

MethodReason for selection• Suggests the potential of impact investing in
debt ﬁnancePositive Impact
Finance• Importance placed on creating a positive impact
in the companyʼ s stated purpose (reason forbeing, objectives) and management strategy(medium-term management plan, value creation
model)
Exchange-tradedfunds• Investment in listed stock tied to impact

CASE STUDY #1
Sumitomo Mitsui Trust Holdings, Inc. and Sumitomo Mitsui Trust Bank, Limited
Reason for selecting Sumitomo Mitsui Trust Holdings, Inc. and Sumitomo Mitsui Trust Bank,
Limited as a subject of the case study
Equity investment (equity ﬁnance) in unlisted companies centered on start-up companies has been themainstream in impact investing in Japan to date, but it is considered that debt ﬁnance such as investment
in listed stocks, loans and debt investment will also expand from now.
GIINʼs research has also found that asset classes of impact investing are diversiﬁed into various kinds.

88

Case Studies

Figure 65. Global impact investment amount by asset class

Share of investment balance

Share of investment amount in 2019

Individual loans, private
placement bonds

21%

37%

Listed stocks

19%

10%

Unlisted stocks

17%

16%

Real assets

17%

10%

Bonds

17%

24%

Equity debt
such as convertible bonds

1%

2%

Others9%2%

Source: GIIN Annual Impact Investor Survey 2020 (GIIN)

In the case study for this report, Sumitomo Mitsui Trust Bank, Limited, which works on impact investing
mainly in the form of loans and is also looking to expand into other asset classes, and Sumitomo Mitsui
Trust Holdings, Inc., its holding company, are taken up to gain input and insight about debt ﬁnance. Also,
we look at importance of placing creation of positive impact at the center of the companyʼs purpose(reason for being, objectives) and management strategy (medium-term management plan, value creation
model)

Positioning of impact investing in the entire management strategy
Management Philosophy of Sumitomo Mitsui Trust Holdings, Inc.
Sumitomo Mitsui Trust Holdings, Inc., which heads up Sumitomo Mitsui Trust Bank, Limited and Sumitomo Mitsui Trust Asset Management Co., Ltd and other companies, has provided that “our purpose,” thecompanyʼs reason for being, is to “create new value and help make future of customers and society
prosperous with the power of trusts.”
Under this purpose, the holding company intends to balance creating value to the society and economic
value to itself and stakeholders through provision of positive impact looking ahead to realization of SDGs
to stakeholders including customers, society, shareholders, and employees.
The background of reaching to this purpose is related to the said companyʼs history. Though the predecessor of the said company was established in 1924 as the ﬁrst trust company in Japan, its “charter”
advocates the sublime idea of contributing to the national economy with best and optimal operational andproblem-solving abilities and a spirit of social service and being an “irreplaceable” company to society, as

89

well as a ﬁrm intention that a trust company is an organization of social and public beneﬁt. In addition,
also given that ﬁduciary business is a mechanism to provide positive impact to third parties, beneﬁciaries
beyond settlors, we can say that this company originally has a spirit leading to impact investing.
Eﬀorts of Sumitomo Mitsui Trust Holdings, Inc. for sustainability
Eﬀorts of Sumitomo Mitsui Trust Holdings, Inc. started to work on sustainability earlier than other Japanese banks, and behind it, the essential role as a trust bank is a starting point. While the company hastaken on the function of operating assets under management through trusts and originally made investments in various portfolios, it started “Positive Impact Finance” (hereinafter, “PIF”) in 2019 based on the
Principles for Positive Impact Finance presented by UENP FI, and became an original signatory at thetime of execution of the Principles for Responsible Banking (PRB) in that year.

Figure 66. Eﬀorts of Sumitomo Mitsui Trust Holdings, Inc. for sustainabilityYearEﬀorts of Sumitomo Mitsui Trust Holdings, Inc.

2003

Established CSR division / Joined UNEP FI, andjoined the United Nations Global Compact

2006

Signed the Principles for Responsible Investment(PRI), and established an SRI fund2008

Signed the Business and Biodiversity Initiative

2011

Signed the 21st Century Financial Behavior
Principles

2012

Signed the Natural Capital Declaration

2014

Related trends in Japan and overseas

Established the PRI

Established the 21st Century Financial Behavior
Principles

Established the Stewardship Code2015

Started materiality management

Adopted the UN SDGs

2016

Signed the Equator Principles

Established the Corporate Governance Code2017

Established the Principles for Positive Impact Finance2018

Established the framework for the Principles for
Positive Impact Finance2019

Started Positive Impact Finance (PIF) / Signed
the Principles for Responsible Banking (PRB)

Established the PRB

Source: Created based on materials provided by Sumitomo Mitsui Trust Holdings, Inc.

90

Case Studies

Practice of impact investing by Sumitomo Mitsui Trust Holdings, Inc.
Creation of positive impact in the medium-term management plan and Positive Impact Finance
The medium-term management plan of Sumitomo Mitsui Trust Holdings, Inc., which started in ﬁscal 2020,
calls for “creation of positive impact towards solution to social challenges” to achieve “balance of social
value creation and economic value creation.”
As part of this strategy, Sumitomo Mitsui Trust Bank, Limited oﬀered “Positive Impact Finance” (loan that
does not limit how the funds can be used, PIF), a new product of loans for companies to which the Principles
for Positive Impact Finance presented by UNEP FI are applied, for the ﬁrst time in the world in March 2019.
Principles for Positive Impact Finance of UNEP FI as a key driver
Behind Sumitomo Mitsui Trust Holdings, Inc.ʼs eﬀorts for sustainability in recent years, the Principles for
Positive Impact Finance, which was established by UNEP FI in 2017, lie in the background. SDGs underlie
the principles, and the United Nations also positions impact investing as a method to achieve SDGs.
There is a need to secure diverse ﬁnding sources to ﬁll ﬁnancing gaps, and asset classes of global impact
investing have been expanding to debts and bonds from equity, which was the initial mainstream.

Figure 67. Principles for Positive Impact FinancePrinciples established by UNEP FI

Practice of “Principles” in PIF

Positive Impact Finance is that which services
to ﬁnance Positive Impact Business. It is thatwhich serves to deliver a positive contribution
to one or more of the three pillars of sustainable development (economic, environmental
PRINCIPLE ONE
Deﬁnitionand social), once any potential negative
impacts to any of the pillars have been duly
identiﬁed and mitigated.
By virtue of this holistic appraisal of sustainability issues, Positive Impact Finance constitutes a direct response to the challenge ofﬁnancing the Sustainable Development

Since UNEP FI is originally designed
to be conscious of initiatives forenvironmental issues, it points out
the importance of holistic consideration given to not only the positiveside of ﬁnancial activities but also
the negative side.
Sumitomo Mitsui Trust Holdings, Inc.
also places emphasis on reduction
on the negative side.

Goals (SDGs).

To promote the delivery of Positive Impact
Finance, entities (ﬁnancial or non ﬁnancial),
PRINCIPLE TWO
Framework

such as banks and investors, need adequate
processes, methodologies, and tools, toidentify and monitor the positive impact of
the activities and projects, programs, and/or
entities to be ﬁnanced or invested in.

Because it is diﬃcult to make impact
measurement only based on the Principles for Positive Impact Finance,
the “framework for the principles for
Positive Impact Finance” was established in 2018.

91

Principles established by UNEP FI

Entities (ﬁnancial or non ﬁnancial) providPRINCIPLE THREE
Transparency

ing Positive Impact Finance should provide
transparency and disclosure. (Details omitted)

PRINCIPLE FOUR
Assessment

The assessment of Positive Impact Financedelivered by entities should be based on
the actual impacts achieved.

Practice of “Principles” in PIF
To ensure objectivity and neutrality,
Sumitomo Mitsui Trust HoldingsGroup asks Japan Credit Rating
Agency, Ltd., a third-party organization, for impact measurement.

Monitoring and ex-post assessment
are conducted.

