2021

The Current State and Challengesof Impact Investing in Japan
FY2021 Survey

March 31, 2022

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

Introduction

About The Current State and Challenges of Impact Investing in Japan- FY2021 Survey
Report authors and survey team
Secretariat, GSG-NAB Japan / Japan Social Innovation and Investment Foundation (SIIF)
Michiru Toda, Kyoji Sasaki, Satoshi Oda
Token Express Co., Ltd. (partial commission of work)
Takatsugu Konno, Misa Kanegae
About GSG-NAB JapanThe Global Steering Group (GSG) is a global network, with 33 nations plus the EU as members, whichaims at promoting impact investing in partnership with ﬁnancial institutions, governments, internationalorganizations, businesses, and other entities around the world. The Japan National Advisory Board, The
Global Steering Group for Impact Investment (GSG-NAB Japan) was established in 2014 as GSGʼs national advisory board 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 research andpublication, 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 inJapan. It has been published under the supervision of GSG-NAB Japan every year since 2016, reportingthe current state of impact investing in Japan.
The main part of the report presents the impact investment balance1 in Japan based on the questionnaire
survey results. It also provides examples of institutions engaged in impact investing, and trends in theﬁeld 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 Researchworks Corporation, the company that administered the collection of responses.
Sponsor and copyrights
This survey was conducted and this report was created by the Social Innovation and Investment Foundation (SIIF) 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 on the results of the questionnaire survey, and 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 Japan

20

Consolidating Terms Related to Impact Investing

22

Chapter 1: What Is Impact Investing24

Summary of Impact Investing24

The Birth of the Term “Impact Investing” and Its Background25

Impact Measurement and Management (IMM)

27

Impact Investing and ESG Investing27

Impact Investing and SDGs

28

Recent Trends in Impact Investing

29

Column 1 : Introduction of the Impact Investment Forum

36

Chapter 2: Impact Investing Market in Japan

38

Survey Method

38

Deﬁnition of “Impact Investing” and Inclusion Criteria in This Survey and Report

39

Impact AUM

45

List of Institutions That Make Impact Investing and Investment Cases

49

Questionnaire Survey Result

51

Features of Organizations That Responded to the Questionnaire Survey

53

Progress and Challenges of Impact Investing in Japan

56

Japanʼs Impact Investing Activities

66

Implementation Status of Impact Measurement and Management (IMM) in Japan

77

Types of Impact Indicators

80

Return and Impact of Impact Investing84

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

88

List of Organizations that Responded to the Questionnaire Survey

89

Potential of Japanʼs Impact Investing Market ‒ Estimated Maximum and Methodology ‒90

Column 2 : Introduction of a Consumer Survey on Impact Investing93

3Case Studies of Impact Investments/Impact Companies
The Dai-ichi Life Insurance Company, Limited

98
99

Future Venture Capital Co., Ltd.

106

CureApp, Inc.

114

Pocket Marche, Inc.

121

Contributed Articles: Topics in Impact Investing"Global Trends in Impact Investing"President, Social Impact Management Initiative / Co-CEO, Blue Mable Japan, Inc.

128
130

Katsuji Imata“Practicing Impact Investing in Public Equity”
Chief Fund Manager, Equity Management Department, Resona Asset Management Co., Ltd.

138

Yuichiro Hanyu“Taking up the Challenge of Impact Investing at the Ritsumeikan Trust”
Deputy General Manager, Division of Financial Aﬀairs and Division of General Planning

144

and Development, Ritsumeikan Trust
Katsuya Sakai
Afterword: Editorsʼ Postscript

149

4

List of Figures

Figure 1

Spectrum of impact investing

Figure 2

Developments in impact investing from 2021 to the beginning of 2022

Figure 3

Scale of impact AUM

Figure 4

Impact AUM, asset manager AUM, and growth rate of repeat responding institutions

Figure 5

Year in which organizations began engaging in impact investing

Figure 6

Stages of evolution in the Japanese and international impact investing market

Figure 7

Progress of Japanʼs impact investing market over the past one year

Figure 8

Challenges facing businesses that aim to increase impact investing

Figure 9Case study examples selected and reasons for selection

Figure 10

The third axis in investment

Figure 11

Depiction of the relationship of impact investing and ESG investing

Figure 12

Global sustainable investing AUM (USD billions)Figure 13

Developments in impact investing from 2021 to the beginning of 2022

Figure 14

History of impact investing in the world and Japan

Figure 15

Terms related to impact investing

Figure 16

Scale of impact AUM

Figure 17

Impact AUM, asset manager AUM, and growth rate of repeat responding institutions

Figure 18

Year in which organizations began engaging in impact investing

Figure 19

List of institutions that make impact investing and investment cases

Figure 20

Number of institutions that responded to the survey in analysis subgroups (n) andtheir ratios to the total number of institutions that responded to the survey (%)

Figure 21

Industry type of all organizations that responded to the questionnaire survey

Figure 22

Industry type of institutions engaged in impact investing

Figure 23

Year in which organizations began engaging in impact investing

Figure 24

Motivation for engaging in impact investing

Figure 25

Importance in terms of requests from customers

Figure 26

Stages of evolution in the Japanese and international impact investing market

Figure 27

Progress of Japanʼs impact investing market over the past one year

Figure 28

Challenges facing businesses that aim to increase impact investing

Figure 29

Conditions that facilitate impact investing

Figure 30

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

Figure 31

Total impact AUM and asset manager AUM and the number of investments madeFigure 32

Impact AUM, asset manager AUM, and growth rate of repeat responding institutions

Figure 33

Proportions of impact AUM and asset manager AUM

Figure 34

Proportions of the number of impact investing madeFigure 35

Asset classes of impact investing

Figure 36

Impact investments by asset class: International comparison

Figure 37

Impact investees by organization typeFigure 38

Impact investees by growth stage of business

Figure 39

Impact investees by stage of business: International comparison

6
7

10
11
12
13
14
15
16
24
28
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35
40
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5

Figure 40

Impact investees by region

Figure 41

Impact investees by sector

Figure 42

Impact investees by sector: International comparison

Figure 43

Impact investing institutionsʼ plans for future impact investment

Figure 44

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

Figure 45

Tools and frameworks utilized in impact measurement

Figure 46

Purpose of using tools and frameworks

Figure 47

Types of measurement metrics adopted for implementation of impact investing

Figure 48

Status of information sharing with investees regarding impact measurement results

Figure 49

Status of information sharing with investors regarding impact measurement results

Figure 50

SDGs-linked impact measurement

Figure 51

Reasons for linking impact measurement with SDGs

Figure 52

Method of linking impact measurement with SDGs

Figure 53

Expected level of ﬁnancial returns

Figure 54

Rate of achievement of ﬁnancial returns

Figure 55

Rate of achievement of impact

Figure 56

List of Organizations which responded to questionnaire survey

Figure 57

Scale of Impact Investment Balance

Figure 58

Awareness of the term “impact investing”

Figure 59

Awareness of impact investment: Cross analysis by investment experience, genderand age

Figure 60

Consumersʼ interest in purchasing impact investments

Figure 61

Interest of consumers in purchasing impact investments: Cross analysis
by investment experience, gender and age

Figure 62

Type of businesses that consumers interested in impact investment want to invest
to solve social issues

Figure 63

Positive response of the respondents interested in impact investment toinstitutional investors purchasing impact investment products

Figure 64

Case study examples selected and reasons for selection

Figure 65

Structure to promote responsible investments

Figure 66

Regional Revitalization Funds Established by FVC

Figure 67

Case: Osaka Social Issue Solving Fund

Figure 68

CureApp Business Model

Figure 69

CureAppʼs Impact Logic

Figure 70

Logic model for Pocket Marche

Figure 71

Examples of 2021 online international conferences and meetings that discussedchanges and impact of socio-economic systems and the role of impact investing

Figure 72

Resona Local Impact Investment

Figure 73

Engagement activities

Figure 74

2021 RIMIX program structure

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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” outlines the deﬁnition of impact investing, goes over its history
globally, presents the background to its development in Japan, and summarizes topics 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 developments in impact investing in Japan and overseas in 2021 andearly 2022.
Figure 2. Developments in impact investing from 2021 to the beginning of 2022
IFRS Foundation established the International Sustainability Standards Board (ISSB)- Set international disclosure standards for non-ﬁnancial reporting

Globalmovements

G7 set up the Impact Taskforce within its framework- Toward impact-driven economies and societies

The Impact Management Project was developmentally dissolved and the Impact Management
Platform was set up- To make impact measurement and management be in the mainstream
The British government announced a roadmap to sustainable investing- To lay down information disclosure requirements for businesses

Actions bygovernmentsof othercountries

The EU published its sustainable ﬁnance strategy- Financial support for carbon neutrality, etc.

The US government changed its stance on sustainable investing- The attitude toward ESG investing in employer-sponsored pension plans

Actions by
the Japanese
governments andother Japanesepublic bodies

Movements of the Financial Services Agency, the Ministry of the Environment, and the Bank ofJapan for sustainable investing- Progress of speciﬁc measures
Prime Minister Kishida mentioned impact investing in his ﬁrst policy speech- Impact investing as part of public-private partnerships
Diversiﬁcation of investees in impact investing- Emergence of public equity funds

Actions by
Japanʼs private
sectorDiversiﬁcation of investors engage in impact investing- Entry of regional ﬁnancial institutions and incorporated schools into the market
Financial business operators and institutional investors signed the Japan Impact-driven
Financing Initiative- Agreement on contribution to practicing impact investing and expanding the impact investing market“Chapter 2: Japanʼs Impact Investing Market” analyzes the responses to the Questionnaire Survey
regarding Impact Investment (2021); and it is the main part of the report. It ﬁrst describes the survey methods and the inclusion criteria of impact investing in the survey. The chapter then presents the impact investment balance in Japan based on the questionnaire and the compiled results of the responses, and summarizes the impact investing market in Japan, and shares its current state and the issues. The report includes
a new initiative that started last 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- Survey period: September 2021 - January 2022
- 580 surveys were distributed and 77 were collected (a response rate: 13.2%). It was mainly distributed to
institutional investors and ﬁnancial institutions.

Deﬁnition of “impact investing” used in the questionnaire
The deﬁnition of “impact investing” used in the Questionnaire Survey and presented to respondents includes all of the following.
■ Impact investments are investments made with the intention to generate a 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 and Management 3 (IMM)(＊2) is conducted before and after making
investments (who does the post-investment measurement does not matter)＊2 IMM refers to the assessment and management process based on impact measurement. This process incorporates
into the investment process the quantitative and qualitative assessment of an impact in order to determine the value ofthe business and/or activities (for example, the value may be used as a criteria when an investment decision is made,or in the reports during the investment period and after investment). Improvements are made to the business anddecisions are made based on the information that is acquired through the process, aiming to increase the impact.

■ The results of Impact Measurement and Management (IMM) are shared with investors (＊3 )＊3 In case of a privately placed ﬁnancial product (e.g., a syndicated loan, an investment trust or privately placed

corporate bonds for institutional investors), the lead bank, investment manager, and issuer share the results of impact

measurement with investors. In case of a publicly oﬀered ﬁnancial product (e.g., an investment trust for individual
investors, publicly traded bonds), the results of impact measurement are available to the public, as the product ispublicly oﬀered. As for impact investing that an investor does on his/her own account, this criteria is not applicablebecause the investor obviously knows the results of the impact measurement.

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 toprovide an estimated size of the impact investing market in a strict sense.
• In principle, responses are self-reported : Like the GIIN Annual Impact Investor Survey, responses are
self-reported by the responding organization, and incomplete responses are supplemented with anadditional interview (by email or telephone).
• 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 not guarantee complete accuracy of the survey results.

2 The description is based on 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 frombelow 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.

9

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.
As for inclusion criteria, the FY2021 Survey used a new criteria shown as ④, in addition to ① to ③ used for
the FY2019 and FY2020 Surveys below. Impact AUM that meet all these four criteria were included.

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 4 and/or outcomes 5 as metrics for Impact Measurement and Management (IMM).
This yearʼs Survey, just as the FY2020 Survey, did not specify what must be measured about abusiness as metrics for an impact, including whether metrics for business outcomes were arequirement or whether metrics for output alone would do. Since there is no international standard
for metrics that all countries follow, what should be included in the measurement will continue tobe explored depending on the stages of Japanʼs market evolution.

③ The responding organization conducts Impact Measurement and Management (IMM) at
the time of making an investment decision and after making the investment.
Impact Measurement and Management (IMM) at the time of an investment decision must be
conducted by the investor organization, an investment manager, investment fund provider, or an
outsourced third-party assessment organization. Post-investment IMM 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).

④ The results of the Impact Measurement and Management (IMM) are shared with investors.
As stated in the deﬁnition, impact investing focuses on each investorʼs “intention (to generate an
impact for investors).” When an intermediary (asset manager or investment fund provider) is used
between the ﬁnal investor and an investee, the results of IMM conducted by the intermediary musthave been shared with the ﬁnal investor in order to determine that the ﬁnal investor, institutional orindividual, has had “the intention to generate an impact” and made “a decision based on the impact.”

3 This term has been created to represent the concept that integrates the conventionally used terms “social impact evaluation” and“social impact management,” so that it is consistent with the “Impact Measurement and Management (IMM),” which is an interna-

tionally accepted concept of impact investing initiatives. For details on the idea behind the change, please see “Consolidating Terms
Related to Impact Investing” in this report and “Consolidating Terms Related to Impact Investing” in the FY2020 Report (Page 20).

FY2020 Report: https://impactinvestment.jp/user/media/resources-pdf/gsg-2020.pdf

4 “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.

5 “Outcomes” refer to changes and beneﬁts as a result of the output of a business or project. These changes are brought to beneﬁcia-

ries 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.

10

Executive Summary

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 (new FY2021 criteria): 1.3204 trillion yen*The ﬁgure was calculated using the new criteria in this yearʼs Survey (i.e., the results of IMM were shared with the ﬁnal investors)(all four inclusion criteria ① to ④ were met).

The ﬁgure is the sum of the investment balances of the 31 organizations that responded to the Questionnaire Survey regarding Impact Investment (2021) 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 and Management(IMM) was conducted both before and after the investing, and when the results of the IMM were sharedwith the ﬁnal investors.
2. AUM that was ascertained by the Survey Questionnaire when the results of Impact Measurement andManagement (IMM) were not required to share with investors (old FY2020 criteria): 1.4814 trillion yen*The ﬁgure was calculated using the old criteria in the past Surveys (i.e., the results of Impact Measurement and Management(IMM) were not required to share with the ﬁnal investors) (Criteria ① to ③ were met, but ④ was not).

The ﬁgure is the sum of the AUM of the responding organizations whose intermediaries were not required toshare the details of measurement with the ﬁnal investors. In order to ensure that it is the “intention (to generate
an impact)” of the ﬁnal investor, in cases in which an intermediary is the one that conducts Impact Measurement and Management (IMM), the results of the measurement should be shared with the ﬁnal investors.
Reference ﬁgure: Maximum estimate (potential) in the market: 5.33 trillion yen
In addition to the ﬁgures ascertained through the Survey, this ﬁgure was conﬁrmed based on publisheddata. It is the sum of the amounts generated by “products” for which an evluation based on impact
measurement is conducted before and after investment, and is the maximum estimate of what can be
impact investing. For details, refer to the “Market Estimate Survey” section below.
Figure 3. Scale of Impact AUM
Marketʼs estimated maximum (potential)
Reference:
Marketʼs estimated maximum

5.33 trillion yen

2. Ascertained by
the Survey (old criteria)

Estimated maximum of potential impact investments. In addition to the ﬁgures
ascertained through the Survey, this ﬁgure was conﬁrmed based on publisheddata. It is the sum of the amounts generated by “products” for which an evaluation based on impact measurement is conducted before and after investment. (Details are in the “Market Estimate Survey” section below)

Impact AUM that was ascertained by the Survey Questionnaire
when the results of Impact Measurement and Management(IMM) were not required to share(old FY2020 criteria)

1.4814 trillion yen

The ﬁgure is the sum of the AUM of the responding organizations whose
intermediaries were not required to share the details of measurement with theﬁnal investors.(Inclusion Criteria ① to ③ were fulﬁlled, but ④ was unfulﬁlled)

1. Ascertainedby the Survey(new criteria)

Impact AUM, as ascertained by this Survey Questionnaire (newFY2021 criteria)

1.3204

trillion yen

The ﬁgure represents the sum of the investment balances which are based on
the Survey, and for which Impact Measurement and Management (IMM) was
conducted before and after the investing, and when the results of the IMM wereshared with the ﬁnal investors.(All Inclusion Criteria ① to ④ were fulﬁlled)11

Observations about factors behind the growth of impact AUM
Last yearʼs FY2020 Survey ascertained that the impact AUM totaled 328.7 billion yen (new FY2021 criteria
was applied for the purpose of comparison)6. This yearʼs FY2021 Survey found that the impact AUM
amounted to 1.3204 trillion yen, about a four-fold increase. This section explores factors behind this
rapid growth.
The impact AUM in Japan shown in this report are ﬁgures that were ascertained based solely on thesurveys of institutional investors and ﬁnancial institutions. With this fact in mind, we believe that thefollowing three factors are behind this increase in AUM.
1) Existing institutions that had already engaged in impact investing increased their investments.
2) New institutions entered the market of impact investing.
3) Diversiﬁcation of asset classes of impact investing, which underlies 1) and 2).
(Investments increased particularly in public equity and debt, as they easily grow in scale)
Regarding 1), we extracted 20 organizations engaged in impact investing which responded to both FY2020
and FY2021 Surveys. These repeat respondentsʼ impact AUM calculated from the FY2020 Survey totaled
approx. 322.6 billion yen (new FY2021 criteria was applied for the purpose of comparison), and those fromthe FY2021 Survey approx. 656.3 billion yen. This means that the year-over-year growth rate of impact
investing by these institutions alone doubled to reach 203 percent (the chart below).