Source: Created based on the Principles for Positive Impact Finance (UNEP FI) and interview with Sumitomo Mitsui
Trust Bank, Limited

Examples of PIF
Since the introduction in March 2019, Sumitomo Mitsui Trust Bank, Limited has implemented 14 cases of
PIF (as at the end of January 2021).
Financing date

Borrower company

2019

March

FUJI OIL HOLDINGS INC.

DecemberJ. FRONT RETAILING Co., Ltd.

March

Sumitomo Metal Mining Co., Ltd. / Nippon Paper Industries Co., Ltd. /2020

Toyo Aluminium K.K. / Sumitomo Forestry Co., Ltd. / SUBARU CORPORATIONMay

Sumitomo Rubber Industries, Ltd.

June

Mitsui Chemicals, Inc.

AugustToray Industries, Inc. / Rengo Co., Ltd. / DIC Corporation /RICOH LEASING COMPANY, LTD.

2021

December

Sumitomo Dainippon Pharma Co., Ltd.

January

Sapporo Holdings Limited

Of these companies, for example, SUBARU CORPORATION to which a loan was executed in March
2020, has set ① reduction of CO2 emissions due to its activities by 30% (compared to ﬁscal 2016) by
2030, ② making 40% or more of its global unit sales electric vehicles (EV) + hybrid vehicles by 2030, andothers as KPIs to be monitored in conformity with the Principles for Positive Impact Finance of UNEP
FI. Other examples have been described in detailed in the said companyʼs sustainability report(https://www.smth.jp/csr/report/2020/full/all.pdf).

92Case Studies

Characteristics of PIF❶ Holistic incorporation and monitoring of impact
While general ﬁnancing is corporate ﬁnance based on credit rating, PIF has incorporated the idea ofimpact management in accordance with the framework of UNEP FI and adopted processes of goal setting
and monitoring.
An important tool for that is the “Impact Radar” promoted by UNEP FI. The Impact Radar consists of 22
categories related to SDGs, and orange represents the economic aspect, black the environmental aspectand blue the social aspect.
ORANGE … Economic value creation for people and society
BLACK … Eﬃcient use of quality (physical and chemical properties)
BLUE … Availability, accessibility, aﬀordability and quality

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Source: THE IMPACT RADAR: A TOOL FOR ANALYSIS (UNEP FI)

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While UNEP FI will see what impact category a companyʼs product or service falls into, the use of thisradar enables a holistic analysis of positive and negative impacts. The Impact Radar has been promoted
as a tool that converts between macro and micro, and KPIs set by one company, a micro indicator, getassociated with SDGs, macro.
Depending on companies, classiﬁcation of categories for services could vary. For example, in the case of

93

ﬁnancing for Sumitomo Rubber Industries, Ltd. where the Impact Radar was used for the ﬁrst time, avibration damper, a rubber product, was classiﬁed as the category of culture and heritage. When attached
to pillars of a building, the vibration dampers have the eﬀect of preventing shaking of earthquake in the 8level on the Japanese scale. This product is used for the Kumamoto Castle, Byodoin Temple and overseas
historic landmarks and has contributed to preservation of cultures and heritages.
In utilizing the PIF ﬁnancing process of UNEP FI framework, Sumitomo Mitsui Trust Bank, Limited
thoroughly reads and understands the content, and then pays attention to avoid Galapagos syndrome,that is, avoid overly concentrating on the Japanese market, away from the global trend, while customizing
ﬁnancing to gear to the realities in Japan.
❷ Holistic intention
One of the characteristics of PIF is not to limit how the funds can be used. Sumitomo Mitsui Trust Bank, Limited does not necessarily provide to solutions focused on certain social issue areas, but intends to holisticallyassess companies and generate positive impact as the entire company or whole socioeconomic environment.
In the case of listed companies, while they have multiple business groups and a supply chain structure foreach of these groups, PRINCIPLE ONE of the Principles for Positive Impact Finance requires a businessto be looked at holistically. Accordingly, we identify where negative impact occurs for each business, andset a goal to amplify positive impact while curbing negative impact.
In other words, it is a characteristic that rather than building a portfolio by sector or by a certain issue, PIF
looks at the entire company and provides ﬁnance with the holistic intention of curbing negative impact
and amplifying positive impact as much as possible.
Challenges
First, lack of suﬃcient human resources who can create a logic model, set KPIs, and implement impact
measurement is considered as a challenge to be resolved. In addition, human resources who can evenencourage companiesʼ behavioral change (engagement) through ﬁnancing are also not suﬃcient yet, anddeveloping such human resources is considered to be a big task in the future. Then, while this is also
related to the principle for transparency, it is another future big task to cultivate human resources who
can quantify KPIs whenever possible and have an engagement with companies.
Considering the relation between impact and technology to generate new value (impact) through combination of “technology” and “industry,” the said company makes eﬀorts to hire highly specialized humanresources and conduct teambuilding activities based on the idea of Technology-based Finance, where
ﬁnance can properly assess risk, return and impact by understanding technology.
Furthermore, the said company deﬁnes what an impact analyst should aim to be as “providing appropriate
solutions contributing to sustainable growth and an improvement in corporate value to customers, basedon the holistic analysis of impact associated with corporate activities,” positively thinks about diﬃculty inimplementing training in a group amid the COVID-19 crisis, and has conducted internal training for tensof people by webinar using Zoom and other tools early on to develop human resources.

94

Case Studies

Suggestions and insights gained from this case study
Engagement through ﬁnancing, not necessarily from the shareholder status, is possible
This time, Sumitomo Mitsui Trust Bank, Limited and Sumitomo Mitsui Trust Holdings, Inc. have beentaken up as a case study to look at practices and future possibility of impact investing in an asset classof loans. The greatest insight gained here is that it is possible through loans, not necessarily throughequity investment, to encourage behavioral change of the subject company.
Generally, loan is a funding means to an entire company based on credit rating, and even the said holding
company initially thought it might be diﬃcult to change borrowers to society-oriented and environment-oriented companies. However, it has found out borrower companies also recognize that they needto change when considering through the ﬁlter of impact.
In one example, when a listed company worked on PIF, it was identiﬁed that the company was planning a
new business. However, in getting an overview of the entire supply chain for the new business, because
this business was thought to cause global warming and damage biodiversity, and also has very high risk
in human rights issues, Sumitomo Mitsui Trust Bank, Limited urged the company to withdraw the plan of
the new business.
In traditional corporate ﬁnance, which depends on credit rating on the repayment possibility, it is diﬃcult
to make such behavioral change and the company might have raised funds from other banks. PIF is madepublic in principle, and information subject to assessment is monitored and disclosed as needed during
the loan period. Now there is a growing recognition, among companies, that negative businesses may
ultimately lead to a decline in corporate value, and when the ﬁnancial institution side shows a social- andenvironment-oriented ﬁnancing attitude, it is possible to create companiesʼ behavioral change eventhrough routes other than shareholdersʼ rights.
Positioning of impact investing from the perspective of management philosophy and management strategy is important
Sumitomo Mitsui Trust Holding originally set “creating new value and help make future of customers andsociety prosperous with the power of trusts” as its purpose, and has ampliﬁed positive impact into a
mission, medium-term plan, value creation model, etc. and developed speciﬁc impact investing products
to achieve the purpose. That is to say, alignment from the purpose to actual PIF has been made explicitly.
When ﬁnancial institutions and others promote impact investing, it is considered important to position
impact investing at the corporate philosophy level and the strategy level from aspects of cultivating
employeesʼ mindset, securing resources, developing human resources, and others.
Holistic approach is important
In traditional impact investing, particularly centered on private equity, focus has been placed on creationof positive impact from products and services. However, this case study has revealed that more holistic
impact management, including generation of positive impact while curbing negative impact, and assessment of impact of products and services after holistic assessment of the overall supply chain, is important. While these approaches are a trend resulting from ESG investing, they are considered useful in future
development of impact investing.

95

CASE STUDY #2
Kamakura Investment Management Co., Ltd.
Reason for selecting Kamakura Investment Management Co., Ltd. as a subject of the case study
With impact investing asset classes expected to diversify going forward, major growth is expected ininvestment in listed stocks. On the other hand, unlike investment in unlisted stocks on primary markets,
in which new funds are injected by private equity funds and venture capital, investment in listed stocks
primarily takes the form of investment through stock markets, which are secondary markets, so there is apotential danger that sharing intentions with investees, impact measurement, and the exercise of impact
will be weakened.
Kamakura Investment Management Co., Ltd. works for sustainable social development primarily by
investing in listed stocks. Therefore, taking it up as a case study can help identify the beneﬁts of suchinvestment, as well as related issues, and also provide suggestions and insights for expanding impact
investing going forward.

Overview of Kamakura Investment Management Co., Ltd.
History
Kamakura Investment Management Co., Ltd. (“Kamakura Investment Management” hereinafter) is anindependent trust management company with the aim of socially responsible ﬁnance established in
November 2008 by multiple founders with experience in asset management at Japanese and foreign-aﬃliated ﬁnancial institutions. It manages and sells Yui 2101, a publicly oﬀered investment trust. Yui 2101ʼs
assets in custody was approximately 47.0 billion yen as of the end of 2020.

Nov. 2008 Established (paid-in capital: 20 million yen)Mar. 2010 Yui 2101 established and management commences (initial clients: 267)
May 2013 Awarded R&I Fund Award, First Prize (Japanese Equity Fund Category in Investment Trusts Category)May 2014 Awarded R&D Fund Award, Second Prize (Japanese Equity Fund Category in Investment Trusts
Category), and Second Prize (Japanese Equity Fund Category in NISA Category)May 2019 Awarded R&I Fund Award, First Prize (Japanese Equity Fund Category in NISA Category)
Oct. 2019 Over 20,000 clients
End of 2020 20,901 clients

96

Case Studies

Vision of Kamakura Investment Management investing principles of Yui 2101
Kamakura Investment Managementʼs corporate vision is as follows:
Finance has an extremely large impact on the economy and society. People involved in ﬁnance therefore must have a vision of utilizing money for the sustainable development of society, a sense of
mission for fulﬁlling this vision, and the ethics of a trustee entrusted with its clientsʼ valuable
money.85
And based on these values, it will:
Honor dialogue with investee companies developing in harmony with society and build mutual
relationships between investors and investee companies bound by values and trust in order to workfor the long-term growth of trust assets and to strive to simultaneously build assets for investors
while pursuing sustainable social development.86
To realize this vision, with the investment trust Yui 2101, the company will:
Continue to invest money entrusted to us by clients in companies that grow while maintaining
harmony with all their stakeholders, which will be truly necessary in Japan going forward, and continue to support and encourage them.87
This represents the companyʼs basic investing principles.

Yui 2101 investment behavior
Policy on selecting investees
Yui 2101 selects investees based on the following three themes and with a basic motto of “investing ingood companies:”
People : Companies that eﬀectively utilize human resources
Coexistence : Companies helping to create a recycling-based society
Craft : Companies that provide skilled Japanese techniques and highly impressive services
Based on this selection policy, as of the end of February 2021, Kamakura Investment Management invests
in around 70 companies, in the stock of listed companies and bonds of unlisted companies.

Method of searching and deciding on investee companies
The job of identifying investee candidates is generally performed by the companyʼs several asset managers, but there are also referrals through the network of the companyʼs executives as well as through its

85 Kamakura Investment Management, President Kamataʼs Greeting (https://www.kamakuraim.jp/company/)
86 Stated in “About Yui 2101” (https://www.kamakuraim.jp/about-yui2101/)
87 Ibid.

97

clients. The company narrows downs the issues based on the investment themes of Yui 2101: people,
coexistence and craft.
Decisions on suitability for investment are made after interviews with multiple people in the candidate
company, including executives and IR department. After conﬁrming in the interviews how the company
intends to contribute to society, quantitative and qualitative compliance targets are set. For example,
potential investees based on the “people” theme may have the separation rate as their characteristic, orif the company champions economic self-suﬃciency for people with disabilities, employment rates andformats for people with disabilities will be monitored.
What the company looks at when investing in individual companies, and whether investees are actuallycomplying with their targets, is all disclosed on the companyʼs website and is also reported as the beneﬁciaries meeting discussed below.

Policy on allocating investment amounts
Yui 2101ʼs investors include many people relatively new to investing. The company has judged that 20%
annual volatility in the stock market on average can be a high psychological barrier, so it keeps around
40% of Yui 2101ʼs entrusted assets in cash and generally limit volatility to 10% or less.
At the same time, Kamakura Investment Management believes it is possible for social aims and investment returns to coexist, and it targets returns of around 4% annually (net of trust fees). Market risk islimited by holding 40% in cash, while 60% of the funds are managed, so the actual investee return needs
to be around 7%. This is one of the reasons why the Yui 2101 portfolio mostly invests in small-andmid-cap stocks, including companies with high growth potential.

Assessment and engagement with investee companies after investing
After investing, quantitative and qualitative information are monitored. For example, investee companies
in the “coexistence” category are monitored for whether they are adding value to local communities andthe environment. Engagement is primarily performed through meetings with executives and IR department, the same as before investing, but the company does not generally attend the general meeting ofshareholders of investees partly because of the cumbersome procedures that are required for investment
management companies, which are not direct shareholders, to attend. Also, there is particular emphasison direct communication with investees that are unlisted companies because they do not disclose as
much information as listed companies.
Kamakura Investment Managementʼs basic policy is to continue holding good companies as long as they
are good companies, but if an investee company adopts behaviors in conﬂict with the investment themesof people, coexistence and craft (for example, in the case of a serious compliance violation or disregarding the rights of employees), it is removed from the portfolio, which actually does happen.

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Case Studies

Reporting and sharing information with beneﬁciaries
Kamakura Investment Management puts emphasis on reporting to ﬁnal investors, called the “beneﬁciaries” of the investment trust, and sharing information with them, and has established various channels forthis purpose. The company reports on the impact of investees through these channels in some cases, andin other cases the management of investee companies report directly to beneﬁciaries.
Figure 69. Examples of information disclosed to investors by Kamakura Investment Management
Frequency

Meetings
General Meeting of Beneﬁciaries®

Disclosed
once per year

Held to report fund settlement andpromote mutual understanding between
ﬁnal investors, investees, and Kamakura

Disclosure through print & online media

Investment management reportCreated at each fund settlement dateand distributed to ﬁnal investors.

Investment Managementʼs fund managers.

Regular disclosure
during the term

Investment report brieﬁng

Yui Dayori (monthly investment report)

Held twice a year (spring and fall) to

Along with monthly disclosure of fundexplain recent fund management tomanagement, includes investee compa-

investors in diﬀerent regions, including

ny information, event information, etc.

Hokkaido and Kansai.

As necessary

Good Company Visits®/ executive seminars

Investees that are “good companies”

Opportunities created to visit investee

Investees are disclosed not only to ﬁnal

companies and for their executives toinvestors but to the general public online.

directly explain their companyʼs philosophy,

The reasons for investing in each indi-vision, and businesses to ﬁnal investors.

vidual company are disclosed.

Source: Created from Kamakura Investment Managementʼs website.

Development going forward
Yui 2101 is primarily focused on the stocks of listed companies in light of the ease of surveying thecompanies and the liquidity of their stock after investing. In addition, after a survey of companies basedon Kamakura Investment Managementʼs selection policy, it anticipated that small- and mid-cap stocks
would be the main assets under management, more so than large-cap equities.
While at the same time, the company puts great emphasis on the nature of the funds ﬂowing in and is
careful to attract investors in harmony with its investment philosophy. For this reason, it does not use
splashy advertisements or marketing companies, and basically works to capture latent investors with amindset of acquiring information and doing research themselves based on social media, personal blogs,
and word-of-mouth.