Figure 4. Impact AUM, asset manager AUM, and growth rate of repeat responding institutions 7*Number of institutions that had year-over-year growth

Impact investing institutions
that responded to the Surveys
for two consecutive years (n = 20)

Impact AUM and Asset Manager AUM

FY2020SurveyFY2021
Survey322.666

656.326

billion yen

billion yen

Growth Rate
(YoY)

Count of
Growth*203%

14Source: Created based on the Questionnaire Survey regarding Impact Investment (2020 and 2021) (GSG National
Advisory Board) - Question: “A2 (2). Please provide your organizationʼs impact AUM and the size of asset manager AUM
as of the last ﬁscal year-end. (Numerical Answer, hereafter “NA”)”

6 Last yearʼs impact AUM totaled 512.6 billion yen when it was calculated based on the impact AUM inclusion criteria used last yearʼs
Survey (FY2020). In order to compare last yearʼs ﬁgure with this yearʼs, this yearʼs new criteria was applied to the last yearʼs ﬁgureof the Survey, and the last yearʼs ﬁgure became 328.7 billion yen.
7 The amounts from the FY2020 and FY2021 Surveys in Figure 4 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.

12

Executive Summary

As for 2), major investment managers and banks have entered the impact investing market. In light of
the numbers of new respondents to the Survey Questionnaire, 20 impact investing institutions last year
met the new criteria set for the FY2021 Survey, and the number grew 1.5 times to be 31 institutions thisyear. As the chart below shows, the year of 2019 saw the largest number of organizations (survey
respondents) that began impact investing. This may indicate that FY2020 covered by this yearʼs Survey
saw the new entrants begin full-scale investments.
Figure 5. Year in which organizations began engaging in impact investing 8
n=30

8

7

7
5
3
1
0

24
20

4

4
2

28

6

6

2
1

1
0

2008 2009

2010

1

1

2012 2013

2014

16
2

2

2
1

0
2011

2015

■ # of organizations that began impact investing (each year)

2016

32

2017

2018

2019

2020

12
8
4

2021

0

ー #of organizations that began impact investing (cumulative)

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board)- Question: “A1. Please answer the year in which you began engaging in impact investing. (NA)”3) is a trend in impact investing that has emerged across the globe as well as in Japan. Impact investing at
the early stage saw venture capital poured into unlisted companies, including start-ups. The backgroundto the growth is a rise in large-scale amounts of investments that include debt ﬁnancing for listed companies and impact investing funds consisting of public equity. In the breakdown of impact AUM by asset classconﬁrmed in this year's survey, debt accounted for 58% and listed equities for 35%, with both accounting
for 93% of the total. The moves for standardization, which includes the development of the principles andframeworks stated below, have created the investment climate that facilitates these initiatives.
■ Development of “The Impact Principles” (Operating Principles for Impact Management) (April 2019) 9
The Impact Principles are operating principles for impact management. The International Finance Corporation (IFC) led the development of these rules. The nine principles provide a framework that enables investors to consciously incorporate their ideas about an impact into their investment lifecycles. As of January2022, 151 institutional investors in 37 countries have signed on. Some of the impact investing institutions
that responded to this Survey are organizations that have signed these principles, or organizations thathave not signed the principles but apply them as general rules to the operation of their investment funds.
■ Establishment of the Principles for Positive Impact Finance 10 and their framework (2017 - 2018)
The United Nations Environment Program Finance Initiative (UNEP FI) led the development of theseprinciples for investments and loans that aim to make a positive impact. The four principles provide a

13common ﬁnancial framework for achieving the SDGs. In Japan, city banks and regional banks are increasingly turning to these principles as the basis of their impact investing initiatives in the form of loans.
We discussed the factors behind the growth of impact investing in the above paragraphs. These factors
can be summarized as follows: both old-timers and newcomers in the impact investing market haveincreased their investments; what is behind the increase includes standardized principles and frameworks
that have been created to facilitate investments that can be easily increased (e.g., investments in public
equity; debt ﬁnancing); and impact investing institutions in Japan took actions to apply and/or expand
those frameworks during FY2020 (the year covered by the Survey). These facts indicate that FY2020 was
probably a milestone year.
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.” 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 6). The evolution of Japanʼs impact investing market was conﬁrmed to be one
stage behind the international market and set for growth in the near future.
Figure 6. Stages of evolution in the Japanese and international impact investing market 11
In its infancy

23%

9%

About to take oﬀ

70%
7%

Stages of Japanʼs impact
investing market evolution( n=30 )21%

Growing steadily
Established/Mature

69%
2%

Saturated
Declining

Stages of the international impact
investing market evolution( n=290)

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board) and the GIIN Annual Impact Investor Survey 2020. - Question: “D5. How do you see the state of Japanʼs impact
investing market? Please select the answer that most accurately describes your view. (Single Answer, hereafter “SA”)”

On the other hand, most respondents view Japanʼs impact investing market as having progressed over the
past year in “the publicʼs awareness of and interest in impact investing,” “Top managementʼs interest in
and understanding of impact creation,” and “Each companyʼs stakeholdersʼ interest and engagement(e.g., asset owners, shareholders, investors)” (Figure 7), whereas “fragmentary and unsystematic
approaches to Impact Measurement and Management (IMM)” was the most commonly cited challenge
going forward for two consecutive years both by institutions already engaged in impact investing andthose considering entering the market in the future (Figure 8). After unsystematic IMM, the second mostcommonly cited challenges were “limited data on potential impact investee companies and investment

89Figure 5 shows the results of responses only from the organizations that are engaged in impact investing and meet the above

inclusion criteria. The organizations that provided no answer were excluded.

https://www.impactprinciples.org

10 https://www.unepﬁ.org/wordpress/wp-content/uploads/2018/09/POSITIVE-IMPACT-PRINCIPLES-JAPANESE-WEB.pdf

11 Figure 6 shows the results of responses only from the organizations that are engaged in impact investing and meet theabove inclusion criteria. The organizations that provided no answer were excluded.

14

Executive Summary

products,” “a limited number of impact companies to invest in,” and “limited availability of professionals
capable of helping impact companies make proﬁts and exit.” These responses made it clear that Japan
still has relatively few impact companies in which investors wish to invest and only a small pool of talent
for operating impact investing (Figure 8). And, as the market grows, there is a concern of ʻimpact washingʼ(regular investments 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.
Figure 7. Progress of Japanʼs impact investing market over the past one year 12■ Signiﬁcant progress ■ Some progress ■ No progress ■ Worsened n=
17%

The publicʼ s awareness of and interest in impact investing
Top managementʼ s interest in
and understanding of impact creation
Each companyʼ s stakeholdersʼ interest and engagement(e.g., asset owners, shareholders, investors)

8%

Incentive plans for start-ups (including impact companies)

13%

79%
88%

5%

76%

15%

8%

26

8%

24

12%

26

19%

50%

Establishment of impact measurement and management (IMM)
as rules and common practice

35%

57%

Greater availability of detailed information about impact
companies and investment products for impact investingEﬃcient use of external resources for impact investing

29

85%

Actions inspired by the Principles for Responsible Investment,
SDG impact (UNDP), and the Operating Principles
for Impact Investing (IFC), among others
Increasing impact investments throughventure capital (VC) and private equity (PE)

3

79%

43%

54%
8%

46%

21
20
23

46%

24

46%

24

Accumulating examples and data about impacts and returns

52%

48%

23

Certiﬁcation/Labeling systems by public/third-party institutions

50%

50%

20

52%

25

Establishment of companiesʼ internal systems
for impact investing
Exit strategies and other means of exit than IPO
as common practice

12%

36%

6%

31%

63%

16

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

35%

65%

17

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

33%

67%

15

Philanthropy or public funds as an incentive
to encourage impact investing
Incentives for impact investing provided
by the government and/or municipalities (e.g., a tax break)

25%
6%

75%
94%

16
18

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board) - Question: “D11. How do you view the progress that Japanʼs impact investing market in general has madeover the past one year? (SA for each statement)”

15

Figure 8. Challenges facing businesses that aim to increase impact investing 13■ Of all respondents（n=66）■ Institutions engaged in impact investing + Organizations deemed to be engaged in impact investing（n=36）■ Institutions not engaged in impact investing（n=30）

67%
64%
70%

Fragmentary and unsystematic approaches to

Impact Measurement and Management (IMM)
Limited data on potential impact investee companies

Lack of an eye for impact companies

21%

on the part of fund providers

20%

A limited number of impact companies to invest in

10%

28%

20%
19%
20%

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

17%

Limited preferential treatment for impact investing

10%

22%

9%
11%
7%

Limited investment methods andmeans available for impact investing
Limited options for exit strategies that make it diﬃcult

3%

to calculate expected return on investment

Limited returns considering the eﬀorts needed for

8%
13%

6%
6%
7%

impact investing, which makes it diﬃcult to incorporate

the investing into a major part of performance evaluation

5%
3%
7%

Diﬃculty of increasing impact investments

due to the constraints of ﬁduciary responsibility

other than start-ups

53%

31%

10%

(i.e., asset owners, asset management companies)

A limited number of impact companies

41%

31%

and investment products

0%

0

3%
7%

10

20

30

40

50

60

70

80 (%)

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory Board) - Question: “D6/E1. What do you think is the problem when Japan plans to increase impact investing
going forward? (Multiple Answer, hereafter “MA”, up to 3)”

12 Figure 7 shows the results of responses only from the organizations that have taken actions to meet the requirements for inclusion in
impact investing that are stated above. 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 not counted.

13 Figure 8 excluded invalid responses that had selected four or more answers, as respondents were asked to select up to three. Sevenof the “institutions not engaged in impact investing” were in eﬀect “institutions engaged in impact investing” when they responded
to the Survey (i.e., not during the period covered by the Survey), and thus their responses were counted as those from “institutions

deemed to be engaged in impact investing” for analysis of answers to this question. For details, see “About ʻInstitutions deemed to
be engaged in impact investingʼ” in the opening of “Questionnaire Survey Result” discussed later.

16

Executive Summary

The Survey asked organizations that fall into the category of impact investing institutions to describe what
they think would “facilitate impact investing” in the open-ended question. Their demands included theaccumulation of model businesses and successful examples around a variety of themes; training of talent
for impact investing; the governmentʼs incentives and encouragement for ﬁnancial institutions, investors,
and major corporations; top managementʼs better understanding of impact investing at not only large
enterprises but also small- to medium-sized businesses; and the standardization of aﬀordable andsimply-designed impact measurement and management.14“Case Studies of Impact Investing and Impact Companies” presents four example initiatives in order to
identify trends in impact investing. Two of the four examples are from ﬁnancial businesses that makeinvestments, and the other two from operating companies that receive investments from ﬁnancial
businesses. Refer to the body of the report for details.

Figure 9. Case study examples selected and reasons for selection
Interviewee

Interviewee Proﬁle & Highlights of Case Study
A life insurance company established in 1902. Its assets under management at theend of March 2021 totals approx. 38 trillion yen. Dai-ichi Life began impact
investing in 2017 as one of the ﬁrst institutional investors in Japan to do so.

The Dai-ichi Life

Insurance Company,
Limited• Dai-ichi Life has contributed to setting examples for the industry since the earlydays of impact investing.
• It has an established system in which multiple departments work together for
impact investing.
• The company practices impact investing across multiple asset classes, including
direct investments in unlisted and listed companies, and investments in funds.

A Kyoto-based venture capital ﬁrm established in 1998. The company has acted asa pioneer providing local models of venture capital funds.
Future Venture

Capital Co., Ltd.

• With the intention of creating impacts, Future Venture Capital oﬀers ﬁnancial
products designed to revitalize local economies.
• The company started local revitalization funds after the Great East Japan
Earthquake in 2011. It has managed these funds across diﬀerent regions since,
acquiring unique know-how in how to agree on impact KPIs with investees.

14 Selected from responses to Question D10. “Please describe what you think is needed to facilitate more impact investing.”

17Interviewee

Interviewee Proﬁle & Highlights of Case Study
Established in 2014, CureApp is the developer and operator of “Digital Therapeutics (DTx)®.” The companyʼ s mission is “Re-evolving ʻtherapeuticsʼ with
software,” and the company receives investments from several impact investors.

CureApp, Inc.

• CureApp is a good example of an impact-oriented business in that thesoftware it oﬀers is designed to urge users to change their behavior in such a
way that helps solve various issues in the healthcare and other related ﬁelds.
• The company considers Impact Measurement and Management (IMM) as
one of its business management tools and is working to make it acompany-wide practice.

A joint-stock company established in 2015. With the mission of “Connecting thePieces,” Pocket Marche runs a website that oﬀers consumers primary products(e.g., fruit, vegetables, meat, and ﬁsh) for direct purchase from producers. It
also operates an electricity business.
Pocket Marche, Inc.

• The business attempts to solve the issue of the divide between urban andrural areas.
• Investors who invest in Pocket Marche are enticed by the companyʼ smission and make their investments in the hope that the connection will be areality through the business. The company also practices Impact Measurement and Management (IMM).

The report includes two commentaries between chapters. “Commentary 1: Introduction of the Impact
Investing Forum” refers to the topics that were discussed at the Impact Investing Forum, one of Japanʼslargest impact investing conferences, to review the trends that have been observed. The Impact Investing
Forum has been organized jointly by the GSG National Advisory Board (GSG-NAB) and Japan Social
Innovation and Investment Foundation (SIIF) since 2018. “Commentary 2: Introduction of the Consumer
Survey on Impact Investing” presents the gist of the General Consumer Awareness Survey on Impact
Investment that has been conducted annually by SIIF since 2019.

The “contributed articles” at the end of the report take up important topics related to the promotionof 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 the oﬃcial views of their aﬃliated organizations or the GSG-NAB Japan.

18

Executive Summary

List of topics and contributors
pg. 130
Global Trends in Impact Investing
Katsuji Imata, President, Social Impact Management Initiative,
Co-CEO, Blue Mable Japan, Inc.

Katsuji Imata, a contributor to The Current State and Challenges of Impact Investing in Japan - FY2020
Survey, illustrates global trends in impact investing in 2021. After presenting various international conferences and high-level meetings that have been held, along with changes in international aﬀairs, Mr. Imata
discusses the necessity of becoming involved in the transition to global economic and social systems, andhow the Copernican Revolution-like changes are happening in the trends in impact investing. He also
oﬀers his views on new trends and issues in sustainable ﬁnance in general as well as on impact investing
and Impact Measurement and Management (IMM).

pg. 138
Practicing Impact Investing in Public Equity
Yuichiro Hanyu, Chief Fund Manager, Equity Management Department, Resona Asset Management Co., Ltd.

In March 2021, Resona Asset Management began to manage an impact investing fund for investments inpublic equity in Japan. Mr. Hanyu illustrated issues and important points unique to impact investing inpublic equity that he faced as he worked on the fund, covering also Resonaʼs view. Mr. Hanyu alsopresents some of the fundʼs eﬀorts, as he believes that providing speciﬁc examples and views for accumulation is essential for further growth of impact investing.

pg. 144
Taking up the Challenge of Impact Investing at the Ritsumeikan Trust
Katsuya Sakai, Deputy General Manager, Division of Financial Aﬀairs and Division of General Planning and Development, Ritsumeikan Trust

Katsuya Sakai presents the objectives and history of asset management by private universities. Then heillustrates the background to Ritsumeikanʼs decision to create a social impact fund as an incorporated
school, using the Ritsumeikan Social Impact Fund (RSIF) as a real-life example that is part of the Ritsumeikan Impact-Makers Inter X (Cross) Platform (RIMIX). Mr. Sakai also elucidates compatibility between
impact investing and the education and research business, along with challenges related to social impact
measurement, as part of what is expected of impact investing by an incorporated school as well as theoutlook for the initiative.

19

Summary conclusion
We conducted the Survey and prepared this report in FY2021 when the coronavirus pandemic, which had
begun the year before, remained rampant. The pandemic, however, apparently advanced the understanding of the beneﬁts of impact investing. Let us quote again some of the responses to last yearʼs Questionnaire Survey that were included in the FY2020 report. 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 inJapan, 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 (2021).
It is our hope that this report contributes to solving social issues through impact investing.