99

Suggestions and insights gained from the Kamakura Investment Management case study
The following suggestions and insights can be gleaned from the behavior of Kamakura Investment
Management, which seeks to help build a better society through investment in listed stocks.
Possible to tie investment to impact and perform engagement even with listed stocks
Compared to impact investment in which impact is created through startup companies, impact investing
through listed company stocks has been cited as diﬃcult to rate because ① it is diﬃcult to conﬁrm thecompanyʼs intentionality, and ② with listed companies, generally, the bigger the company, the morediﬃcult it is to see the relationship between investment and actual impact creation.
Regarding conﬁrmation of intentionality, Kamakura Investment Management makes considerable eﬀort
to analyze companies that are candidates for investment, and through proactive research that does notjust rely on disclosed information and through communication, it selects companies with intentionalitythat align with its investment themes of people, coexistence, and craft. Also, on the matter of linking
investment to actual impact creation and its measurement, Kamakura Investment Management holds
regular discussions, even after investing, with the investeesʼ executives and IR departments and conﬁrms
that the quantitative and qualitative targets set prior to investing are being met.
Accordingly, there is essentially no diﬀerence between unlisted stocks and listed stocks; rather, what is
important is whether through the quality and quantity of communication trust can be built with investee
candidates and the business and direction of the company is understood on the basis of that trust.
By building trust underpinned by appropriate communication in this way, it becomes suﬃciently possible
even with investment through listed stocks to conﬁrm the intentionality of investee candidates in thesame manner as investment in unlisted companies, and to link investment and impact and conduct
measurement. There are useful suggestions and insights for expanding asset classes for impact investing
going forward.

Importance of the nature of the funds
Kamakura Investment Management puts forth three investment themes (people, coexistence, and craft)when selecting issues for inclusion in Yui 2101, but it takes some time for impact to be created in society
through investment in these companies. Whether investors are able to patiently wait out this period is
crucial. Kamakura Investment Management spends time explaining the philosophy and signiﬁcance of Yui
2101 and works to ﬁnd investors that are sympathetic with them.
In order to work to expand impact investing in Japan going forward and increase the number of impact
investors in the retail sector especially, it will be important to comprehensibly explain the social ideals
being pursued and the social issues for which solutions are being sought.

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Contributions

Contributed Articles: Topics in Impact InvestingThough impact investing is growing, there are still many challenges, from the deﬁnition of impact investing and the methods used to measure impact to the correlation between impact and returns, ensuring
appropriate exit methods, and its positioning as an asset class. In promoting the healthy development of
impact investing, it is essential that understanding be deepened between market participants and related
public- and private-sector institutions and that there be cooperation between the public and private
sectors as it is needed, including for appropriate infrastructure.
Against this backdrop, two study groups related to impact investing were established in Japan in 2020 toserve as hub organizations. Takeshi Mizuguchi, Professor in the Faculty of Economics at Takasaki City
University of Economics, chairs both of these groups. Here he explains key issues in impact investing thathave come out of the various discussions currently taking place at the groupsʼ meetings.
At the same time, internationally, impact measurement and management (IMM) has become an important
trend for impact measurement. When measuring impact, the focus tends to be on method, but in order for
impact investors to clearly generate “intentional impact,” it is important to view impact measurement as
a part of impact management and to understand the signiﬁcance of investorsʼ intentionality and theoretical approaches to investment results, etc. Katsuji Imata, President of the Social Impact Management
Initiative (SIMI) and Co-CEO of Blue Mable Japan, Inc., gives us a summary of impact measurement witha focus on IMM.
In order to promote further growth and widespread practice of impact investing, it will be important forthere to be an increase in business operators opting for impact investment from among the various
fund-raising vehicles available to them. For this to happen, there needs to be understandings among
business operators of the signiﬁcance of being a recipient of impact investment. Yoshiaki Ishikawa, Director, CFO, and Impact Oﬃcer at Life is Tech, Inc., has therefore provided his views from the frontlines ofimpact investment and business practice on the signiﬁcance of impact measurement, the relationshipwith impact investors, and prospects for impacting investing going forward.
The opinions expressed in these articles belong to the contributors; they do not represent the oﬃcial
views of their aﬃliated organizations or the GSG National Advisory Board (NAB) Japan.

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List of contributed articles
No.1
Main Issues for Impact Investing in Japan
Takeshi Mizuguchi, Professor, Faculty of Economics, Director and Vice-President, Takasaki City University of Economics

Professor Takeshi Mizuguchi chairs both the Study Group on Impact Investment, which is co-organized by
the Financial Services Agency and GSG-NAB Japan, and the Positive Impact Finance Task Force, established by the ESG High-Level Panel and administered by the Ministry of the Environment. In this article,
he identiﬁes key points of debate from among the issues discussed by both these groups and summarizes
them with reference to his personal views. Professor Mizuguchi also serves as chair of the Expert Panelon Sustainable Finance 88 established by the Financial Services Agency.

No.2
Impact investing and IMM
Katsuji Imata, President, Social Impact Management Initiative,
Co-CEO, Blue Marble Japan, Inc.

The article introduces impact measurement and management (IMM), a basic concept of impact investing,and explains why it is necessary in IMM to ask “why” and “what” before considering “how.” It also discusses the importance of intentionality and practical standards for impact investing and explains diﬀerent
approaches as the ﬁeld continues to evolve. Finally, Mr. Imata suggests promoting IMM as the best of themeasures that are needed to bring the thinking and practice of impact investing into the mainstream.

No.3
Impact investing from a startupʼs point of view
Yoshiaki Ishikawa, Director, CFO, and Impact Oﬃcer, Life is Tech, Inc.

This article summarizes Mr. Ishikawaʼs thoughts on impact investing and business practice from thestandpoint of an education startup that is promoting its business together with an impact investor. It
conveys the views of a frontline participant on the signiﬁcance of impact measurement as a form of R&D,
relationships with investors who are partners in impact generation, and prospects for the future of impact
investing as gleaned from interactions with the younger generation.

88 https://www.fsa.go.jp/singi/sustainable̲ﬁnance/index.html

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Contributions

Contribution No.1

Main Issues for Impact Investing in Japan
Professor, Faculty of Economics, Director and Vice-President, Takasaki City University of Economics

Takeshi Mizuguchi
1. Introduction
In FY 2020, two research groups went into action over impact investing. One of the groups is the Study
Group on Impact Investment 89 which is co-organized by the Financial Services Agency and GSG-NAB
Japan, and the other one is the Positive Impact Finance Task Force 90, established by the ESG FinanceHigh Level Panel and administered by the Ministry of the Environment. Although it seems that diﬀerences in the names between “Investment” and “Finance” and “Study Group” and “Task Force” represent
subtle diﬀerences in stance between the two groups, both groups have members of many market
players and engage in deep discussions. Many members are involved in both groups. While there is no
signiﬁcant variance in discussions of the both, some challenges have become apparent through discussions. Of these challenges, major ones are taken up and discussed in this article. While the writerserves as chair 91 of both the study group and the task force, this article does not represent either sideand does not present a viewpoint as the chair. This article shows a purely personal view.

2. Overview of the study group and the task force
At the beginning, a brief overview of the two research groups that have started from FY 2020 is oﬀered.

(1) Impact Investment Study Group (Financial Services Agency and GSG-NAB Japan)
The Impact Investment Study Group has held a meeting once every two and a half months since June 2020.
Members at the inception were 35 people centered on business people, and the group gathers nearly 100
participants in every meeting including observers. At the ﬁrst meeting (June 18), a discussion about aholistic view on impact investing were held, and diverse opinions were exchanged on a relation between
having an intention and ﬁduciary responsibility, how to conduct impact measurement 92, connections
between social return and economic return, concept of timeline, and other matters. At the second meeting(September 3), based on the results of a questionnaire targeting members done in advance, views were
exchanged on four issues extracted: ① position of initiatives, whether it is biaxial or triaxial, ② relationshipwith global trends, ③ necessary measures, and ④ impact measurement. At the third meeting (November20), a deeper discussion was conducted with a focus on impact measurement. These issues are mutuallyconnected, and some aspects of them are presented below.

89 https://impactinvestment.jp/activities/fsa-study.html

90 http://greenﬁnanceportal.env.go.jp/policy̲budget/esg̲highlevelpanel/pif̲taskforce.html
91 As of contributing the article at the end of December 2020

92 The Study Group on Impact Investment uses the phrase “impact measurement,” instead of “social impact measurement.”

103(2) Positive Impact Finance Task Force (Ministry of the Environment)
The ESG Finance High Level Panel was established in February 2019 as a place where industrial leadersin the ﬁnance and investment ﬁelds get together to discuss ESG ﬁnance. The second High Level Panelsession held in March 2020 decided to set up the Positive Impact Finance Task Force under the said panel
and started activities in April.
The task force published the Concept Paper on Impact Finance as its ﬁrst report in July and reported it at
the third High Level Panel session in October. In response, the panel adopted the Declaration for Creating
Positive Impact through Developed ESG Finance, and has declared that each ﬁnancial entity makes
eﬀorts for promotion and practice of impact ﬁnance in collaboration with necessary stakeholders tocreate positive impact on the environment and society through ESG ﬁnance, among others. The task force
continues to take action to develop the Green Impact Measurement Guide.

(3) Overview of the Concept Paper on Impact Finance
The Concept Paper on Impact Finance by the above task force was developed in the stance of ① giving
consideration to consistency with global trends, ② being premised on non-compulsory and voluntaryeﬀorts of market players, and ③ encouraging the spread in accordance with the context of Japan. First,
in light of UNEP FIʼs Principles for Positive Impact Finance, GIINʼs deﬁnition of impact investing andothers, impact ﬁnance was deﬁned with four elements: (i) having an intention to appropriately manage
material negative impact and create positive impact, (ii) measuring and monitoring impact, (iii) disclosing
information, and (iv) ensuring appropriate risk and return. Then, the basic pattern of impact ﬁnance wasorganized as in Figure 70.

Figure 70. Basic pattern of Impact Finance1

2

Identiﬁcation of impact▼ Intend to generate
positive impact

Developmentof an impact
strategy

Pre-assessmentof impact▼ Set goals▼ Mitigate andmanage signiﬁcantnegative impact

5

4
3
Conﬁrmation of
results ofpre-assessmentof impact

Imple-

mentation of
investments

Monitoring

and loans

Information disclosure (about once a year)

Source: excerpt from p.12 of the Ministry of the Environment (2020) Concept Paper on Impact Finance6
At theend ofinvestment
or loan：taking into
sustentionof impact

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Contributions

3. What does impact investing aim for?
One thing that emerged through discussions by these groups is a wide range of the concept of impact
investing or impact ﬁnance. The “Concept Paper on Impact Finance” classiﬁes this point into two things:“what holistically understands diverse impacts of companies” and “what aims for certain positive impact
based on a project or fund, etc.” And the paper organizes ideas with a view to the both. In other words,
image of impact investing varies from person to person. Then, can we say this is an “issue”?
Because individual ﬁnancial institutions and investors just work on “what they believe is impact investing,” it is ﬁne that there are other diverse ideas on impact investing and there may be a view that this is
not a particular issue. On the other hand, some are concerned about impact wash. While initiatives inJapan and abroad hope to maintain quality of “products advocating impact investing” which would continue to appear in the market in succession, they should intent to expand the scale of impact investing andmainstream it. From such a standpoint, “what kind of” impact investing is aimed for is an issue.
The reason for the diversiﬁcation of the concept of impact investing is ﬂows with diﬀerent places oforigin, in addition to a diﬀerence in asset classes. As is well known, the predecessor of the current GSG(Global Steering Group for Impact Investment) is the G8 Impact Investment Task Force called for by thethen UK Prime Minister Cameron in 2013. The point of origination was Social Impact Bonds connected toperformance-linked payments. A typical image of impact investing evolved from that point is theexistence of companies with resolution of certain social issues as their direct mission, and investment inthese companies. Main targets are mainly unlisted companies, and investments in start-ups are typical.
However, that is not enough to expand the market scale. Then came impact investing funds targeting
listed shares. However, there is controversy regarding whether the framework of impact investingpremised on problem-solving-type investments can be used without any change.
Meanwhile, the United Nations Environment Programme Finance Initiative (UNEP FI), which was involved
in development of the Principles for Responsible Investment (PRI) together with the Global Compact in2006, released the Principles for Positive Impact Finance in 2017 and the Principles for Responsible
Banking (PRB) in 2019. Principle 2 of the PRB declares that we (banks) “will continuously increase ourpositive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services.”
In addition, the PRI also advocated “Moving from awareness to impact” in the three-year plan in 2015,
released the Impact Investing Market Map in 2018, and came up with the concept of “connecting ﬁnancial
risks to outcomes in the real world” in proposals in the new three-year plan in October 2020. Behind it,
there seems to be an awareness that negative externality of investments becomes systemic risk from thestandpoint of universal owners. This means there is a standpoint that considers impact ﬁnance andimpact investing as development of ESG ﬁnance/ESG investment.
In any position, a core element of “intention to seek measurable positive impact” is shared, but there is adiﬀerence between bottom-up impact investing to work to solve individual problems, so to speak, from

105

grass roots eﬀorts, and top-down impact investing where an idea is generated from the perspective ofwhat ﬁnancial system should be. Whether is “mainstreaming” considered as regarding impact investingas certain investment and loan products and growing their market to a certain scale? Or whether should
we take into consideration impact investing in all investments and loans as every investment and loan
always shave some impact? While both points are important, we need to understand that there are diﬀerent standpoints.

4. Relation with ﬁduciary responsibility
What was controversial at the ﬁrst and second meetings of the Impact Investment Study Group is whether
it is biaxial or triaxial. This means that whether investment decisions are made biaxially from the viewpoint of risk and return, or triaxially from the viewpoint of impact in addition to the two. The Impact Investment: The Invisible Heart of Markets, a report published by the G8 Impact Investment Taskforce in 2014,
states that “a paradigm shift” is required “in capital market thinking, from two-dimensions to three” at the
opening and Impact Investment is “bringing a third dimension, impact, to the 20th century capital market
dimensions of risk and return.”
Because impact investing seeks impact with purpose, three axes appear obvious. The problem is how the
relation with risk and return is seen. Is that a causal relation? That is, do we think the impact leads toreturn, or do we think that the greater the impact is, the higher the return is? And do we aim for impactthat leads to return? Does this mean that the idea is based on the two axes after all? Or, should we thinkthat the two sides are originally independent? Then, should we aim to balance the two by devising asolution to creating impact while also generating return?
This also relates to how to take timeline. Given that social impact translates into return in the long term,
this will lead to a discussion about dynamic materiality argued by the GRI, etc. This is the hypothesis thatsocial materiality will translate into ﬁnancial materiality over time. On the other hand, from the standpointof universal owners, reducing negative externality (negative impact) and seeking positive impact results
in indirectly protecting interests of a whole portfolio by protecting the basis of economic activities forenvironment and society. This is triaxial as the evaluation axis for investment decisions, but may be biaxial as purpose.
Such a discussion might be seemingly just an idealism. However, depending on where we stand, whatkind of impact and how far we seek vary. Furthermore, the diﬀerence in standpoints also relates toﬁduciary responsibility. Of course, none of investors think it is ﬁne to neglect ﬁduciary responsibility. The
problem is an interpretation of ﬁduciary responsibility regarding the scope of ﬁduciary responsibility.
There are multiple diﬀerent positions.
A common interpretation in Europe is probably that consideration of ESG must not sacriﬁce risk andreturn, and conversely, elements of environment and society are allowed to be taken into account for aninvestment with risk and return equivalent to other investments. However, there is a tougher standpoint
mainly in the US. That is to say, there is an opinion that consideration given to environment and society

106

Contributions

is “considering what should not be considered, without considering what should be considered” andnegligence ﬁduciary responsibility. In this position, “balancing the two sides” cannot be accepted. On theother hand, these days, some research shows that there are “sustainability preferences” in which it ishoped that investments are made also taking into account environment and society, on the sides ofindividual investors and beneﬁciaries. If that is the case, is it enough to limit the interpretation of ﬁduciary
responsibility that ﬁrst priority should be given to beneﬁciariesʼ interests, to monetary return? Thus,
evidently the relation with ﬁduciary responsibility is one of important issues in impact investing.