20

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 chairs 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 of March 2022, 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,
Japan Social Innovation and Investment Foundation

Tadahiro Kaneko

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

Ryousuke Kawahara

Deputy Head of Retail & Business Banking Company/General Manager ofCorporate Business Coordination Department, Operating Oﬃcer,
Mizuho Financial Group, Inc.

Ken Shibusawa

Chief Executive Oﬃcer, Shibusawa and Company, Inc.

Tomoya Shiraishi

Director, Social Investment Partners

Miyuki Zeniya

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

21

Chunmei Huang

Managing Director, Impact Investment Team,
Shinsei Corporate Investment Limited

Masataka Fukao

Professor, Faculty of Policy Science, Department of Policy Science,
Ryukoku University

Hiroshi Mikitani

Representative Director, Japan Association of New Economy

Megumi Muto

Vice President, Japan International Corporation Agency (JICA)

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.
• Japan Social Innovation and Investment Foundation (SIIF)• Japan Fundraising Association

22

Glossaries

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 (2021)
as investing that meets the following three 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 a positive,
measurable social and environmental impact alongside a ﬁnancial return. 15• Impact measurement and management (IMM) is conducted before and after making
investments (who does the post-investment measurement does not matter).
• The results of impact measurement and management (IMM) are shared with investors.16

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 and Management (IMM)” refers to the assessment and management process
based on impact measurement. This process incorporates into the investment process the quantitativeand qualitative assessment of an impact in order to determine the value of the business and/or activities(for example, the value may be used as a criterion when an investment decision is made, or used in reports
made during the investment period and after investment). Improvements are made to the business anddecisions are made based on the information that is acquired through the process, aiming to increase theimpact.
■ An “impact company” refers to a company oriented to creation of impact.

15 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.
16 As stated in the ﬁrst condition, impact investing focuses on each investorʼs “intention (to generate an impact).” When an intermediary (asset manager or investment fund provider) is used between the ﬁnal investor and an investee, the results of IMM conductedby 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 the impact.” Therefore, this condition was adopted
as a new criterion in this yearʼs survey.

23

Change from “social impact evaluation” to “Impact Measurement and Management (IMM)”
About “social impact evaluation”
The traditional expression of “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 Evaluation” 17 of the Cabinet Oﬃceʼs Council for Promotion of the Society of Mutual Assistance acting as a
trigger, utilization of social impact evaluation was discussed with an aim to attracting private funds tosolve social issues. Then, together with the introduction of impact investing into Japan, impact investing and social impact evaluation 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.
About “Impact Measurement and Management”
In addition, in the global context, a term “Impact Measurement and Management (IMM)” is commonlyused as the term corresponding to “social impact evaluation” in the global impact investing initiatives.18 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 toreduce negative impact and maximize positive impact while being consistent with your own objective.” 19
Consolidation at this stage in this yearʼs survey and report
In this yearʼs survey and report, the expression “Impact Measurement and Management” was adopted
as a consolidated concept of “(social) impact evaluation” and “(social) impact management” that had
been traditionally used, to ensure consistency with global trends. Changing the meaning to be synonymous with “Impact Measurement and Management (IMM)” as deﬁned by GIIN has been avoided at
this point, and the meaning of traditional “impact evaluation” and “impact management” have been
consolidated under the Japanese expression “Impact Measurement and Management.” Consolidationof concepts and terms of “impact investing” and “Impact Measurement and Management” is expected
to progress going forward as impact investing in Japan develops.

17 “Working Group on Social Impact Evaluation” 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
18 GIIN and IMP are striving to familiarize this term: https://thegiin.org/imm and https://impactmanagementproject.com
19 Explanation of IMM by GIIN: https://thegiin.org/imm (The translation was made by the writer in the Japanese version of this report.)

24

Chapter 1

Chapter 1 : What Is Impact Investing
Summary of Impact Investing
Impact investing refers to investing activity that is intended to generate a positive, measurable social
and/or environmental change or eﬀect alongside ﬁnancial returns.
Conventional investing judges value on the two axes of risk and return. Impact investing refers toinvestments that add a third axis “impact,” which means social and/or environmental change or eﬀect
as a result of the investment.

ReturnFigure 10. The third axis in investment
ImpactSource: Position Paper on Expanding Impact Investing
2019, The Japan National Advisory Board, The Global
Steering Group for Impact Investment (GSG- NAB
Japan), April 2020

Risk

What is impact
Impact refers to social and/or environmental change or eﬀect as a result of a business or activity.
In impact investing, it is required that social and/or environmental change, etc. as a result ofinvesting activities is identiﬁed quantitatively and qualitatively and a value judgment is added by
the entity that performs the act of investing. Activity that identiﬁes social and/or environmental
change, etc. as a result of investing activities and adds a value judgment is referred to as impact
measurement, or recently, to impact measurement and management. 20

Elements of impact investing
The following four elements determine whether an investing activity can be considered an impact
investing.
(1) Intentionality(2) Financial Returns(3) Range of Asset Classes(4) Impact Measurement

20 Guidelines for Impact Measurement and Management, ﬁrst edition, The Japan National Advisory Board, The Global Steering Groupfor Impact Investment (GSG- NAB Japan), IMM Working Group, May 2021

25(1) Intentionality refers to looking at whether the entity that performs the act of investing aims
(intends) to generate a positive impact through its investing activity. (2) Financial Returns refer tolooking at whether the entity that performs the act of investing aims not only to generate an impact,
but also to receive ﬁnancial returns through its investment. (3) Range of Asset Classes refers to thefact that impact investing is not limited to investment in speciﬁc assets. (All ﬁnancial transactions
that seek ﬁnancial returns, including investments (stocks and bonds), loans, and leases, are collectively covered.) (4) Impact Measurement refers to looking at whether the entity that performs the actof investing carries out activities of identifying social and/or environmental change, etc. as a result ofinvesting activities and adding a value judgment.
Any investment in which the entity that performs the act of investing has an intention, aims to generate ﬁnancial returns, and carries out impact measurement and management can be classiﬁed as
impact investing, regardless of the asset class in which investment is made.

The Birth of the Term “Impact Investing” and Its Background
The term “impact investing” was allegedly coined at the meeting convened by the Rockefeller Foundation of the U.S. in Bellagio, Italy, in 2007.21 The meeting was to explore ways and means of investment to generate environmental and social impact, attended by leaders from the ﬁnancial institutions,philanthropic sectors, and social development sectors including development of developing countries.
As the issues facing society had become more serious and complex, it had become clear that solving
these issues cannot be carried out solely through philanthropy by governments and citizens. Against
this backdrop, the term impact investing was born. In other words, the resources that can be investedby the public sector (public entities such as government) and social sector (non-proﬁt activities) are
insuﬃcient compared to the scale of resources (including funds) that should be invested in solvingsocial issues. In particular, in terms of “funds,” a resource that is easy to understand, at the time when
the term “impact investing” was coined, administrative costs (and funds for aid to developing countries) were being reduced, especially in Western countries.
In addition, in the society of the year 2007, there was a growing momentum to reconsider investing
activities due to the emergence of the subprime loan problem in the U.S., several successful businesscases to seek to create positive social and environmental change had emerged, and the wealthyclasses who seek “added value” in their investments beyond ﬁnancial returns had become increasingly present among the entities that perform the act of investing in developed countries.
Under such circumstances, awareness naturally arose that the public and social sectors and theﬁnancial sector were operating under diﬀerent discipline and value standards. The former pursues
generating an impact while the latter pursues ﬁnancial returns. The term “impact investing” was given

21 Accelerating Impact, Rockefeller Foundation, July 2012,https://www.rockefellerfoundation.org/wp-content/uploads/Accelerating-Impact-Full-Summary.pdf

26

Chapter 1

to an investment approach that integrates both of these two value standards in a single ﬁnancialtransaction, that is, to realize environmental and social beneﬁts while providing ﬁnancial returns.22
Subsequently in September 2015, the Sustainable Development Goals (SDGs) were adopted at the
UN Summit. The SDGs represent international goals to achieve a sustainable and better world by2030. In the year prior to the adoption, the UN estimated that as much as 2.5 trillion dollars per year
would be needed to achieve the SDGs.23 It is unrealistic for public and social sectors alone to fundsuch a huge amount of money, therefore, entities in a wide range of ﬁelds, including private ﬁnancial
institutions and corporations, are expected to make investments. Partly due to such circumstances,
expectations for impact investing are increasing.

☞ Impact Investing and Development Finance
Since the term “impact investing” was coined at the meeting in Bellagio, Italy, in 2007, impact investing has been closely linked to development ﬁnance in practice. Development ﬁnance refers to theﬁnancial ﬁeld that is designed to achieve the economic and social development of a speciﬁc industry
or a speciﬁc region. Development ﬁnance is provided by government-aﬃliated ﬁnancial institutions
within the same country, by developed countries to developing countries, or by international organizations. Most of its providers had been public institutions. As such, in the ﬁnancing arrangement, it wascommon that the entities that provides ﬁnancing are required to simultaneously generate (and be
accountable for) ﬁnancial returns as well as social and environmental impact as they originallyintended. Therefore, much of the experience and knowledge of development ﬁnance can be applied
to impact investing, and has played a major role in the development of impact investing.
In particular, International Finance Corporation (IFC), a member of the World Bank Group, which uses
ﬁnancial techniques to mobilize private funds for development in developing countries, is an institution that respects the discipline of capital markets and has pursued methods to generate an impact,
not only with its own funds but also with private funds. It possesses extensive experience and knowledge that can be utilized by general private ﬁnancial institutions and corporations in making theirimpact investing. Therefore, there are many methods and concepts of impact investing that can bereferred to those originating from IFC. The Impact Principles (OPIM) that was created at the initiativeof IFC 24 is a typical example, and as of January 2022, 151 ﬁnancial operators in 37 countries havesigned up to operate impact investing based on the Principles.

22 “What is Impact Investing?”, Rockefeller Philanthropy Advisors, https://www.rockpa.org/guide/impact-investing-introduction
23 World Investment Report 2014, United Nations Conference on Trade and Development, 2014年6月、https://unctad.org/system/ﬁles/oﬃcial-document/wir2014̲en.pdf
24 The Impact Principles, IFC, April 2019,https://www.ifc.org/wps/wcm/connect/fe499630-792d-434f-8dd2-f5d06da4c1ed/Impact+Investing+Principles̲+FINAL.pdf?MOD=AJPERES&CVID=mSUxyEd (in Japanese translation for reference)

27

Impact Measurement and Management (IMM)
It was stated that four elements of Intentionality, Financial Returns, Range of Asset Classes, and Impact
Measurement are the requirements for impact investing. Impact Measurement and Management(“IMM”) is positioned as a means of achieving investorsʼ “intentionality” in impact investing. IMM adds
a “management” element to “Impact Measurement,” one of four elements of impact investing, in whichinvestors and business operators make business improvements or decisions based on the results ofmeasurement and aim to improve impact.
IMM is the result of the sophistication and standardization of impact measurement and its management
techniques in the global impact investing market over the past decade. In response to the developmentof IMM, GSG-NAB Japan released the guidelines for IMM practice, a practice guidebook, a discussion
paper to create global standards for IMM, and other materials in July 2021, with the purpose of sharing
with impact investing practitioners the points to be considered that GSG-NAB Japan believes areimportant for them to practice IMM as well as issues they may face and measures they can take toaddress them.25 Please refer to these documents for details of IMM.

Impact Investing and ESG Investing
ESG investing is an investing activity similar to impact investing. ESG investing is often deﬁned as“investment that considers the elements of not only traditional ﬁnancial information but also Environment, Social, and Governance” factors.26 As stated earlier, impact investing refers to “an investing
activity that is intended to generate a positive, measurable social and/or environmental change oreﬀect alongside ﬁnancial returns.” Impact investing and ESG investing are similar in that they areboth aware of the “environmental” and “social” impacts generated by their investing activities and arealso aware of ﬁnancial returns.
One clear diﬀerence between impact investing and ESG investing is that in impact investing, there isa requirement that the entity that performs the act of investing has the “intention” to generate an
impact and that the entity conducts “impact measurement.” (Please refer to “Elements of impact
investing” in the previous section.) Therefore, in order to determine whether an investing activity isimpact investing or ESG investing, the intentionality of the entity that performs the act of investing
and the implementation status of impact measurement and management should be conﬁrmed. Whenboth are conﬁrmed, the investing activity can be considered impact investing.
Apart from this method of distinguishing impact investing from ESG investing based on the requirement of impact investing above, the diﬀerence between impact investing and ESG investing can be
simply expressed in terms of balance, that is, how much emphasis is to be placed on (1) ﬁnancial
returns and (2) non-ﬁnancial impact, as shown in the ﬁgure below.

25 Press release “GSG-NAB Japan creates and releases the ʻIMM Practice Guidebookʼ and other documents in impact investing(stocks),” GSG-NAB Japan, July 2021, https://impactinvestment.jp/news/research/20210701.html

26 Ministry of Economy, Trade and Industry website (viewed in January 2022),

https://www.meti.go.jp/policy/energy̲environment/global̲warming/esg̲investment.html

28

Chapter 1

Figure 11. Depiction of the relationship of impact investing and ESG 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

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

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

Impact Investing and SDGs
There are high expectations for impact investing from the perspective of contributing to the SDGs.
SDGs is an abbreviation for Sustainable Development Goals, international goals that aim for asustainable and better world by 2030.27 Upholding the development with “leave no one behind,” the2030 Agenda for Sustainable Development sets 17 goals, including no poverty, gender equality, and

27 Ministry of Foreign Aﬀairs of Japan website (viewed in January 2022), https://www.mofa.go.jp/mofaj/gaiko/oda/sdgs/about/index.html

29

climate action, which were unanimously adopted by all UN Member States at the UN Summit in
September 2015.
The 17 goals of the SDGs cover a wide range of economic and social themes. Although some themes
are also covered by the “Environment,” “Social,” and “Governance” themes that ESG investing focus
on, the SDGs covers a broader economic and social aspects. Therefore, it can be considered that ESG
investing alone is not suﬃcient enough to achieve the goals of the SDGs. For that reason, high expectations are placed on impact investing.
As stated in “Elements of impact investing” in the previous section, impact investing requires that theentity that performs the act of investing has the “intention” to generate an impact, but places norestrictions on the theme of that impact. The theme could be any positive social or environmental
impact. This means that impact investing is highly compatible with the SDGs. According to IFCʼsestimate,28 additional ﬁnancing of 2.6 trillion dollars will be needed in 2030 in emerging and low-income developing countries, just for some area of SDGs (education, health and wellness, roads,
electricity, water and wastewater), and IFC urges that impact investing is essential to address thishuge ﬁnancing shortfall.

Recent Trends in Impact Investing
Impact investing is commonly positioned as a form of sustainable investing (investment that aims torealize a sustainable society), along with ESG investing. The sustainable investing market has kept
expanding over the past decade, reaching 35.3 trillion dollars by 2020.29

Figure 12. Global sustainable investing AUM (USD billions)
40,00035,30135,00030,68330,00022,87225,00018,27620,00015,00013,261

10,000
5,000
0

2012

2014

2016

2018

2020

Source: Global Sustainable Investment Review 2020, Global Sustainable Investment Alliance

28 “CREATING IMPACT”, International Finance Corporation, 2019,https://www.ifc.org/wps/wcm/connect/publications̲ext̲content/ifc̲external̲publication̲site/publications̲listing̲page/promise-of-impact-investing

29 Global Sustainable Investment Review 2020, Global Sustainable Investment Alliance,
http://www.gsi-alliance.org/wp-content/uploads/2021/08/GSIR-20201.pdf

30

Chapter 1

With the expansion of the sustainable investing market, especially the expansion of ESG investing, theyear 2021 witnessed a year of activation and materialization of global movements that transcended
national boundaries, movements by the Japanese government, and movements by domestic private
sector. Of which, major developments related to the impact investing market are shown in Figure 13.

Figure 13. Developments in impact investing from 2021 to the beginning of 2022
IFRS Foundation established the International Sustainability Standards Board (ISSB)- Set international disclosure standards for non-ﬁnancial reporting

Globalmovements

G7 set up the Impact Taskforce within its framework- Toward impact-driven economies and societies

The Impact Management Project was developmentally dissolved and the Impact Management
Platform was set up- To make impact measurement and management be in the mainstream
The British government announced a roadmap to sustainable investing- To lay down information disclosure requirements for businesses

Actions bygovernmentsof othercountries

The EU published its sustainable ﬁnance strategy- Financial support for carbon neutrality, etc.