5. Impact measurement
At the third meeting of the Impact Investment Study Group, it was discussed that the essence of what iscurrently called “social impact measurement” in Japan is IMM (Impact Measurement and Management).
Although understanding on IMM has grown, it will continue to be an issue how this method can be applied
to investments in listed shares and corporate loans of companies engaged in diverse businesses.
In addition, IMM is impact measurement as a process for impact investors to clearly generate “intentional
impact.” Although this is understandable as an indication of honesty of investors advocating impact
investing, large and small impacts cannot necessarily be compared among diﬀerent impact investments.
So a discussion on value assessment of impact in terms of valuation has started. However, I think how far
appropriate valuation is possible and whether it should be made in the ﬁrst place are also future issues.

107

Contribution No.2

Impact Investing and IMM
President, Social Impact Management Initiative
Co-CEO, Blue Mable Japan, Inc.

Katsuji Imada
IMM, Impact Measurement and Management. It is translated as “Impact Measurement and Management.” When organizations that implement an impact investment and investors who intend to practice itsay, “But impact measurement 93 is diﬃcult (seems diﬃcult)...,” I recommend you to riposte, saying, “Oh,IMM.”

Deﬁnition of IMM
The GIIN (Global Impact Investing Network), which is known as the ecosystem builder for impact investing, periodically conducts research of individuals and organizations related to impact investing andpublishes the results. The second edition (ﬁrst edition was released in December 2017) of The State of
Impact Measurement and Management Practice released in January 2020 showed that respondents who
think that a progress was made “considerably” or “to some extent” in “investorsʼ understanding onpractice and reporting of IMM,” “guidance in IMM,” “sophistication of IMM-related tools and frameworks,” “research and data on practice of IMM,” and “experts with IMM skills” in the past three years
accounted for nearly 90%, or 90% or more (p.26). Putting it another way, in the last three years or so, theterm and concept of “IMM” gained a foothold in the world of impact investing. Since the IMP (Impact
Management Project) set up in 2016 coordinated the basic ideas including “ABC Impact Classiﬁcation”
and “Five Dimensions of Impact,” a common understanding on the basic concept of impact investing is
growing 94. We can say IMM is one of them.
Letʼs see the deﬁnition of IMM by the GIIN.
Process of identifying and considering the positive and negative eﬀects oneʼs business actions andinvestments have on people and the planet, and then ﬁguring out ways to mitigate the negative andmaximize the positive in alignment with oneʼs goals 95
And immediately after this deﬁnition, the sentence “Impact measurement & management is iterative by
nature” follows. This adjective “iterative” is a word often heard in recent years when exchanging opinionswith intellects and practitioners on impact investing and impact management. Above all, this shows that
so-called impact measurement is neither sporadic nor linear.

93 In actual discussions about impact investing, “impact measurement,” with “social” removed, may be often used.

94 For example, refer to the glossary of SDG Impact. https://sdgimpact.undp.org/assets/SDG-Impact-Standards-Glossary.pdf
95 https://thegiin.org/imm/ (Preliminary translation made by the writer)

108

Contributions

Need to ask WHY and WHAT before HOW
Figure 71. from Oxford Impact Measurement Programme, Karim Harji
CRITICAL FRAMEWORK

Why do wemeasure?

What do wemeasure?

How do wemeasure?

How willuse and act?

Framing
Perspectives

Evidence of
ImpactMeasurement
Approaches

Managing for
ImpactSource: Impact Measurement and Management (IMM), Trends, Approaches and Prospects, Karim Harji (2020)

At the third meeting of the Study Group on Impact Investment hosted jointly by the Impact investment and
GSG-NAB Japan, which was held on November 20, 2020, impact measurement 96 was picked up as the
subject 97. As a foreign intellect appropriate as coach on this subject, Karim Harji, who operates the
Impact Measurement Program at the Saïd Business School, the University of Oxford, explained on video.
Figure 71 shows the steps of IMM utilized by Mr. Harji for the said program. When I had a pre-meeting
regarding the explanation on video with him, he said, “The situation where people want to jump at The
HOW is all the same for Japan and abroad.” This program is said to tell students to ask WHY and WHAT
before HOW.
Firstly, WHY. That is, why a measurement is made. Is it to justify an envisioned theory or investment
decision, to achieve better engagement with the investee company or improve business activities of theinvestee, accurately understand positive and negative impacts on people and ecosystem directly aﬀectedby the business, or to deepen consideration of sources of impact generation, innovation and gap withneeds?
Secondly, WHAT. Speciﬁcally what is measured. Answering this question is predicated on the existenceof theory of change envisioned along with setting of own impact theme and impact goal in addition to
WHY. In order to monitor whether things is transiting toward the impact goal, it is necessary to be able toexplain how the object to be measured is related to the impact goal (even if it is at the hypothesis in manycases).

96 The Study Group on Impact Investment uses the phrase “impact measurement,” instead of “social impact measurement.”
97 https://impactinvestment.jp/news/research/20201204.html

109

You will reach HOW at last through these two steps. Then it continues into utilization and action. We areasked how lessons and discoveries from measurement including quantitative and qualitative information
are connected to next decision-making to continue eﬀorts to improve impact. Conducting these activities
just “iteratively” is the practice of IMM.

Intention and practical standards as top priority
At home and abroad, importance of intention or intentionality is talked about in the introduction to impact
investing. To both investors and business companies, intention to create impact, strategy design toactually generate impact, and the implementation will establish impact investing. Amid severe change inthe environment surrounding impact investing, this basic has not changed. For that reason, it is necessary
to also ask WHY and WHAT before HOW in assessment. That is because it is a question about strategic
characteristic of investing and business actions.
IMM and the word of iterativeness seen frequently in implementation of IMM call for making constantreview of strategy based on intention a habit. Best practice there is the one that answers the question of
not “what kind of impact is generated through IMM” but “what kind of things are done in IMM.”

Figure 72. Operation Principles for Impact Investing (Japanese translation for reference)

Originating &Structuring

Strategic Intent

Portfolio
Management

1Deﬁne strategic
impact objective(s)consistent with theinvestment strategy.

3

Establish theManagerʼs contribution to achievementof impact.

2

Manage strategic
impact on a
portfolio basis.

4

Assess the expected
impact of each
investment, basedon a systematic
approach.

5

Assess, address, monitor, and manage potential
negative impacts on each investment.

6 Monitor the progressof each investment
in achieving impact
against expectations
and respond
appropriately.

Impact at Exit

7

Conduct exits
considering the eﬀect
on sustained impact.

8

Review, document,
and improve decisions
and processes basedon the achievement of
impact and lessons
learned.

Independent Veriﬁcation

9

Publicly disclose alignment with the Principles and provide regular independent veriﬁcation of the alignment.

Source: Investment seeking impact: Japanese translation of Operating Principles for Impact Investing for reference(IFC) (2019)110

Contributions

Take a look at two things that are becoming reference points for such best practice. One is the Operating
Principles for Impact Management developed under the leadership of the International Finance Corporation (IFC). Starting with an intention, steps leading to exit are shown in the form of eight principles, andPrinciple 9 represents “Independent Veriﬁcation.” The principles were published in April 2019, andsigning organizations increased to 109 organizations as of December 2020 98.
The other is the SDG Impact Standards 99. This is currently being developed by the United Nations Development Program (UNDP) as the standards for impact generation under the mission of “oﬀering ideas andtools necessary to enhance contributions to achievement of SDGs” to both investors and businesscompanies. Three types of standards for private equity funds, bonds, and enterprises are created. Thereis also a plan to conduct impact certiﬁcation as well. This is also of strong interest to company-related
individuals in Japan, and over 300 people participated in an online brieﬁng held in December 2020.
At this brieﬁng, it was reminded that the SDG Impact Standards “is practical standards, rather than performance standards and reporting standards.” To us, standards are associated with something like “things
that it is enough to do” or “being successful when certain scores or more are obtained.” However, forbusiness activities aiming at impact investing and impact generation, there are too many uncertainties todevelop standards for “being successful when such impact is generated in such activities.” While discussions on standardization are progressing, the discussions have not yet been matured to the level where aconsensus can be built for standards for generated outcomes (impact performance)100. In the SDG Impact
Standards, what will be the standard form is the way of IMM, rather than outcomes of performance.