The US government changed its stance on sustainable investing- The attitude toward ESG investing in employer-sponsored pension plans

Actions by
the Japanese
governments andother Japanesepublic bodies

Movements of the Financial Services Agency, the Ministry of the Environment, and the Bank ofJapan for sustainable investing- Progress of speciﬁc measures
Prime Minister Kishida mentioned impact investing in his ﬁrst policy speech- Impact investing as part of public-private partnerships
Diversiﬁcation of investees in impact investing- Emergence of public equity funds

Actions by
Japanʼs private
sectorDiversiﬁcation of investors engage in impact investing- Entry of regional ﬁnancial institutions and incorporated schools into the market
Financial business operators and institutional investors signed the Japan Impact-driven
Financing Initiative- Agreement on contribution to practicing impact investing and expanding the impact investing market

Global movements
IFRS Foundation established the International Sustainability Standards Board (ISSB)
Rules for ﬁnancial information disclosure and ESG (non-ﬁnancial) information disclosure are the two31

most important norms for the sustainable investing market. The announcement of the establishmentof the International Sustainability Standards Board (ISSB) by the IFRS Foundation, a private
non-proﬁt organization responsible for developing international ﬁnancial reporting standards,
represents a global movement relating to these two norms. The announcement was made at the 26th
session of the Conference of the Parties to the United Nations Framework Convention on Climate
Change (COP26) on November 3, 2021.
There have been several disclosure standards for non-ﬁnancial information developed by variousorganizations. The embarkation by the IFRS Foundation, which is responsible for developing international accounting standards, on developing standards for non-ﬁnancial information is expected toeliminate confusion. With this move, several institutions (the Climate Disclosure Standards Board(CDSB) and the Value Reporting foundation (VRF)) that have developed disclosure standards forsustainability information focused on investors will be consolidated into the ISSB by June 2022.
This move is expected to ease some of the practical confusion that has tended to arise among
companies and investors regarding ESG information disclosure.
The IFRS Foundation positions the International Sustainability Standards Board (ISSB) in parallelwith the International Accounting Standards Board (IASB). They are expected to work closely in acomplementary manner. In other words, disclosure of sustainability information, which is non-ﬁnancial information, is expected to be recognized as equally important as disclosure of ﬁnancial information, and disclosure of both information is expected to progress in a more coordinated manner.30
Although conducting impact measurement is one of the elements of impact investing (please refer to“Elements of impact investing” in the previous section), there are no rules for the disclosure of
non-ﬁnancial information. Therefore, there is no direct relationship between the practice of impact
investing and the establishment of ISSB by the IFRS Foundation. However, it is inevitable that thepractice of investors who make impact investing and the actions of impact creation-oriented companies will be aﬀected by the uniﬁcation of disclosure rules for non-ﬁnancial information by companies,
and the impact investing market will also be aﬀected.

G7 set up the Impact Taskforce within its framework
At COP26, an important matter for the impact investing market was also announced. The UK, the chair of
2021 G7 summit, announced the launch of the Impact Taskforce (hereinafter referred to as “Taskforce”).
The Taskforce aims to promote an impact-driven economy and society toward a sustained and comprehensive recovery from the global crisis caused by COVID-19. It will focus on facilitating discussion andrecommendation around impact transparency, integrity, and trust, and promote impact investing, with aparticular emphasis on impact investing in low- and middle-income countries. The Taskforce will have thefollowing two working groups. The ﬁrst is a discussion of impact transparency and reliability, including
impact reporting methodologies, accounting, information disclosure, and industry integrity, for which the

30 https://www.asb.or.jp/jp/ifrs/press̲release/y2021/2021-1103.html

32

Chapter 1

GSG serves as the secretariat. The second is a discussion of ﬁnancing vehicles that can mobilize private
capital at scale to achieve impact in areas such as the creation of quality jobs, education and health, forwhich Impact Investment Institute that also serves as the UK GSG National Advisory Board, serves as thesecretariat. The Taskforce will bring together diverse and practical voices who are focused on maximizing
the impact of investments, drawing from the G7 countries and beyond, and coordinate with initiatives led
by other relevant working groups and regulatory authorities of G7, G20, and COP26.
The GSG was originally established in 2013 as the “G8 Impact Investment Task- force,” driven by the callof the UK, the then chair of Group of Eight (G8) summit, and changed its name to GSG in August 2015. It
is signiﬁcant that the UK, which had created an international framework to promote impact investing, hascalled for the establishment of the Taskforce to further materialize the movement.

The Impact Management Project was developmentally dissolved and the Impact Management Platform was set up

An international movement aﬀecting the practical aspects of impact investing is the launch of the
Impact Management Platform. Impact Management Platform was the successor to the Impact Management Project, which had been responsible for creating norms for impact measurement and management (please refer to “Impact Measurement and Management (IMM)” in the previous section),
and was a limited-time project, running until 2021, promoted by the United Nations Development
Programme (UNDP), International Finance Corporation (IFC), Organization for Economic Co-operation and Development (OECD), and Principles for Responsible Investment (PRI). In Impact Management Platform, key organizations that have provided standards, frameworks, tools, and guidance, will
collaborate, as in the Project era, to mainstream impact measurement and management.

Actions by governments of other countries
As the year 2021 was also the year that COP26 was held, various government-led initiatives wereconﬁrmed for sustainable investing. Only major initiatives that are not directly related to impact
investing, but could have an impact, are brieﬂy presented.

The British government announced a roadmap to sustainable investing
In the UK, where COP26 was held, “Greening Finance: A Roadmap to Sustainable Investing,” agovernment roadmap for sustainable investing, was released in October. As phase 1 of the roadmap,
the UK government intends to work on the establishment of disclosure requirements for sustainability information, to provide information to investors and consumers.

The EU published its sustainable ﬁnance strategy
The EU has traditionally taken a strong stance on focusing on economic and social sustainability. Amongthem is the “EU Taxonomy,” a set of related regulations to guide private funds toward achieving carbon
neutrality by 2050. In April 2021, a series of policies related to the EU Taxonomy were announced, and the“Strategy for ﬁnancing the transition to a sustainable economy” was adopted in July, 2021.

33

The US government changed its stance on sustainable investing
In the U.S., the government stance on sustainable investing has changed with the launch of the Biden
administration in 2021. The regulations on the management of corporate pension funds shown by the
US Department of Labor have attracted a great deal of attention, as symbolic of its stance. The Trumpadministration had taken a negative stance on taking into consideration ESG factors in the management of corporate pension funds; however, this became positive with the Biden administration.

Actions by the Japanese governments and other Japanese public bodies
Movements of the Financial Services Agency, the Ministry of the Environment, and the
Bank of Japan for sustainable investing

In response to international trends in sustainable investing, the Japanese government has taken
active action, led by the Financial Services Agency, the Ministry of the Environment, and the Bank ofJapan. The Financial Services Agency published “Report by the Expert Panel on Sustainable Finance”
in June 2021 and “Social Bond Guidelines” (ﬁnal version) in October 2021. As for actions directly
related to impact investing, the “Study Group on Impact Investment,” jointly organized by the Financial Services Agency and the GSG-NAB Japan, reached a milestone (completion of Phase I), and thereport on the “Achievements and Future issues for Phase I” was compiled and published as theoutcome of the Study Group, which had been implemented over a period of approximately one year
and three months. The Ministry of the Environment published the “ESG Regional Finance Practice
Guide 2.0” and the “For Financial Institutions Guide for Adaptation Finance” in March 2021. The Bankof Japan published a rough draft of the “Funds-Supplying Operations to Support Financing for
Climate Change Responses” (commonly called “Green Operations”) in July 2021 to make its stanceon sustainable investing-related instruments more speciﬁc than before.

Prime Minister Kishida mentioned impact investing in his ﬁrst policy speech
In Japan, the Kishida Cabinet was inaugurated on October 4, 2021. The Kishida Cabinet, with “NewForm of Capitalism” as its keyword, established the “Council of New Form of Capitalism Realization,”chaired by the prime minister, to discuss this issue.31 In his ﬁrst policy speech on “New Form of Capitalism” (on January 17, 2022), Prime Minister Kishida mentioned impact investing as a way to achieve
new public-private partnerships and to supplement public functions by the private sector.32

Actions by Japanʼs private sector
The year 2021 witnessed a year of acceleration in the expansion of awareness of impact investing among
the private sector in Japan. The signing of the “Japan Impact-driven Financing Initiative” by 21 ﬁnancial

31 Cabinet Secretariat website, https://www.cas.go.jp/jp/seisaku/atarashii̲sihonsyugi/index.html

32 Prime Minister Kishidaʼs ﬁrst policy speech (full text), NHK, https://www3.nhk.or.jp/news/html/20220117/k10013435201000.html

34

Chapter 1

institutions on November 29, 2021, which aims to solve environmental and social issues, was a symbolic
event. As symbolized by the participation of ﬁnancial institutions in the Japan Impact-driven Financing
Initiative, the impact investing market in Japan is actually expanding and diversifying. (Statistical data on
the expansion and diversiﬁcation of the impact investing market will be presented in Chapter 2.)
In response to the establishment of the International Sustainability Standards Board (ISSB) by the IFRSFoundation, the Financial Accounting Standards Foundation resolved to establish the Sustainability Standards Board of Japan (SSBJ) in December 2021, and established the SSBJ Preparation Committee.33
Transmission of information to the international movements and the development of a domestic standards
structure for developing the sustainability disclosure standards are expected to progress in Japan.

Diversiﬁcation of investees in impact investing
Diversiﬁcation of impact investing has two aspects. One is the diversiﬁcation of investees, which is represented by the origination of impact investing funds that invest in listed stocks. For example, asset
management companies that are wholly owned subsidiaries of city bank-aﬃliated R Holdings and M
Financial Group have actually established funds that make impact investing in listed stocks (including
those to be listed). In addition, R company, a venture capital fund, formed Japanʼs ﬁrst deep-tech impact
investing fund.

Diversiﬁcation of investors engage in impact investing
Another aspect of the diversiﬁcation of impact investing is the diversiﬁcation of investors engage inimpact investing. The establishment of a venture capital subsidiary by a credit union in Kyoto, targetingsocial entrepreneurs who are challenging to solve social issues, is one example. The Ritsumeikan Social
Impact Fund (established in 2020), an impact investing fund managed by the incorporated educational
institution, released an impact report in October 2021 that described the results of the impact measurement and management of one of its investments.

Financial business operators and institutional investors signed the Japan Impact-driven
Financing Initiative34“Japan Impact-driven Financing Initiative” is an initiative to promote impact investment through cooperation and collaboration between diverse and multiple ﬁnancial institutions that believe that the purpose ofﬁnancial institution is to actively address social and environmental issues, holistically understanding
impact. Financial institutions that signed the Initiative have agreed to seven commitments and actions forpracticing impact investing and contributing to the expansion of the impact investing market. The factthat city banks, regional banks, trust banks, credit unions, credit cooperatives, asset managementcompanies, investment funds, and other institutions have agreed to the commitments and actions forpromoting impact investing, regardless of their business, is considered a signiﬁcant turning point in thedevelopment of the impact investing market in Japan.

33 https://www.asb.or.jp/jp/wp-content/uploads/news̲release̲20211220̲02.pdf
34 Japan Impact-driven Financing Initiative website (viewed in January 2022), https://www.impact-driven-ﬁnance-initiative.com

35

Figure 14. History of impact investing in the world and Japan
Year
2007
2008

GlobalJapan

The Rockefeller Foundation used the term “impact investing”
for the ﬁrst time and started to promote impact investing
The Dormant Accounts Act was enacted in the UK
Global Impact Investing Network (GIIN), a global network of2009

impact investors, was established
IRIS, a reporting standard for impact investing, began operating

2011

2012

2013

The U.S. gave legal recognition to Beneﬁt Corporation, as a

The 21st Century Financial Behavior Principles werecategory for social enterprises (Maryland, as the ﬁrst U.S. state)

adopted mainly by private ﬁnancial institutions

Big Society Capital, a wholesale fund funded by dormant
bank accounts, was established in the UK
Global Steering Group for Impact Investment (GSG) wasestablished (at the time, it was called “G8 Impact Investment
Task Force,” which was renamed “GSG” in 2015).
GSG National Advisory Board was established2014

GSG National Advisory Board issued a report on the current
state of impact investing in Japan for the ﬁrst time.
GSG National Advisory Board proposed 7 keyrecommendations towards promotion of impact investing
The promotion of impact investing is mentioned for the ﬁrst

2015

time in the governmentʼ s growth strategies and in basic
policies for regional revitalization

The Government Pension Investment Fund (GPIF) signed the
UN Principles of Responsible Investment (PRI)

Social Impact Management Initiative (SIMI) was established2016

Impact Management Project (IMP), an initiative for
impact measurement and management, was established(at the time, it was called the “Social Impact Measurement
Initiative,” which was later renamed.)
The Dormant Deposits Utilization Act was promulgated2017

TPG, a major private equity ﬁrm, established a JPY 200
billion Impact Investment fund
“Impact investing” was included in the leadersʼ declarationof G20 Buenos Aires Summit

2018

The United Nations Development Programme (UNDP)The Dormant Deposits Utilization Act came into eﬀect

started the SDG Impact in the expectation that the ﬂow ofprivate funds will expand to achieve the goals of the SDGs

Prime Minister Abe declared at the G20 Osaka Summit

2019that Japan will lead in innovative ﬁnancing schemes suchas impact investing and dormant bank accounts
IFC developed operation principles for impact investing

2020

2021

UKʼ s Big Society Capital and a major private-sector asset
management institution partner to establish an impact
investment trust company

The Cabinet Oﬃce designated Japan Network for Public
Interest Activities (JANPIA) as the designated utilization

organization based on the Dormant Deposits Utilization Act
Japan International Cooperation Agency (JICA) signed up for
operation principles for impact investing as the ﬁrst
organization in Japan

Assistance for solving social issues using dormant bankaccounts commenced

The Impact Taskforce was set up, raised by the UK, thePrime Minister Kishida mentioned impact investing in his

chair of 2021 G7 summit

ﬁrst policy speech

The Impact Management Platform was set up as the

21 ﬁnancial institutions signed the Japan Impact-driven

successor to the Impact Management Project

Financing Initiative

36

Column #1

Column 1 : Introduction of the Impact Investment Forum
We will introduce Japanʼs largest business conference to raise awareness of impact investing and tobuild the market in Japan.
WEBSITEhttps://impactinvestment.jp/iif/2021/index.html

This conference began in 2018 under the joint sponsorship of the GSG-NAB Japan and the Japan Social
Innovation and Investment Foundation (SIIF). Every year, this event provides the opportunity to learn
about the latest trends in the world and the future prospects of the Japanese market, and is widely attended by public oﬃces and government municipal oﬃces, ﬁnancial institutions, and think tanks.
In this column, we will introduce the major topics raised at each conference and look back at the trends to date.
In 2018 when the ﬁrst forum was held, interest in sustainable development goals (SDGs) adopted by theUnited Nations and ESG investments had just begun to spread domestically. We introduced pioneering
examples of impact investments which was just beginning to garner attention as a method to utilize private
funds for social issues such as the aging population and regional revitalization. In 2019, at the second
forum, there was heightened global expectation with the importance of “innovative ﬁnancing” being
mentioned in the Leadersʼ Declaration at the G20 Summit in Osaka. Amidst this, we invited key persons
from ministries and agencies, ﬁnancial institutions, and institutional investors and introduced trends on agovernment level, as well as the challenges and prospects faced by investors seriously looking to takeinitiatives. At the third forum in 2021, with such rising momentum both domestically and internationally, thecontinued rapid growth in ESG investments, and the unexpected attention given to trends in purpose-driven management, we introduced the three major possibilities in mainstreaming impact investment.

First Social Impact Investment Forum 2018
Theme “Building Sustainable Capital Markets for the Future” ｜ Feb. 19th (Mon) & 20th (Tue), 2018
WEBSITEhttps://peraichi.com/landing̲pages/view/iif2018

Summary: The impact investing market has grown to a market scale of 111.4 billion dollars (*in 2018). In orderto realize the sustainable development goals (SDGs) adopted by the United Nations in 2015, it was estimatedthat approximately 2.5 trillion dollars would be required per year, requiring a mechanism that would introduce
private capital at a large-scale. Through the use of private capital, the construction of a future-oriented capital
market that is solid and sustainable is imperative for the comprehensive and sustainable growth of Japan.
Panel Theme : Demand for growing social impact investments and the role of ﬁnancial institutions
Regional revitalization and social impact investment - the role of regional ﬁnance
The eco-system of Japanʼs social impact investment
The pioneer of social impact investments
Gender lens and social impact investing
Towards the further promotion of social impact investment
Innovative business that seeks to solve social issues
1) The aging society and healthcare 2) Child rearing and education 3) Regional revitalization
Financing methodologies for social impact investments
1) Social Impact Bond (SIB) 2) Financial products and platforms 3) Social impact measurement

37

Second Social Impact Investment Forum 2019
“Post G20: The Potential of Innovative Financing Towards Achieving SDGs” ｜ Sep. 6th (Fri), 2019WEBSITEhttps://peraichi.com/landing̲pages/view/iif2019

Summary: It has been said that to achieve SDGs, we will require funds in the amount of ﬁve to seven trillion
dollars per year. In place of public funds such as development assistance funds, solution-oriented innovative
ﬁnancing methods that use private capital is gathering attention. At the G20 Osaka Summit held at the end ofJune 2019, “innovative ﬁnancing mechanisms” was mentioned in the Leadersʼ Declaration and the speech by
Prime Minister Abe. We have invited key persons in ﬁnancial institutions, government oﬃcials, business leaders,
and think tanks in Japan and abroad to discuss the shape of innovating ﬁnancing.
Panel Theme : SDGs and Innovative FinanceImpact Investing x Private Financial Institutions Case Studies
1) Aging and Health 2) Gender Lens Investment 3) Environment
Subgroups by Method
1) Pay for Success Contracts and Social Impact Bonds (SIB) 2) Digital Technology (Fintech)3) Social Impact Evaluation and Social IPO

Third Social Impact Investment Forum 2021
Theme “Global Standardization of ESG Investments and the Awakening of Impact Investments”
Sep. 28th (Tue), 2021
WEBSITEhttps://impactinvestment.jp/iif/2021/index.html

Summary: The balance of ESG investments under management has grown to account for one third of the worldʼsassets under management and the market for impact investments, which further focuses on intention to solve
social issues, is also showing remarkable growth. At the G20 Osaka Summit in 2019, the Japanese government
announced proactive initiatives towards impact investments. Given such trends both domestically and globally,
we introduce three latest developments for impact investments; Expansion in scale of impact investments anddiversiﬁcation of growth models, From theory to social implementation. Evolution of information disclosure andevaluation, and Challenges of ﬁnancial institutions to adopt impact-oriented, purpose-driven management.
Panel Theme : Towards an impact-oriented, purpose-driven management. Challenges of ﬁnancial institutions
Information disclosure of impact investing
Expansion in scale of impact investment generating social unicorns
Breakout sessions
1) An impact company becoming a listed company - Challenges seen from case studies
2) Investments that tackle gender equality: The spread to the open market and its possibilities
3) IMM: Latest trends in development regarding principles, frameworks, standards
4) Practicing public equity impact investing by ﬁnancial institutions
5) Start of risk money diversiﬁcation!
- The possibilities of impact investing without the IPO requirements
6) Retail marketing of impact investing: Insights from latest consumer survey7) Challenges for the gender gap through ﬁnancial initiativesrequirements

The summary of lectures from each forum is available on the GSG-NAB Japan website.
▶▶ https://impactinvestment.jp/resources/lectures/index.html?tag=17

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 (2021),” presenting the current situation and challenges
surrounding the market. The Chapter ﬁrst describes the survey method and the inclusion criteria of impact
investing in the survey. It then presents the impact investment asset under management (“impact AUM”)
in Japan that have been identiﬁed through the survey, along with the results of responses to the questionnaire 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 2021 - January 2022
• Number of collected survey forms: 77 organizations / number of distributed survey forms: 580(collection rate: 13.2%)‒ To survey institutions that may be connected to impact investing, this Survey, just as in the FY2020 Survey, covered awide 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 at least 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 FY2020 (“the last ﬁscal year-end” on the surveyform) and the plans and forecasts for FY2021 (“this ﬁscal year” on the survey form).
■ Design of the survey form
To make the analysis comparable with trends in global impact investing markets, we used thesurvey form for the “GIIN Annual Impact Investor Survey” as guide in designing our survey form.
Note that we mostly used the content of our survey form for the last year designed using thecontent of GIINʼs 2020 survey, which is its most recent one as it did not conduct a survey for
2021 due to various reasons.35
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)‒ Implementation status of impact measurement and management (IMM)‒ Present state of the impact investing market in Japan and perceived challenges

35 GIIN Annual Impact Investor Survey 2020」(Global Impact Investing Network, GIIN)：

https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf

As stated above, GIIN did not conduct a survey for 2021 due to various circumstances. As such, the international comparison data

referred to in tallies and analyses in the main text of this report are for 2020.

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 was partial orincomplete, or when any inconsistent responses were found, a follow-up interview was conducted with theorganization by email or phone to have a complete and accurate answer.

Data cleaning 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 of balances. These eﬀorts, however,
do not guarantee complete accuracy.

Deﬁnition of “Impact Investing” and Inclusion Criteria in This Survey and Report
Deﬁnition of “impact investing” used by the questionnaire survey
The deﬁnition of “impact investing” used for the Questionnaire Survey and presented to respondents includes all of the following.
■ Impact investments are investments made with the intention to generate a positive,
measurable social and environmental impact alongside a ﬁnancial return (＊1）36＊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 and Management 37 (IMM)(＊2) is conducted before and after making
investments (who does the post-investment measurement does not matter).

＊2 IMM refers to the assessment and management process based on impact measurement. This process incorporates

into the investment process the quantitative and qualitative assessment of an impact in order to determine the value ofthe business and/or activities (for example, the value may be used as criteria when an investment decision is made, orused in reports made during the investment period and after investment). Improvements are made to the business anddecisions are made based on the information that is acquired through the process, aiming to increase the impact.

■ The results of IMM are shared with investors (＊3 )＊3 In case of a privately placed ﬁnancial product (e.g., a syndicated loan, an investment trust or privately placed
corporate bonds for institutional investors), the lead bank, investment manager, and issuer share the results of IMM
with investors. In case of a publicly oﬀered ﬁnancial product (e.g., an investment trust for individual investors, publicly

traded bonds), the results of impact measurement are available to the public, as the product is publicly oﬀered. As for
impact investing that an investor does on his/her own account, this criteria is not applicable because the investor
obviously knows the results of impact measurement.

36 The description is based on 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 sentence is presented in the survey form, and theremaining portion in the letter sent with the survey form.

37 This term has been created to represent the concept that integrates the conventionally used terms “social impact assessment” and “social
impact management,” so that it is consistent with the “Impact Measurement and Management (IMM),” which is an internationally accepted

concept of impact investing initiatives. For detail on how the change was determined, please see “About Consolidating Terms Related to
Impact Investing” in this report and “About Consolidating Terms Related to Impact Investing” in the FY2020 Report (Page 20).
FY2020 Report: https://impactinvestment.jp/user/media/resources-pdf/gsg-2020.pdf

40

Chapter 2Deﬁnitions of related terms
The Questionnaire Survey presented the deﬁnitions of terms related to impact investing as below:
Figure 15. Terms related to Impact Investing
Term

ImpactImpactMeasurement andManagement(IMM)38

Deﬁnition
Social and/or environmental change or eﬀect as a result of a business or activity,
whether it is long- or short-term
IMM refers to the assessment and management process based on impact measurement. This process incorporates into the investment process the quantitative and qualitative assessment of an impact in order to determine the value of the business and/or
activities (for example, the value may be used as criteria when an investment decision
is made, or used in reports made during the investment period and after investment).
Improvements are made to the business and decisions are made based on the information that is acquired through the process, aiming to increase the impact.

Impact company

An “impact company” refers to a company oriented to creation of impact.

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.
As for inclusion criteria, the FY2021 Survey added new criteria shown as ④ below in addition to ① to ③
used for the FY2019 and FY2020 Surveys. Impact AUM that meets all these four criteria were included.

① The responding organization is a corporation based in Japan.
This Survey is on impact investing in Japan. Hence, responding organizations must be corporations basedin 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 39 and/or outcomes 40 as metrics for IMM
This yearʼs Survey, just as the FY2020 Survey, did not specify what must be measured about a business as
an impact indicator, including whether indicators for business outcomes were a requirement and whether
indicators for output 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 IMM at the time of making an investment decision
and after making the investment.
IMM at the time of making an investment decision must be conducted by the investor organization, investment manager, investment fund provider, or an outsourced third-party assessment organization. Post-investment IMM may be conducted by any qualiﬁed person, including a ﬁnancial intermediary (e.g., a securities
ﬁrm other than those stated above, bond issuer, or business operator that receives the investment or loan).

41④ The results of impact measurement and management (IMM) are shared with investors.
As stated in the deﬁnition, impact investing focuses on each investorʼs “intention (to generate an
impact).” When an intermediary (asset manager or investment fund provider) is used between the ﬁnal
investor and an investee, the results of IMM conducted by the intermediary must have been sharedwith 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 the impact.”

For consideration of inclusion criteria

This Survey conforms to globally 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.”41 Note that the “GIIN Annual Impact Investor Survey” does not state these
key elements. Instead, it presents only the deﬁnition presented in the above footnote 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 torisk-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.

38 This term has been created to represent the concept that integrates the conventionally used terms “social impact assessment”
and “social impact management,” so that it is consistent with the “Impact Measurement and Management (IMM),” which is aninternationally accepted concept of impact investing initiatives. For detail on how the change was determined, please see “
About Consolidating Terms Related to Impact Investing” in the FY2020 Report (Page 20).
FY2020 Report: https://impactinvestment.jp/user/media/resources-pdf/gsg-2020.pdf

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

40 “Outcomes” refer to changes and beneﬁts as a result of the output of a business or project. These changes are brought to beneﬁcia-

ries 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.

41 “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 Impact investments have intentions to generate positive and measurable impacts.
Since it is diﬃcult to judge in a tangible way whether the “intention” exists, the Survey only presented
a deﬁnition, instead of giving questions about the intention.
❷ Impact investments seek a ﬁnancial return on capital that can range from below 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 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 A hallmark of impact investing is the commitment of the investor to measure 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 impact indicators, the timing of the measurement (at the time of making an investment decision and after making an investment), and whether results of impact measurement andmanagement are shared with ﬁnal investors.

Key points for consideration of future inclusion criteria
The angles detailed below were not included as inclusion criteria for this yearʼs Questionnaire Survey
and the market estimate survey discussed later. However, they may serve as important focus points inthe process of facilitating improvements of quality on impact investing in Japan.
While most of them are reposted here from the last ﬁscal yearʼs report, we may further explore these
possible focus points and, while considering practical issues and actions, incorporate them into theinclusion criteria from the next ﬁscal year onward, or discuss them as eﬀorts that should be encouraged
if they are not included in the criteria.
“④. The results of impact measurement and management (IMM) are shared with investors.” (mentioned above), which is adopted as new criteria in this ﬁscal yearʼs survey, was taken up as an issue inthe corresponding place in the last ﬁscal yearʼs report. It is included herein after being discussed by a
GSG-NAB Japan subcommittee to ensure ﬁnal investorsʼ judgment and intentions are based on theimpacts.

431 ) Quality of impact measurement and management
1-1 ) 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 or eﬀect 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.

1-2 ) 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,
how long it takes for an “impact” to emerge (time), and to what extent the metrics cover geographicalregions, 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 its own
company or on direct stakeholders of the own company, the investing would approximate to an activity
for its own companyʼs survival, rather than for the sustainability of a region, society, or the global
environment.
On the other hand, “sales” of an investee company were not previously regarded as a metric for impact
investing at ﬁrst glance, but we think there are potentially cases where they can have an impact inregional contexts. In a region in which outﬂow or reduction of population is signiﬁcant, for example,
one cannot deny the possibility that even economic metrics such as sales may lead to revitalization of
the regional economy or an increase in tax revenues for the local government, eventually leading tosocial beneﬁts. It is necessary to take account of the context of the business environment to determine what constitutes an impact.

1-3 ) Setting target values for metrics
If setting and monitoring impact indicators is inadequate as a drive to generate an impact, setting atarget value for indicators may become standard. Studying how much has been achieved toward atarget value would provide an investor with a good indication of whether an impact investing has beensuccessful or not.

44

Chapter 22 ) Relations with ESG investing2-1 ) “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 deﬁnitionof 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, especially 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 indicators for comprehensiveness of the corporate activities by each investee
company, rather than for a single project by the investee company.

2-2 ) “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 thecase in which the impact investing is not made (counterfactual) is compared with the case in which
the impact investing is made. It is required that a net impact generated by an impact investing isstrictly 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 Questionnaire Survey: 1.3204 trillion yen*The ﬁgure was calculated using the new criteria in this yearʼs Survey (i.e., the results of IMM are shared with the ﬁnal investors)(all four inclusion criteria were met).

The ﬁgure is the sum of the investment balances of the 31 organizations that responded to the “Questionnaire Survey regarding Impact Investment (2021)” 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 IMM was conducted both
before and after the investing, and when the results of IMM were shared with the ﬁnal investors.
2. AUM calculated when the results of IMM ascertained by the Questionnaire Survey were not required
to share with the ﬁnal investors: 1.4814 trillion yen*The ﬁgure was calculated using the old criteria in the past Surveys (i.e., the results of IMM are not required to sharewith the ﬁnal
investors) (Criteria ① to ③ were met, but ④ was not).

The ﬁgure is the sum of the AUM of the responding organizations of the Questionnaire Survey whose intermediaries were not required to share the details of measurement with the ﬁnal investors. In order to ensure that
it is the “intention (to generate an impact)” of the ﬁnal investor, in cases in which an intermediary is the onethat conducts IMM, the results of the measurement should be shared with the ﬁnal investors.
Reference ﬁgure: Estimated maximum (potential) in the market: 5.33 trillion yen
In addition to the ﬁgures ascertained through the Survey, this ﬁgure was conﬁrmed based on publisheddata. It is the sum of the amounts generated by “products” for which an evaluation based on impact
measurement is conducted before and after the investment, and is the estimated maximum of what canbe impact investing. For details, refer to the “Market Estimate Survey” section below.

Figure 16. Scale of Impact Investment BalanceMarketʼs estimated maximum (potential)

Reference:
Marketʼs estimated maximum

5.33 trillion yen

2. Ascertained by
the Survey (old criteria)

Estimated maximum of potential impact investments. In addition to the ﬁgures
ascertained through the Survey, this ﬁgure was conﬁrmed based on publisheddata. It is the sum of the amounts generated by “products” for which an evaluation based on impact measurement is conducted before and after investment. (Details are in the “Market Estimate Survey” section below.)

Impact AUM calculated when the results of IMM ascertainedby this Questionnaire Survey were not required to share(oldFY2020 criteria)

1.4814 trillion yen

The ﬁgure is the sum of the impact AUM of the responding organizations of
the Questionnaire Survey whose intermediaries were not required to share thedetails of measurement with the ﬁnal investors.(Inclusion Criteria ① to ③
were fulﬁlled but ④ was unfulﬁlled)

1. Ascertainedby the Survey(new criteria)

Impact AUM, as ascertained by this Questionnaire Survey (newFY2021 criteria)

1.3204

trillion yen

The ﬁgure represents the sum of the investment balances which are based on
the Survey, and for which IMM was conducted both before and after the investing, and when the results of the IMM were shared with the ﬁnal investors.(All
Inclusion Criteria ① to ④ were fulﬁlled)

46

Chapter 2

We will introduce the ﬁgures of global impact AUM for the purpose of comparison with the scaleof impact AUM in Japan.
According to the GIIN Annual Impact Investor Survey 2020 42 (GIIN),− The impact AUM grasped in the Questionnaire Survey equivalent to 1 or 2 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”43 (IFC),− The impact AUM equivalent to the reference ﬁgure above as the marketʼs maximum was 505.0
billion dollars (approx. 56 trillion yen).

Observations about factors behind an increase in impact AUM
Last yearʼs Survey ascertained that the impact AUM for FY2020 totaled 328.7 billion yen (calculatedwith the new FY2021 criteria applied for the purpose of comparison).44 This yearʼs Survey found thatthe impact AUM for FY2021 amounted to 1.3204 trillion yen, a four-fold increase. This section
explores factors behind this rapid growth.
The impact AUM in Japan that this report presents are ﬁgures that were ascertained based solely on
the surveys of institutional investors and ﬁnancial institutions. With this fact in mind, the following
three factors may be behind this increase in AUM.
1）Existing impact investing institutions increased their investments.
2）New impact investing institutions entered the impact investing market.
3）Impact investing has spread to diverse asset classes, which underlies 1) and 2).
(Investments increased particularly in public equity and debt, as they easily grow in scale)
Regarding 1), 20 organizations engaged in impact investing (impact investing institutions) responded
to both the FY2020 and FY2021 Surveys. These repeat respondentsʼ impact AUM calculated from the
FY2020 Survey totaled approx. 322.6 billion yen (with the new FY2021 criteria applied for the purposeof comparison), and those from the FY2021 Survey approx. 656.3 billion yen. This means that the

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

43 “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

44 Last yearʼs impact AUM totaled 512.6 billion yen when it was calculated based on the impact AUM inclusion criteria used last year

(FY2020). Here, to compare last yearʼs ﬁgure with this yearʼs, the new criteria that was adopted this year was also applied, which
led last yearʼs ﬁgure to be 328.7 billion yen.