Figure 73. Explanatory materials for the SDG Impact Standards (from the 12/4/2020 UNDP brieﬁng)
Three key things to remember about the SDG Impact Standards

The Standards arepractice and standards not
performance or reporting
standards

The Standards represent
best practiceThe Standards bridgea signiﬁcant gap in thecurrent toolbox

Source: Contributing positively to the SDGs-Standards for Enterprises, United Nations Development Program (UNDP)(2020)98

https://www.impactprinciples.org “Operation Principles for Impact Investing” in Japanese translation for reference.
https://www.ifc.org/wps/wcm/connect/fe499630-792d-434f-8dd2-f5d06da4c1ed/Impact+Investing+Principles̲+FINAL.pdf?MO
D=AJPERES&CVID=mSUxyEd
99 https://sdgimpact.undp.org/practice-standards.html
100 For example, refer to Standardization in Impact Management by the IMP.
https://29kjwb3armds2g3gi4lq2sx1-wpengine.netdna-ssl.com/wp-content/uploads/IMP̲Standardisation-in-impact-managemen
t-discussion-document.pdf

111Integration, and evolution to integrity
The idea that the starting point of impact investing is intention cannot be removed. However, as IMM is
spreading, thoughts on impact investing are also evolving, and an awareness that integration is necessary is being popularized and the implementation is progressing. Many asset holders and investment
management companies have become to use IMM in various phases in the form where IMM is integrated into a series of investment processes, for example like impact due diligence 101, in the entire investment process.
With integration as the pass point, the idea of impact integrity has been particularly discussed in recent
years. This comes from a great sense of caution of people promoting impact investing about “impact
washing.” Impact washing includes investments which are labeled as impact investing but where
impact strategy is halfway in essence, the basic of IMM is not implemented, generated impact isoverclaimed, or impact not resulting from own eﬀorts are explained as being generated by own eﬀorts.
Impact integrity is almost equivalent to preventing impact washing and ensuring quality of impact
investing, and is to stop the circulation of “fake” impact investing amid expansion of the scale of the
impact investing ﬁeld to be mainstreamed. Phrases “rainbow washing” and “SDGs washing” have alsocome to be heard. This represents reality where there is the trend of washing also increasing as thesociety seeks social and environmental impact. When we reach impact integrity, we have come back to
the awareness that “HOW is essential” to ensure quality, from “WHY and WHAT before HOW.”
While of course “washing” should be avoided, when we try to measure impact too strictly, it will beconcluded that we “cannot.” Particularly in Japan where impact investing and the implementation havenot spread much, there are some concerns about emphasizing impact integrity too much resulting inhindering the entry. What matters is the transparency and information disclosure, as well as a stanceof explaining what is implemented, including IMM, externally in implementation of impact investing.

101 For example, refer to the summary by Paciﬁc Community Ventures.

https://www.paciﬁccommunityventures.org/2019/07/03/impact-due-diligence-guide/112

Contributions

Closing: toward mainstreaming impact
Figure 74 shows an extract from the working group report for formation of ecosystem of impact investing
released by GSG in 2018 102. For the concept and implementation of impact to become the mainstream insociety, while Widening Participation in Impact Investment and impact management of investors andbusiness companies at an accelerated pace is necessary, eﬀorts for Deepening Impact Investment Practice and preventing impact washing that damages credibility of impact investing as much as possible
should not be neglected. At the moment, what is regarded as the best measure to secure the both is the
spread of IMM. Can we spread impact with the power of ﬁnance and move ahead toward creating asustainable and fair society? I think we are approaching a critical stage.

Figure 74. GSG vision of expansion and deepening of impact investing (October 2018)

WIDENINGPARTICIPATION IN
IMPACT INVESTMENT

Mobilising for Impact
Case 2: Alina VisionAﬀordable world class eye-care

DEEPENING
IMPACT INVESTMENT
PRACTICE

Impact at Scale

Case 1: University Ventures
Re-imagining education andpathways to ﬁnance

Catalysing Impact

Case 3: Rockefeller
Foundation and cKer ﬁnanceCritical intermediationand facilitation

Impact by Design

Case 4: Habitat for Humanity
Microbuild fund to eliminate
sub-standard housing

Impact Integrity
Case 5: Heron
Foundation

Net impact for mission

Source: The Impact Principle: Widening participation and deepening practice for impact investment at scale, GSG (2018)

102 The Impact Principle: Widening participation and deepening practice for impact investment at scale

http://gsgii.org/wp-content/uploads/2018/10/GSG-Paper-2018-Widening-Deepening-the-Market.pdf

113

Contribution No.3

Impact investing from a Startupʼs Point of View
Director, CFO, and Impact Oﬃcer, Life is Tech, Inc.

Yoshiaki Ishikawa
In this article, I summarized my thoughts on impact investing and business practice from the standpointof an education startup that is promoting its business together with an impact investor. While I have manythings I would like you to know, I have particularly taken up subjects such as signiﬁcance of impact
measurement, relationships with investors, and what impact investing will be from now. I hope you readthe article as one of front-line opinions.

Impact measurement/evaluation are not costs but R&D investment
At ﬁrst, I would like to tell you the reality of impact measurement and impact management through introduction of Life is Tech businesses.
Life is Tech is a start-up working on education reform, with the mission of “developing each one thepotential of each of as many junior high and high school students as possible to the maximum.” Since thefoundation in 2010, the start-up has provided programing camps for junior high and high school students
and recently also endeavored to develop and oﬀer school study materials corresponding to society where
programing is made compulsory.
The business, which started from the awareness of the founder and representative Mizuno who was apart-time teacher at a high school, “opportunities to learn creation using IT are scarce!,” has grownsteadily since the foundation and the total number of users of its services has reached 200,000 people.
Although it has only begun, as the next generation who is doing well in various places is produced from
graduates, I feel our eﬀorts have borne fruit gradually. In our steps in these 10 years, impact measurement
and support of investors have played a key role.
I regard impact measurement and evaluation as not just costs but R&D (research and development)
investment. In these few years, as the donation market and the impact investing market are expanding,business operators have come to be asked for accountability to capital providers. While fundraising andaccountability are inseparable, business operators may also feel that they are burdensome and costly
operations.
However, in reality, measuring impact and taking opinions of stakeholders centered on beneﬁciaries
seriously is also research and development to generate a next outcome. I think we, business operators,
should regard this as not just costs for explanation but positive investment to generate larger impact, andwork on it positively.

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Contributions

Letʼs take a look at Life is Tech as an example. When we newly established a school that students continue to attend in addition to camps held in long holidays, which are our initial business, and when wereleased an online learning material “Technologia School of Magic” in partnership with Walt Disney Japan,
we always had impact understandings and goals set.

Camps of Life is Tech were created meticulously byfounders, thinking “Letʼs oﬀer a programing campwhich is as much fun as Disneyland and wherechildren can enjoy and learn!” In this case, learning
experience was built in line with the theory thatchildren do not just like something fun but alsocome to like learning through enjoyable experience.
Children who knew the fun of enjoying creating
smartphone apps and games with friends want tolearn on a full scale with an aim at service release.

Children who participated in the programing camp

To release a service, time is limited in a camp only. Understand such needs, Life is Tech started a schoolin 2014. As a result, many children created new services. Some services were ranked in App Store for iOS
and there are also many cases in which an award was received in a famous contest.
Next, in response to voices of junior high and high school students who “want to learn” which could not
be covered by camps and schools oﬀered mainly in large urban areas, we embarked on development of
online learning materials. To enjoy learning even when students live in high and mountainous areas awayfrom large cities, mechanism of online learning with no place and time constraints was indispensable. Yet,
there was a challenge that online learning centered on video had a low persistence rate. Then, we decided
to create learning materials that enable everyone to learn intently with pleasure and acquire skills withouteven noticing, in collaboration with Disney.
While the above are one example among many, businesses of Life is Tech are always created by understanding current challenge structure and impact and newly generating lacked value. This is not an idea of“because this market will grow, or because there are such similar services.” Of course, market-basedideas are valuable, but to break through the diﬃcult process of realizing a new business, inspiration foundfrom dialogues with beneﬁciaries and stakeholders is very important.