47

year-over-year growth rate of impact investing by the existing impact investing alone doubled to reach
203% (see the chart below).
Figure 17. Impact AUM, asset manager AUM, and growth rate of repeat responding institutions 45*Number of institutions that had year-over-year growth

Impact investing institutions
that responded to the Surveys
for two consecutive years (n = 20)

FY2020SurveyImpact AUM and Asset Manager AUM

FY2021
Survey322.666

656.326

billion yen

billion yen

Growth Rate
(YoY)

Count of
Growth*203%

14Source: Created based on the Questionnaire Survey regarding Impact Investment (2020 and 2021) (GSG National
Advisory Board) - Question: “A2 (2). Please provide your organizationʼs impact AUM and the size of asset manager AUM
as of the last ﬁscal year-end. (Numerical Answer, hereafter “NA”)”

As for 2), major investment managers and banks have entered the impact investing market. In terms ofthe numbers of new respondents to the Questionnaire Survey, 20 impact investing institutions last year
met the new criteria set for the FY2021 Survey, and the number grew about 1.5 times to be 31 institutions this year. As the chart below shows, 2019 saw the largest number of organizations (survey respondents) that began impact investing. This may indicate that FY2020 covered by this yearʼs Survey saw the
new entrants began full-scale investments.
Figure 18. Year in which organizations began engaging in impact investing 46
n=30

8

7

7
5
3

2

2
0

24
20

4

4

1

28

6

6

1

1

0

2010

2011

1

1

2012 2013

2014

16

2

2

2
1

2015

■ # of organizations that began impact investing (each year)

2016

2017

2018

2019

2020

12
8
4

0
2008 2009

32

2021

0

ー #of organizations that began impact investing (cumulative)

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board)- Question: “A1. Please answer the year in which you began engaging in impact investing. (NA)”45 The amounts from the FY2020 and FY2021 Surveys in Figure 17 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.

46 Figure 18 shows the results of responses only from the organizations that are engaged in impact investing and meet the above
inclusion criteria. The organizations that provided no answer were excluded.

48

Chapter 23) is a trend in impact investing that has emerged in Japan as well as across the globe. The early daysof impact investing saw a lot of venture capital for unlisted companies, including start-ups. The background to the growth is a rise in large-scale amounts of investments that include debt ﬁnancing forlisted companies and impact investing funds consisting of public equity. In the breakdown of impact
AUM by asset class conﬁrmed in this year's survey, debt accounted for 58% and listed equities for
35%, with both accounting for 93% of the total. The moves for standardization, which includes thedevelopment of the principles and frameworks stated below, have created the investment climate thatdrives these initiatives.
■ Development of “The Impact Principles” (Operating Principles for Impact Management) (April 2019) 47
The Impact Principles are operating principles for impact management led the development by theInternational Finance Corporation (IFC). The nine principles provide a framework that enables investors
to consciously incorporate their ideas about an impact into their investment lifecycles. As of January2022, 151 institutional investors in 37 countries have signed on. Some of the impact investing institutions that responded to this Survey are organizations that have signed these principles, or organizations
that have not signed the principles but apply them to the operation of their investment funds.
■ Establishment of the Principles for Positive Impact Finance 48 and their framework (2017 - 2018)
The United Nations Environment Program Finance Initiative (UNEP FI) led the development of theseprinciples for investments and loans that aim to make a positive impact. The four principles provide acommon ﬁnancial framework for achieving the SDGs. In Japan, city banks and regional banks are
increasingly turning to these principles as the basis of their impact investing initiatives in the form ofloans.

We have discussed the factors behind an increase in impact investing. These factors can be summarized as follows: both old-timers and newcomers in the impact investing market have increased theirinvestments; what is behind the increase includes standardized principles and frameworks that havebeen created to facilitate easy-to-expand initiatives (e.g., investing in public equity, debt ﬁnancing);
and impact investing institutions in Japan took actions to apply and/or expand those frameworks
during FY2020 (the year covered by the Survey). These facts indicate that FY2020 was probably a
milestone year.

47 https://www.impactprinciples.org
48 https://www.unepﬁ.org/wordpress/wp-content/uploads/2018/09/POSITIVE-IMPACT-PRINCIPLES-JAPANESE-WEB.pdf

49

List of Institutions That Make Impact Investing and Investment Cases
Figure 19. List of institutions that make impact investing and investment cases 49
Industry

Organization Name

Examples of Impact Investing(in billions of yen)

Impact AUM 50

Asset Management One
Co., Ltd.

Management of impact investment portfolio in
public equity in Japan

Kamakura Investment
Management Co., Ltd.

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

28.682

Nomura AssetManagement Co., Ltd.

Global Sustainable Equity Strategy, Japan Sustainable Equity Growth, Improve the World Corporate
Fund (Nomura Japan equity ESG investment),
Nomura ACI Advanced Medical Impact Fund, Global
Food Related Equity Open “Smart Food” (public
equity investment through a public mutual fund)(undisclosed)

Sumitomo Mitsui Trust
Asset Management Co.,
Ltd.

Japan Equity Impact Investment Fund, Global
Equity Impact Investment Fund (public equity
impact investment fund)2.574

Mitsubishi Corp. UBS Realty Inc.

Real estate investment trusts and asset
management for investment corporations

0.1

Resona AssetManagement Co., Ltd.

Japan Equity Local Impact Fund (public equity
impact investment fund)(undisclosed)

Energy & Environment
Investment, Inc.

EEI Fund 4 Innovation and Impact Investing Limited
Partnership (private equity impact investing fund)(undisclosed)

Shinsei Corporate
Investment Limited

Japan Impact Investment I Limited Partnership“Child-care Support Fund,” Japan Impact Investment II Limited Partnership “HATARAKU FUND”(private equity impact investment fund)(undisclosed)

Future Venture CapitalCo., Ltd.

Osaka Social Issue Solving Fund in collaboration
with Osaka Shinkin Bank (private equity impact
investment fund)(undisclosed)

Insurancecompanies

The Dai-ichi Life
Insurance Company,
LimitedImpact investing (private equity, PE funds), SIB
projects 51

Approximately 8.2

Government-run
development
agencies andﬁnancial
institutions

Japan International
Cooperation Agency

Overseas loans and investments

Assetmanagers

Venturecapitals(undisclosed)

212.6

49 We referred to the content of the responses to the relevant questions in the questionnaire upon classiﬁcation of industry.

50 “Impact AUM” in this Figure is not limited to investment assets under management for which the company has ownership rights.

Depending on the industry, it can include entrusted assets under management for asset management companies, and for someinstitutions that deal with other ﬁnancial products, it can include structuring and sales amounts. Figures are for the period of theQuestionnaire Survey and are as of the end of FY2020.

51 SIB denotes social impact bonds and is one type of performance-linked private sector consignment contract. A private entity raises funds

from ﬁnancial institutions and investors to implement a project outsourced by a governing authority and the returns and repayment arepaid by the governing authority administration depending on payments (consignment fees) linked to performance results.

50

Chapter 2

Industry

Banks andtrust banks

Creditassociations,credit unions

Securities
companies

Foundations

Incorporated
educational
institutions

Organization Name

Examples of Impact Investing

The Shizuoka Bank, Ltd.

Positive impact ﬁnance (includes syndicatedloans), sustainability-linked loan, ESG/SDGs
assessment loan

8.42

Mizuho Bank, Ltd.

Japan Impact Investment II Limited Partnership“HATARAKU FUND” (private equity impact
investment fund)(undisclosed)

Sumitomo Mitsui
Banking Corporation

SDGs Green/ social/ sustainability loan,
PIF-principle applied ESG/SDGs assessment
loan, green bond (private placement bond)(undisclosed)

Sumitomo Mitsui Trust
Bank, Limited

Positive Impact Finance (loans to businesses)(undisclosed)

MUFG Bank, Ltd.

BlackRock Global Renewable Power III Fund,Ares Climate Infrastructure Partners Fund (realassets investment fund), ﬁnancing of green
projects such as renewable energy(undisclosed)

Mitsubishi UFJ Trustand Banking Corporation

Baillie Giﬀord Impact Investment Fund forinstitutional investors “Positive Change” (public
equity impact investment fund)(undisclosed)

The Kyoto Shinkin Bank

Toyonaka City SIB Project(undisclosed)

Dai-ichi Kangyo Credit
Cooperative

Social business support loan
(ﬁnancing for private companies)(undisclosed)

Daiwa Securities
Group Inc.

World Impact Investment Fund “Better World”(public equity investment through public
investment trusts)(undisclosed)

KIBOW Foundation

KIBOW Impact Investment Fund(private equity impact investment fund)

0.5

The Sasakawa Peace
Foundation

Blue Orchard Micro Finance Fund (BOMF), Japan
ASEAN Women Empowerment Fund (JAWEF)(investments in microﬁnance funds)

4.0

The Social Innovation
and Investment
Foundation

SIB Project (Okayama City, Toyonaka City), Japan
Impact Investment II Limited Partnership“HATARAKU FUND” (private equity impact
investment fund), Healthcare New Frontier Fund(private equity impact investment fund), private
equity direct investment / J-KISS share option

0.369

Mitsubishi Corporation
Disaster Relief
Foundation

Investments to support businesses in areasaﬀected by disasters (silent partner investments)

1.554

Sophia School
Corporation

Japan International Cooperation Agency bonds, African
Development Bank bonds, bonds issued by the Universityof Tokyo (social bonds), Social Investment Fund, Global
Green Bond Fund, Aavishkaar Bharat Fund (impact
investment fund in India), U.K. oﬀshore wind power
project, private global stock impact investment funds

5.086

Impact AUM

51

Industry

Organization Name

Examples of Impact Investing

Impact AUM

Incorporated
educational
institutions

The Ritsumeikan Trust

Ritsumeikan Social Impact Fund(impact investment fund for private equity/bonds)(undisclosed)

Crowd Credit, Inc.

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

2.295

Gojo & Company, Inc.

Investments in microﬁnance institutions in India,
Myanmar, Cambodia, Sri Lanka

39.2

Digisearch andAdvertising, Inc.

Angel investment, silent partnerships, share funds,
SIB projects(undisclosed)

Plus Social Investment
Co., Ltd.

Management of SIB Projects (cities of Saijo,
Higashiomi, Okayama, etc.) and Ritsumeikan
Social Impact Fund (impact investment fund for
private equity/bonds)

0.857Music Securities,Inc.

Project-based fund by social businesses in theregion (mainly silent partnership investments)(undisclosed)

Other
organizations

Questionnaire Survey Result
From next page, we introduce the result of the “Questionnaire Survey regarding Impact Investment(2021).” In addition to the aggregation of the number of all the responding institutions (n=77), we also
performed some 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,so some 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.

52

Chapter 2

Figure 20. 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

77

100%

Institutions engaged in impact investing

31

Institutions not engaged in impact investing

46

40%
60%

ｎ

％

Institutions engaged in impact investing

31

100%

Equity-focused22

Debt-focused

9

71%
29%

Institutions deemed to be engaged in impact investing
Seven of the institutions not engaged in impact investing did not disclose impact AUM in this Survey or
did not engage in impact investing at the end of FY2020, or around the target period of the Survey (“thelast ﬁscal year-end” on the Survey form), but was already engaging in impact investing or had speciﬁcplans to engage in one in FY2021, or the period in which the Survey was conducted.
As the impact AUM in this Survey was strictly for the period through the end of FY2020, their balancesand numbers of investments made are not included in the tallies or analyses of numerical questions.
However, considering that the number of the samples of institutions engaged in impact investing islimited in this Survey, for multiple-choice and open-ended questions, responses from these seveninstitutions were regarded as institutions eﬀectively engaged in impact investing, whenever appropriate, in carrying out tallies and analyses.
Comparison with GIIN Survey
As stated earlier, in preparing the survey method and questionnaire-form design of this Survey, the“GIIN Annual Impact Investor Survey” was referred to as guide to make it comparable with trends in the
global impact investing market. Just as this Survey, GIINʼs survey was conducted every year, but GIIN
did not conduct it for 2021 due to various reasons.
As a result, GIINʼs survey for 2020 is the latest that can be referred to in comparing between global andJapanese trends. This ﬁscal yearʼs report again quotes GIINʼs survey for 2020 (“GIIN Annual Impact
Investor Survey 2020”), considering the importance of comparison with overseas data, althoughcomparison with GIINʼs survey for 2020 was already made in the last ﬁscal yearʼs report and the content
repeats and is one-year old.

53

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 the“Questionnaire Survey regarding Impact Investment (2021).”

Industry type of all organizations that responded to the questionnaire survey• Of all organizations that responded to the questionnaire survey, those who answered “banks, trustbanks, credit associations, credit unions” answered were the largest (25%) followed by “venture capitals(including corporate VCs)” and “asset management companies” (both 18%).

Figure 21. Industry type of all organizations that responded to the questionnaire survey■ 25%

Banks, trust banks, credit associations, credit unions■ 18%

Asset managers■ 18%

Venture capitals (including corporate VCs)

■ 8%Foundations

5%

■ 6%

Insurance companies

6%

■ 5%

Government-run development agencies and ﬁnancial institutions■ 3%

Leasing companies, non-bank ﬁnancial institutions■ 1%

Securities companies■ 0%

Listed companies■ 0%

Pension funds

1%
16%

3%

8%

n=77

25%

18%
18%

0%

Private equity■ 16%

Other organizations

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (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” and“asset management companies” were the largest (both 23%).
• In Figure 1 of the “GIIN Annual Impact Investor Survey 2020” 52 (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).

52 “GIIN Annual Impact Investor Survey 2020”（https://thegiin.org/research/publication/impinv-survey-2020）

54

Chapter 2

Figure 22. Industry type of institutions engaged in impact investing 53

16%

3%

23%

3%
6%

23%

10%
16%
n=31

■ 23%

Banks, trust banks, credit associations, credit unions■ 23%

Asset managers■ 16%Foundations■ 10%

Venture capitals (including corporate VCs)

■ 6%

Government-run development agencies and ﬁnancial institutions■ 3%

Insurance companies■ 3%

Securities companies■ 0%

Leasing companies, non-bank ﬁnancial institutions■ 0%

Listed companies■ 0%

Pension funds

0%Private equity■ 16%

Other organizations

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “2. Please select one answer that most accurately describes your industry (SA)”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 and 2019 (six to seven organizations each).
• 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 23. Year in which organizations began engaging in impact investing 54 (reposted)
n=30

8

7

7
5
3
1
0

24
20

4

4
2

28

6

6

2
1

1
0

2008 2009

2010

1

1

2012 2013

2014

16

2

2

2
1

0
2011

2015

■ # of organizations that began impact investing (each year)

2016

32

2017

2018

2019

2020

12
8
4

2021

0

ー #of organizations that began impact investing (cumulative)

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board)- Question: “A1. Please answer the year in which you began engaging in impact investing. (NA)”55

Motivation for engaging in impact investing• As a motivation for engaging in impact investing, the highest ratio of respondents considered “responding to client demand” (83%) as “very important” motivations, followed by “their commitment as responsible investors” (79%).
• 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 investors” as “very important” motivations (both 87%).
• The above global comparison revealed that impact investors in Japan tended to cite “more client oriented” and responding to client demand as their motivations for engaging in impact investing.

Figure 24. Motivation for engaging in impact investing 55■ Very important
We are responding to client demand■ Somewhat important■ Not important

83%

They are part of our commitment
as a responsible investor

79%

They are an eﬃcient way to meet
our impact goals

71%

They contribute to a global agenda, such as
the UN SDGs and the Paris Agreement

59%

41%

We do so to meet regulatory requirements

48%

4

32%
53%

24%
41%

27
29
29

52%

45%

12%

28

29%
33%

They oﬀer diversiﬁcation to
our broader portfolio

24

21%

63%

They are ﬁnancially attractive relative toother investment opportunities

23

17%

It is central to our mission to intentionallypursue impact through our investments

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

n=

23%

22

24%

17

47%

17

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “D4. How important are each of the following in terms of motivating your organization to engage
in impact investing? (SA)”53 Figure 22 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria.
54 Figure 23 shows the results of responses only from the organizations that are engaged in impact investing and meet the above
inclusion criteria. The organizations that provided no answer were excluded.
55 Figure 24 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.

56

Chapter 2

Importance in terms of requests from customers• The most frequent response chosen by the impact investing institutions as a “very important”
request about investing activity from customers was “to make investments that suit social values ofcustomers” (76%), followed by “to achieve the targets in terms of monetary returns” (65%).
• This indicated pursuing both social and environmental impacts and the economic goal of generating
returns is regarded as important in practical aspects, as in the deﬁnitions in impact investing.

Figure 25. Importance in terms of requests from customers 56■ Very important
To make investments that suit■ Somewhat important■ Not important76%

social values of customers
To achieve the targets

29

24%

65%

in terms of monetary returns

n=

31

35%

To contribute to achieving SDGs

53%

44%

3

32

To pursue speciﬁc impacts

52%

45%

3

31

To diversify, or mitigate risks of, portfolio

46%

4

28

50%

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “D1. How important is each of the following to your organizationʼs investing activities, when it
is asked by customers? (both 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 (2021).”
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” (70%), and some considered the market is “in its
infancy” (23%).
• 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 23),” 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.