Regarding proﬁt as a means to generate impact
Impact investors are an encouraging existence to start-ups with a social purpose. Life is Tech raised two
billion yen through equity ﬁnancing under the theme of impact investing in 2020, but has been supported
by investors who attach much value to impact, since previous fundraising.

115

Life is Tech, which did not consider fundraising from venture capital and IPO at the time of foundation in
the ﬁrst place, moved to equity-based fundraising as a result of a dialogue with an investor stating thatspeed and scale of education reform should be accelerated. That is to say, we set our teeth, thinking that
it is necessary to utilize the power of capital and overstep the limits of own funds in order to generate
impact. Of course, there are some concerns. If a company founded for junior high and high school
students is urged to exit on the strength of voting rights and moves toward a completely diﬀerent purpose,
this is preposterous. So we clearly expressed, in the investment agreement, that we “promote future
growth of educational services for junior high and high school students,” though this statement has nobinding force.
When impact is emphasized this far, you might think Life is Tech sets a low value on economic proﬁt. But
this is not true. Investors are partners to generate impact to Life is Tech, and we are committed to realization of economic returns that they seek. Though shareholder returns are not the top priority, to shareholders who have provided resources to generate impact, we properly give back consideration that they
expect or exceeds their expectation. This is our attitude.
In future IPO that we are aiming for, there might be concerns about how far this concept can be realized.
In not a few cases, people worry about us, wondering if it is OK to say that. However, looking at the realworld, there are many cases where companies with social vision have earned recognition.
For example, Tesla, which is overwhelmingly highly reputed as a company providing next-generation
mobility, has published an impact report stating that the purpose of its existence is “to accelerate theworldʼs transition to sustainable energy.” 103 Not just giant global companies. Lemonade, which is also
known as an investee of Vision Fund, not only publishes a social impact report but also donates insurancemoney with no receivers for it which the company can take as revenue in nature. This way, the said
company has advanced bold eﬀorts 104, and the market still values the company highly. Vital Farms, which
went public this past July, states in its listing prospectus that it “may not place utmost priority on shareholder return 105,” but the message is said to have favorably received in the investor roadshow before
listing.
In the US, innovation is occurring not only in individual companies but also in infrastructure of the capital
market. Now a new trading market promoting long-term investments, called the Long-Term Stock
Exchange, has started trial operation. This move is supported by investors and entrepreneurs in Silicon
Valley. If we continue to seek proﬁts only, even the earth, our infrastructure, may be jeopardized. In this21th century, I feel that the movement of emphasizing the balance of proﬁt and impact by both entrepreneurs and investors is irreversible.

103 Tesla Impact Report 2019 Translated Version, Tesla Motors Japan LLC (2020) https://www.tesla.com/ja̲jp/impact-report/2019
104 The Lemonade Giveback, Lemonade Inc https://www.lemonade.com/giveback

105 “Coronavirus and capitalism - I see it this way: stronger through emphasizing public interest and going public, Mr. Matt OʼHayer,founder of US-based Vital Farms,” The Nikkei (2020)

https://www.nikkei.com/article/DGKKZO66292790W0A111C2EE8000/?fbclid=IwAR0tt93KRqLz34Baf1QPejYHgGUaKq09xn6Mn
CqR9RBORTCdQoHNEwG1Gyk

116

Contributions

Entrepreneurs aiming for social impact
In order to predict the future, it is best to talk with young people who are responsible for the next generation. Life is Tech has started working to support start-up of the youth responsible for the next generation.
When I have contact with these young people in that process, I think they have a natural sense to balance
economic proﬁt and impact. They do not seek their own economic proﬁt too much, but do not necessarily
sacriﬁce it. And their way of honestly working on issues that they regard as challenges seems encouraging and contains many things to be learned.
At the start of The B Corp Handbook published in 2014 106 , it is described that “Millennials who have amajority in the worldʼs labor market seek not only economic value but also social signiﬁcance in work.” In
the 2020s, this move will be accelerated further. I hope we can pave the way for successive generations
even if only slightly through impact investing and social IPO that is an extension of it 107, and we would liketo continue to grow and expand impact on education.

106 The B Corp Handbook: How to Use Business as a Force for Good, Ryan Honeyman(2014), Berrett-Koehler Publishers
107 Also called “Impact IPO.”

Editorsʼ postscript

Afterword: Editorsʼ postscript
GSG-NAB Japan Secretariat / Social Innovation and Investment Foundation (SIIF)
Report Production Team for The Current State and Issues of Impact Investing in Japan ‒ FY2020 Survey ‒Michiru Toda Project Leader, SIIF Impact Oﬃcer
As the leader of the writing and research team for this yearʼs report, my primary responsibilities weremanaging production for the project overall, organizing concepts, developing estimation methods, designing
the questionnaire form, ﬁeldwork, compilation and analysis, and writing the text (mainly the summary andChapter 2). It is my hope that this report can be utilized as the foundation for discussions and practices
aimed at the continuing development of impact investing.

Noriko Tadate Assistant Project Leader, SIIF Impact Oﬃcer
I was primarily responsible for contributed articles, market estimates, and publication. As a member of theSecretariat, I have attended every meeting of the Study Group on Impact Investment co-sponsored by the
Financial Services Agency and GSG-NAB Japan and which is referenced in the main body of the report andthe contributed articles. In the meetings, the frank opinions and views of Japanʼs top leaders in impact
investing are shared from their commitment and sense of responsibility to their trepidations and concerns. I
have seen how this has enlivened discussion and deepened understanding of impact investingʼs signiﬁcanceand issues.

Yukina Uchiyama Project Assistant, SIIF Intern
As a member of this year reportʼs writing and research team, I was responsible for helping compile the data
and writing a portion of the report. I would like to thank everyone for responding to the questionnaire andcontributing articles in the midst of teleworking and the many other changes that have occurred this year
due to COVID-19.

Satoshi Oda Advisor, SIIF Knowledge Development Oﬃcer
Along with writing Chapter 1 of the report and a pair of its case studies, as the advisor for the project overall,
I was primarily involved in identifying issues and developing causal hypotheses for the growth of impact
investing and in reﬁning the reportʼs proposals. Even from before this project was launched, I had felt thatperhaps the biggest barrier to impact investing growth in Japan was not a lack of money but the relative lackof companies that impact investors would want to invest in. And that perhaps one of the underlying reasonsfor this was the relative lack of professionals in corporate monetization. This hypothesis was backed up by
the survey.

Fumi Sugeno Project Director, SIIF Director of Business Development
With impact investing initiatives expanding in Japan, good quality data accumulation and analysis is becoming more and more important for promoting both quantitative and qualitative improvements. This year, wefundamentally revamped the surveyʼs design. It will be necessary to continue making improvements going
forward, but I think we have made major progress toward a survey that paints a multi-faceted picture of
impact investing in Japan and analyzes it in deep, meaningful terms. I look forward to hearing your unﬁlteredopinions on the survey. They will be gratefully used for further improvements.

117

The Current State and Challenges of Impact Investing in Japan‒ FY2020 Survey −PUBLICATION DATEMarch 31, 2021
PUBLISHER
Japan Social Innovation and Investment Foundation (SIIF)AUTHORS
Secretariat, GSG-NAB Japan / Japan Social Innovation and Investment Foundation (SIIF)
Michiru Toda, Noriko Tadate, Yukina Uchiyama, Satoshi Oda, Fumi Sugeno

For inquiries about this report
If you have any questions or comments,
please contact the GSG-NAB Japan Secretariat.
GSG-NAB Japan Secretariat, Research Team ( SIIF )＜gsg̲survey @ siif.or.jp＞

The copyrights of this report belong to the Social Innovation and Investment Foundation.
This report may not be edited, duplicated, published, or reproduced without permission.

© 2021 Japan Social Innovation and Investment Foundation ( SIIF )