57

Figure 26. Stages of evolution in the Japanese and international impact investing market 57
Stages of Japanʼs impact investing
market evolution ( n=30 )Stages of the international impact investing
market evolution ( n=290)
In its infancy

23%

9%

About to take oﬀ

70%
7%

21%

Growing steadily
Established/Mature

69%
2%

Saturated
Declining
Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board) and the GIIN Annual Impact Investor Survey 2020. - Question: “D5. How do you see the state of Japanʼs 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 largest proportion of respondents said that Japanʼs impact investing market had progressedover the past one year in “the publicʼ s awareness of and interest in impact investing” (“signiﬁcantprogress”: 17%; “some progress”: 79%), followed by those who said progress was made in “top managementʼ s interest in and understanding of impact creation” (“signiﬁcant progress”: 8%; “someprogress”: 85%) and “each companyʼ s stakeholdersʼ interest and engagement (e.g., asset owners,
shareholders, investors)” (“signiﬁcant progress”: 13%; “some progress”: 79%).
• 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(IMM) practice” (“signiﬁcant progress”: 39%; “some progress”: 59%).58。
• Respondents in the international markets noted “research on market activity and practice” and“sophistication of impact measurement and management (IMM) practice” as the areas of progressover the past one year. It is expected that Japanʼs market may make progress in impact investing
and measurement coupled with the sophistication of impact management practice going forward.

56 Figure 25 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 add up to 100% due to the processing of decimal points.

57 Figure 26 shows the results of responses only from the organizations that are engaged in impact investing and meet the above
inclusion criteria. The organizations that provided no answer were excluded.

58 The “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory Board) was designed based on survey forms
used in the GIIN Survey 2020 where possible to facilitate comparison with that survey, but considering the level of development ofJapanʼs impact investing market, we did not use exactly the same wording in questions as those in its nearest equivalent in the GIIN
Survey 2020.

58

Chapter 2

Figure 27. Progress of Japanʼs impact investing market over the past one year 59■ Signiﬁcant progress ■ Some progress ■ No progress ■ Worsened
17%

The publicʼ s awareness of and interest in impact investing
Top managementʼ s interest in
and understanding of impact creation
Each companyʼ s stakeholdersʼ interest and engagement(e.g., asset owners, shareholders, investors)

Incentive plans for start-ups (including impact companies)

13%

79%
88%

5%

76%

15%

8%

26

8%

24

12%

26

19%

50%

Establishment of impact measurement and management (IMM)
as rules and common practice

35%

57%

Greater availability of detailed information about impact
companies and investment products for impact investingEﬃcient use of external resources for impact investing

29

85%

Actions inspired by the Principles for Responsible Investment,
SDG impact (UNDP), and the Operating Principles
for Impact Investing (IFC), among others
Increasing impact investments throughventure capital (VC) and private equity (PE)

3

79%

8%

43%

54%
8%

46%

n=

21
20
23

46%

24

46%

24

Accumulating examples and data about impacts and returns

52%

48%

23

Certiﬁcation/Labeling systems by public/third-party institutions

50%

50%

20

52%

25

Establishment of companiesʼ internal systems
for impact investing
Exit strategies and other means of exit than IPO
as common practice

12%

36%

6%

31%

63%

16

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

35%

65%

17

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

33%

67%

15

Philanthropy or public funds as an incentive
to encourage impact investing
Incentives for impact investing provided
by the government and/or municipalities (e.g., a tax break)

25%
6%

75%
94%

16
18

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory
Board) - Question: “D11. How do you view the progress that Japanʼs impact investing market in general has madeover the past one year? (SA for each statement)”

59 Figure 27 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.

59

Progress of Japanʼs impact investing market 60
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.
While there were general opinions that reﬂected respondents generally felt recognition and awareness insociety about impact investing have increased, some pointed out that dividing lines between sustainability
ﬁnancing and impact investing and between startups in general and impact companies have become
blurred. This suggested that, for impact investing to gain further traction, there is the need for disclosure/publication of impact information, sharing of good practices, eﬀorts to incorporate impact measurement
and management (IMM) into actual practice, training of personnel and development of proper organizational structures.

“

As ESG investing became mainstream, impact investing is increasingly known and there have beeninteresting developments across the globe, including moves to create new markets and searches for”ways to exit impact investing (SDGs IPO, SPO, etc.). However, there have not been successful examples in which these have reﬂected economic value. We see growing interest among businesses insustainability management in general and a tendency for more businesses to disclose/publish theinformation that includes purposes/SDGs/ESG/impacts. We expect a stronger interest among investors in investees practicing appropriate disclosure will lead to more positive impact on share prices,
and as more cases exemplifying such an eﬀect emerge, impact disclosure/investing will further grow.

“We have the impression that sustainability ﬁnance, especially the products that feature impact
measurements, increased rapidly in the area of loans over the past year and the dividing line”

between it and impact investing has become increasingly blurred (in terms of the perception of thegeneral public and the issue of the realization of IMM aside). Accountability of measurement
remains the key to prevent impact washing, but as there is the possibility that we may have cometo a point where either of them may become the mainstream as a process for measurement andmanagement, it is necessary to make IMM easy to understand and especially ensure proﬁt is felt.
Under such circumstances, an issue is that there are few cases in which investment has been
completed and can be examined.

“

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

“

Businesses have signiﬁcantly deepened their understanding of impact investing over the past one
year. Now, impact measurement should be incorporated into practical business processes to”accelerate the eﬀorts for impact investing. In some cases, social 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.

60 Some of the responses to Question D11 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.

60

Chapter 2““

Impact measurement criteria should be standardized and companies should disclose detailed
information about social impacts so that impact investing will become more common.
We feel the dividing line between startups and impact companies has become increasingly blurredsince a few years ago. In that sense, we feel companies with the potential of engaging in impact””

investing have increased as startups have become revitalized. On the other hand, an emerging
issue is that the number of individuals in charge of investing who are capable of considering
impact investing. We feel there is a need to train individuals in charge of investing who can address
impact investing needs and create viable structures.

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 (IMM)” (67%), followed by those citing “limited data on potential impact investee companies and investment products” (41%).
• The majority of responding impact investing institutions believe that the challenge is “fragmentary andunsystematic approaches to Impact Measurement and Management (IMM)” (64%), followed by thoseciting “limited data on potential impact investee companies and investment products” and “lack of aneye for impact companies on the part of fund providers (i.e., asset owners, asset management companies)” (both 31%).
• The majority of the responding non-impact investing institutions believe that the challenge is “fragmentary and unsystematic approaches to Impact Measurement and Management (IMM)” (70%), followed bythose citing “limited data on potential impact investee companies and investment products” (53%).
• 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 (IMM)” is noted across all groups as a challenge facing
businesses that aim to increase impact investing. This indicates, as was the case in the last ﬁscal yearʼs
Survey, that systematic Impact Measurement and Management (IMM) will be needed so that institutions that are already making impact investing will invest more, and that more institutions will begin
impact investing.
• Following the issue of Impact Measurement and Management (IMM) as the biggest challenge, thefollowing three responses were the second most frequent responses: “limited data on potential impact
investee companies and investment products,” “a limited number of impact companies to invest in,” and“limited availability of professionals capable of helping impact companies make proﬁts and exit.” Thismeans that a limited number of impact companies and limited availability of professionals capable ofhandling practical aspects of impact investing is a major issue for impact investing in Japan.

61

Figure 28. Challenges facing businesses that aim to increase impact investing 61■ Of all respondents（n=66）■ Institutions engaged in impact investing + Organizations deemed to be engaged in impact investing（n=36）■ Institutions not engaged in impact investing（n=30）

67%
64%
70%

Fragmentary and unsystematic approaches to

Impact Measurement and Management (IMM)
Limited data on potential impact investee companies

Lack of an eye for impact companies

21%

on the part of fund providers

20%

A limited number of impact companies to invest in

10%

28%

20%
19%
20%

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

17%

Limited preferential treatment for impact investing

10%

22%

9%
11%
7%

Limited investment methods andmeans available for impact investing
Limited options for exit strategies that make it diﬃcult

3%

to calculate expected return on investment

Limited returns considering the eﬀorts needed for

8%
13%

6%
6%
7%

impact investing, which makes it diﬃcult to incorporate

the investing into a major part of performance evaluation

5%
3%
7%

Diﬃculty of increasing impact investments

due to the constraints of ﬁduciary responsibility

other than start-ups

53%

31%

10%

(i.e., asset owners, asset management companies)

A limited number of impact companies

41%

31%

and investment products

0%

0

3%
7%

10

20

30

40

50

60

70

80 (%)

Source: Created based on the Questionnaire Survey regarding Impact Investment (2021) (GSG National Advisory Board) - Question: “D6/E1. What do you think is the problem when Japan plans to increase impact investing
going forward? (Multiple Answer, hereafter “MA”, up to 3)”

61 Figure 28 excluded invalid responses that had selected four or more answers, as respondents were asked to select up to three.

Also, as stated above, note that seven of the “institutions not engaged in impact investing” were in eﬀect “institutions engaged in

impact investing” when they responded to the Survey (i.e., not during the period covered by the Survey), and thus their responses
were counted as those from “institutions deemed to be engaged in impact investing” for analysis of answers to this question. For
detail, see “About ʻInstitutions deemed to be engaged in impact investingʼ” in the opening of “Questionnaire Survey Result”
discussed earlier.

62

Chapter 2

Conditions that facilitate impact investing• The majority of responding organizations responded that “establishment of impact measurement andmanagement (IMM) as rules and common practice” (39%) would facilitate impact investing, followed bythose citing “the publicʼ s awareness of and interest in impact investing” (37%).
• The majority of responding impact investing institutions selected the answer “each companyʼs stakeholdersʼ interest and engagement (e.g., asset owners, shareholders, investors)” (40%), followed bythose selecting “establishment of impact measurement and management (IMM) as rules and common
practice” (34%).
• The most frequent responses by the non-impact investing institutions were “establishment of impact
measurement and management (IMM) as rules and common practice” and “the publicʼs awareness ofand interest in impact investing” (both 44%).
• The responses suggest that establishment of impact measurement and management (IMM) as rules andcommon practice is the key in encouraging new institutions to engage in impact investing and existing
investing institutions to expand impact investing, and that the marketʼs interest has shifted to practicalaspects (“how”) from awareness in society (“why”) of impact investing. Another observation is that, for
institutions already engaged in impact investing, how to increase interest and engagement of institutional investors, including asset owners, who are customers of asset management companies, is thefocus in the future.

63

Figure 29. Conditions that facilitate impact investing 62
Establishment of impact measurement andmanagement (IMM) as rules and common practice

34%

29%

The publicʼs awareness of and interest in impact investing30%

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

19%

Top managementʼ s interest in
and understanding of impact creation

19%

37%
44%
40%

23%
26%

18%

Philanthropy or public funds as an incentive
to encourage impact investing

26%

11%
18%

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

14%

Certiﬁcation/Labeling systems
by public/third-party institutions

14%

23%

17%
20%

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

15%
14%
17%

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

15%
17%
14%
13%
11%
14%

Establishment of companiesʼ internal systems
for impact investing

10%
11%
8%

Incentive plans for start-ups (including impact companies)

6%
3%
8%

Exit strategies and other means of exit than IPO
as common practice
Actions inspired by the Principles for Responsible Investment,
SDG Impact (UNDP), and the Operating Principles
for Impact Management (IFC), among others

4%
3%
6%

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

4%
6%
3%

Eﬃcient use of external resources for impact investing

44%

23%
23%
22%

Accumulating examples and data
about impacts and returns

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

39%

0%

3%
6%
3%

0%

0

■ Of all respondents（n=71）■ Institutions engaged in impact investing +Organizations deemed to be engaged in
impact investing（n=35）■ Institutions not engaged in
impact investing（n=36）

6%

10

20

30

40

50

60

70(%)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National
Advisory Board) - Question: “D9 / E4. What do you think would facilitate more impact investing? (MA, up to 3)”

62 Figure 29 excluded invalid responses that had selected four or more answers, as respondents were asked to select up to three. Also,

as stated above, note that seven of the “institutions not engaged in impact investing” were in eﬀect “institutions engaged in impact
investing” when they responded to the Survey (i.e., not during the period covered by the Survey), and thus their responses werecounted as those from “institutions deemed to be engaged in impact investing” for analysis of answers to this question. For detail, see“About ʻInstitutions deemed to be engaged in impact investingʼ” in the opening of “Questionnaire Survey Result” discussed earlier.

64

Chapter 2

Conditions that facilitate impact investing 63
The Survey asked the responding institutions to describe “Conditions that facilitate impact investing”
in the open-ended question, and the following responses were obtained. Their demands included theaccumulation of model businesses and successful examples around a variety of themes; training oftalent for impact investing; the governmentʼs incentives and encouragement for ﬁnancial institutions,investors, and major corporations; top managementʼs better understanding of impact investing at not
only large enterprises but also small- to medium-sized businesses; and the standardization of aﬀordable and simply-designed impact measurement and management.
＜Opinions of institutions engaged in impact investing ＞“

The impact investing market needs diverse investors, including traditional institutional investors,
ﬁnancial institutions and other mainstream investors. The following are needed 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 andsocial beneﬁts, know-how for impact measurement, and a network for collecting and spreading
information), ③ Support from administration (e.g., Financial Services Agencyʼs encouragement toﬁnancial institutions, a tax break, branding and marketing), and ④ Deep understanding bymanagement coupled with the ability to design and promote practical and feasible initiatives on
the part of capital providers.

“

There is a tendency for impact investing to be concentrated on relatively easy-to-understandthemes, such as renewable energy and international cooperation. Accumulation of projects that”can serve as a model for impact investing on other, wide-ranging themes and successful examples
are needed.

“

We think it is important to train human resources with skills for impact investing. A currently
noticeable issue is that there are hardly enough human resources who can assess investment on”

the level of normal venture investment and have skills or ability to work out theory-of-change andlogic models for intended impacts.

“

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

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

“

Eﬀorts should be made to boost awareness of impact investing so that it can become a common
language for companies in general, not just among ﬁnancial institutions. For this to happen, it is”necessary to increase investing opportunities by reducing costs, make impact investing common
through certiﬁcation by independent rating agencies, increase understanding of large businesses,
and inﬂuence supply chains.

63 Some of the responses to Question D10. “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.

65“

Impact creation at listed companies is indispensable for generating impacts on a large scale. For
this to happen, listed company executives must be interested in generating impacts. In other”words, listed companies need to have top-down initiatives and their management teams need tohave advanced understanding.

“Moves to build track records in impact investing are expected to be led mainly by large businesses,
but it is necessary to expand such eﬀorts among small and medium businesses. For that, there is”

the need to create models for impact-measuring methods that are cheap and simple to use.

“

I can feel the importance of impact investing has grown, driven by a rapid increase in the awareness for sustainability in society. However, I get the impression that development of methods for”measuring and managing impacts has yet to catch up, slowing down the wider adoption of impact
investing. There is the need to reduce costs of impact measurement by standardizing rules.

＜Opinions of institutions not engaged in impact investing ＞“

The following three points are required to revitalize impact investing:① Perception of impact investing itself: Impact investing is currently recognized to be”positioned as a special method that additionally pursue social returns (and sometimes at thecost of economic returns) among wide-ranging investing methods. In order for impact
investing to be practiced more widely, it is necessary to promote the perception that the actof pursuing social impacts is justiﬁable from the perspective of economic rationality and is
one of the wide-ranging investment strategy options available to investors, rather than being
something that increases social returns at the cost of economic returns.
② Creation of uniform criteria for impact measurement that make outcomes easy to see③ Revitalization and expansion of the impact investing-fund market that enables comparison andanalysis of products“

Development of rules and manuals for impact measurement methods; reduction in workload of“

For companies to develop processes for its business by which they can achieve both ﬁnancial andmeasuring impacts (simpliﬁcation to enable in-house evaluation for companies)

social returns, steadily commit to them and work to grow as a company. In addition, for listed””companies to actively incorporate such companies into their ecocycles through business acquisition or tie-ups and have many successful experiences.

“

Creation of easy-to-understand guidance that features speciﬁc examples of impact investing in
diﬀerent industries.

”

66

Chapter 2

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” and “plan and make more impact investing” (both 67%).
• When responses are compared to the FY2020 Survey (last year), more respondents perceived that
their organizationsʼ “attitude toward impact investing shifted from ʻwhy we should do itʼ to ʻhow weshould do itʼ.”Figure 30. Changes within an organization from the year before in relation to impact investing 64

67%

The organization increasingly supports impact investing

The organization plans and makes more impact investing57%

The organizationʼs attitude toward impact investing shiftedfrom “why we should do it” to “how we should do it.”

43%

The organization is now strongly committed to
impact management

43%
43%

The organizationʼ s key decision-makers areless motivated to make impact investing48%■ FY2021 Survey (n=30)■ FY2020 Survey (n=26)

0%
0%

0

67%

60%

43%

It has become easier to convince
relevant internal staﬀ for impact investing

76%

10

20

30

40

50

60

70

80

90(%)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2020 and 2021)” (GSG National
Advisory Board) - Question: “D2. What changes do you observe within your organization compared to the 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 (2021).”

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 1.3204 trillion yen (asshown in Figure 16 (1) in the previous section) as of the last ﬁscal year-end, based on the respondentsof this Survey (FY2021). The total impact AUM calculated from the last yearʼs Questionnaire Survey(FY2020) was 328.7 billion yen (new FY2021 criteria was applied for the purpose of comparison).65。
• The number of impact investing made as of the last ﬁscal year-end was 293.

67

Figure 31. Total impact AUM and asset manager AUM and the number of investments made 66
Last Fiscal Year-end

AUM (n=29)# of Investments Made (n=22)Median2.574 billion yen

10

Average

45.531 billion yen

13

1,320.402 billion yen

293

Total

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory Board) - Question:“A2 (2). Please provide your organizationʼs impact AUM and the size 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 impact AUM held by impact investing institutions that participated in both FY2020 and
FY2021 Surveys• We extracted 20 organizations engaged in impact investing that responded to both FY2020 and FY2021
Surveys. These repeat respondentsʼ impact AUM calculated from the FY2020 Survey totaled approx.
322.6 billion yen (new criteria introduced in the FY2021 Survey was applied for the purpose of comparison), and those from the FY2021 Survey totaled approx. 656.3 billion yen.
• The year-on-year growth rate was 203%, and 14 out of the total 20 organizations had increased theirimpact AUM.
• These results conﬁrmed that, generally speaking, the institutions that have long been making impact
investing further increased the investments.
Figure 32. Impact AUM, asset manager AUM, and growth rate of repeat responding institutions (reposted)45*Number of institutions that had year-over-year growth

Impact investing institutions
that responded to the Surveys
for two consecutive years (n = 20)
Impact AUM and Asset Manager AUM

FY2020SurveyFY2021
Survey322.666

656.326

billion yen

billion yen

Growth Rate
(YoY)

Count of
Growth*203%

14Source: Created based on the “Questionnaire Survey regarding Impact Investment (2020 and 2021)” (GSG National Advisory Board) Question: “A2 (2). Please provide your organizationʼs impact AUM and the size of asset manager AUM as of the last ﬁscal year-end.
(NA)”

64 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.
65 The impact AUM grasped through last yearʼs questionnaire totaled 512.6 billion yen when it was calculated based on the impact AUM
inclusion criteria used in last yearʼs Survey (FY2019). In order to compare last yearʼs ﬁgure with this yearʼs, this yearʼs new criteria
was applied to the last yearʼs ﬁgure of the Survey, and the last yearʼs ﬁgure became 328.7 billion yen.
66 Figure 31 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned
inclusion criteria. As for the AUM, responses from two organizations whose impact AUM were also counted as other respondingorganizationsʼ AUM (double-counting) were excluded. This means that the responses from 29 organizations out of the impact investing
institutions (n=31) were counted. The number of investments made excludes responses from organizations that provided no answer.
67 The amounts from the FY2020 and FY2021 Surveys in Figure 32 show the results of responses only from the organizations that are
engaged in impact investing and meet the 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.

68

Chapter 2

Proportions of impact AUM and asset manager AUM• About 70% of the impact investing institutions had impact AUM of less than 10.0 billion yen as of thelast ﬁscal year-end, based on the respondents to this Survey (38% and 31%, respectively, had less than
1.0 billion yen and less than 10.0 billion yen).
• A not-so-insigniﬁcant number (17%) of these institutions had impact AUM of at least 100 billion yen.

Figure 33. Proportions of impact AUM and asset manager AUM 68■ Less than 1.0■ 1.0 - less than 10.0

17%
38%

14%

■ 10.0 - less than 100.0■ 100.0 (Billions of yen)

31%

n=29

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “A2 (2). Please provide your organizationʼs impact AUM and the size of asset manager AUM as ofthe last ﬁscal year-end. (NA)”

Proportions of the number of impact investing made
• 61% of the impact investing institutions had made 10 or fewer instances of impact investing as of thelast ﬁscal year-end, based on the respondents to this Survey.
• A not-so-insigniﬁcant number (22%) of these institutions had at least 20 instances of impact investing.

Figure 34. Proportions of the number of impact investing made 69■ 10 or less

22%

17%

■ 11 - fewer than 20
61%■ 20 or more
n=23

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory Board) Question: “A3 (2). Please provide the number of impact investing your organization made as of the last ﬁscal year-end. (NA)”68 Figure 33 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.

69 Figure 34 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.

69

Asset classes of impact investing• To the question about the asset classes of impact investing, the largest proportion of the responding
institutions answered that they allocate their impact investing to “private equity” (39%), followed by those
who answered, “public equity” and “private debt (other than public and corporate bonds)” (both 26%).
• On the other hand, the largest proportion of impact assets under management (AUM) were “private
debt (other than public and corporate bonds)” (58%), followed by “public equity” (35%).
• These results conﬁrmed that impact investing is widely allocated to the asset class of equity (especially private equity), while most of the impact AUM are allocated to the classes of private debt or
public equity.

Figure 35. Asset classes of impact investing 70■ Of responding institutions (n=31)■ Of impact AUM (AUM=1,107.857 billion yen)
Private equity

39%

5％

Public equity

26%

35％

Private debt

26%

58％

(other than public and corporate bonds)

Beneﬁcial interest

0.5％

6%

Public and corporate bonds

0.3％

6%

Crowdfunding

0.0％

Real assets

0.4％

Equity-like debt

0.0％

Other

0.2％

13%

3%
3%
10%

(e.g., convertible debt)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (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 (other than public and corporate bonds)” (58%).
• These results conﬁrmed that private equity is internationally more common as an asset class of impact
investing than in Japan.

70 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. As for responses based on impact
AUM, responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM(double-counting) were excluded.

70

Chapter 2

Figure 36. Impact investing by asset class: International comparison 71
Private equity

70%

39%

Private debt

58%

26%

(other than public and corporate bonds)

Equity-like debt

21%

3%

(e.g., convertible debt)

17%

Public equity
Real assets

3%

Public and corporate bonds

10%

0%

■ GIIN Survey 2020 (n=289)■ Impact investing institutions (n=31)

15%

6%

Other

26%

17%

15%

20%

10%

30%

40%

50%

60%

70%

80%

Source: These ﬁgures have been created based on the “Questionnaire Survey regarding Impact Investment (2021)” (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, the largest percentage of responding institutions
answered that they invest in “(direct investments) private companies” (42%), followed by those citing“(direct investments) publicly traded companies” (39%).
• On the other hand, the majority of impact AUM are allocated to “(direct investments) publicly traded
companies” (34%), followed by "(for intermediaries) asset managers ” (28%).
• These results conﬁrmed that impact investing is widely made in private companies in line with asset
class, and allocations of the impact AUM are concentrated on publicly traded companies not only inequity investment but also in debt.
Figure 37. Impact investees by organization type 72[Direct investment] Private companies

42%

10%

[Direct investment] Listed companies

39%[Direct investment] Other

13%
6%
0%

28%

[Direct investment] Government sector

0.1%[Direct investment] Nonproﬁt organizations

0.0%[For intermediaries] Asset managers

16%■ Of responding
institutions（n=31）

34%

28%

6%

[For intermediaries] VC and PE

0.2%

3%

[For intermediaries] Other

0.0%■ Of impact AUM(AUM = 1,107.857 billion yen)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory Board)
Question: “A5③ Types of investee organizations (MA)”71 Figure 36 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. The chart shows only comparable items from the GIIN Survey.

72 Figure 37 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, responses fromorganizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

71

Impact investees by growth stage of business• As for the growth stages of the impact investees, the largest percentage of responding institutions
answered that the impact investees are at the “venture-stage (not yet generating revenues)” (59%),
followed by the “growth-stage (generating revenues)” and “later-stage (publicly traded companies thatearn good proﬁts and have good size)” (both 45%).
• 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)” (84%), followed by the “later-stage(unlisted private companies)” (7%).
• 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 listed companies at a later stage.
Figure 38. Impact investees by growth stage of business 73■ Of impact AUM (AUM = 789.997 billion yen)

■ Of responding institutions（n=29）
Venture-stage

59%(not yet generating revenues)

Growth-stage

45%(generating revenues)

6%2%

Later-stage

45%

84%

(listed companies that earn good proﬁts
and are of good size)
28%

24%

Later-stage(private companies that earn good proﬁts
and are of a suﬃcient size)

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

7%

0.5%

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory Board)
Question: “A5④ Stages (MA)”

Impact investees by growth 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 investees in Japan.

73 Figure 38 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, responses
from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting) were excluded.

72

Chapter 2

Figure 39. Impact investees by stage of business: International comparison 74
Growth-stage■ GIIN Survey 2020 (n=232)■ Impact investing institutions (n=29)

76%

45%

(generating revenues)

Venture-stage

63%
59%

(not yet generating revenues)

Later-stage

38%

28%

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

Seed-stage

36%

24%

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

Later-stage

15%(listed companies that earn good proﬁts and are of good size)

0％

45%

10％ 20％ 30％ 40％ 50％ 60％ 70％ 80％

Source: These ﬁgures have been created based on the “Questionnaire Survey regarding Impact Investment (2021)”(GSG National Advisory Board) and the “GIIN Annual Impact Investor Survey 2020.” - Question: “A5④ Stages (MA)”

Impact investees by region• As for investees by region, the majority of responding institutions answered Japan (86%). The majorityof impact AUM are also allocated to companies in Japan (28%).
• Secondly, as high as 29% of responding institutions noted “Asia” (excluding Japan) and 23% of impact
AUM are allocated to companies in “North America.”• 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, about three-fourths ofimpact AUM are allocated to overseas businesses.
Figure 40. Impact investees by region 75
Japan

86%
29%

28%
21%

Asia (excluding Japan)
21%
18%■ Of responding institutions（n=28）

14%
11%
7%

North America

23%

Europe20%

Africa3%

Latin America

5%

Oceania1%■ Of impact AUM(AUM = 952.313 billion yen)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “A8. Please provide a breakdown of impact AUM by region, with all assets being 100.” (NA)”74 Figure 39 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,
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.
75 Figure 40 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.

73

Impact investees by sector• As for the impact investeesʼ sectors, a clear majority of responding institutions answered that they
invest in “health/healthcare” (72%), followed by “promotion of active female participation” (56%).
• The majority of impact AUM are allocated to “microﬁnance” (34%), followed by “health/healthcare”(11%). Note that the share of one organization specializing in a particular issue as a percentage of the
AUM was signiﬁcant. Excluding this organization, the most common response in terms of balance was"health/healthcare" (18%), followed by "renewable energy" (17%).
• 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 the area of health/healthcare in anticipation of aging of domestic population.
Figure 41. Impact investees by sector 76
72%

11%

Health/healthcare
Promotion of active female participation

5%

52%

Quality education and parenting

4%

52%

Renewable energy

56%

40%

IT and advanced technology

40%

Support forsmall & medium-sized businesses

5%
2%

32%

Environmental protection

0.6%

32%

Addressing andmitigating climate change

7%

28%

Microﬁnance

28%

Financial services(other than microﬁnance)

28%

Food security/sustainable agriculture

0.3%

28%

Housing supply

2%

28%

Water resource security/hygiene

0.1%

Arts and culture

0.2%

16%

institutions（n=25）

2%

Infrastructure/urban development36%■ Of responding

10%

32%

Other

34%
10%

■ Of impact AUM(AUM=94.212 billion yen)
8%

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)”
76 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,

responses from organizations whose impact AUM were also counted as other responding organizationsʼ AUM (double-counting)were excluded.

74

Chapter 2

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” (29 points, international > Japan), and“health/healthcare” (23 points, Japan > international).

Figure 42. Impact investees by sector: International comparison 77■ GIIN Survey 2020 (n=289)■ Impact investing institutions (n=25)

Food security/sustainable agriculture

57%

28%
49%

Health/healthcare

46%

Renewable energy

41%

Quality education and parenting
Financial services(other than microﬁnance)

52%
52%

39%

28%

Housing supply

72%

39%

28%
30%
28%

Microﬁnance26%

IT and advanced technology

23%

Water resource security/hygiene

28%

21%

Infrastructure/urban development
9%

Arts and culture

40%

36%

16%

Other

32%
0％

10％

20％

30％

40％

49%

50％

60％

70％

80％

Source: These ﬁgures have been created based on the “Questionnaire Survey regarding Impact Investment (2021)”(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)”

77 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, 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.

75

Impact investing institutionsʼ plans for future impact investment• A clear majority of impact investing institutions answered that they plan to “increase” (90%) impact
investing. None of the institutions plan to “decrease.”• A combined 40% of non-impact investing institutions either “plan to engage in” or are “considering”
impact investing (n=35).
• Ninety percent of the impact investing institutions plan to increase impact investing, which indicatesthat the market will likely grow.
Figure 43. Impact investing institutionsʼ plans for future impact investment 78
3%
7%

90%

■ 90%

Increase■ 0%

Maintain■ 0%

Decrease■ 7%

Considering impact investing

■ 3%

Other

n=29

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “D7. Please select one of the following that is closest to your organizationʼs plan for future impact
investment. (SA)”

Impact investing institutionsʼ plans for future impact investment (by sector)• The majority of the impact investing institutions plan to “increase” impact investing in “renewableenergy” (81%), followed by “addressing and mitigating climate change” (78%).
• 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%).

78 Figure 43 shows the results of responses only from the organizations that are engaged in impact investing and meet the above
inclusion criteria. The organizations that provided no answer were excluded.

76

Chapter 2

Figure 44. Impact investing institutionsʼ plans for future impact investment (by sector) 79■ Increase■ Maintain■ Decrease■ Considering impact investing

Renewable energy

81%

Addressing and mitigating climate change

78%

14%

5

n=
21

22%

23

19%

21

Environmental protection

76%

Health/healthcare

76%

Arts and culture

73%

9%

18%

11

Promotion of active female participation

73%

14%

14%

22

Microﬁnance

71%

7%

IT and advanced technology

70%

15%

Support for small & medium-sized businesses

67%

Food security/sustainable agriculture

65%

Financial services (other than microﬁnance)

5

10%

14%

21%
15%

21

14
20

33%

18

4

30%

23

63%

11%

26%

19

Quality education and parenting

60%

15%

25%

20

Infrastructure/urban development

56%

17%

28%

18

Water resource security/hygiene

50%

30%

Housing supply

40%

20%

20%
40%

20
20

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory Board)- Question: “D8. Please circle options that apply about your organizationʼs plan for future impact investment. (SA)”

Ideas and eﬀorts to the planning, implementation, and measurement of impact investing 80
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, as well as in conducting dialogue with investees and increasing their engagementin pursuing impacts.

“

We spent a lot of time in examining deals in light of SDGs, and studied both positive and negative
impacts in advance.

”

79 Figure 44 shows the results of responses only from the organizations that are engaged in impact investing and meet the above
inclusion criteria. The organizations that provided no answer were excluded.

80 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.

77“

In interviewing investee candidates, we work to have in-depth communication from the viewpointof what social issues they are seeking to solve. Even if we cannot make investments as a result,”

we think we had a positive impact on future business growth of the investee candidates throughwhat we discussed in the interviews.

“

Along with evaluation of and a critical eye for investeesʼ business, the methodology aspect of what
investment scheme to use in investing is also important. We think that, if the method changes, the”quality of business operator that we want to procure using the method will also change and thequality of the investor that wants to invest will change. By building a new ﬁnancial structure in linewith such purposes, we are working to “develop a new structure, implement it, (participate in it
ourselves as an investor,) and create followers and trends.”“

We are working to disclose impact indicators to investors beginning in the phase of soliciting fundinvestment money and disclose monitoring results throughout investment periods. In doing so, we”

try to make sure especially small- and medium businesses can recognize their businessʼ value insociety and showcase it as their strengths toward investors. Beginning in the fund-structuringphase, we keep conducting discussions from the perspective of social impacts, brush up on logic
models and set indicators. In addition, we always ask businesses to make monthly and annual
reports during a fund management period, to ensure a PDCA cycle is adhered to.

“

In impact investing in public equity, we focused on what investment philosophies and concepts areimportant and the process and discussion of planning and designing them. In investing in public”

equity, we think it is important to ensure that intentions of investors and investees are aligned.

“

We deﬁned our companyʼs purposes, which we believe will play an important role in practicing
impact investing.

”

Implementation Status of Impact Measurement and Management (IMM) in Japan
This section provides an overview of impact measurement and management (IMM), which diﬀerentiates
the methods between impact investing and conventional investment, primarily by “impact investing
institutions” that are engaged in impact investing and meet the aforementioned inclusion criteria, basedon the responses to the “Questionnaire Survey regarding Impact Investment (2021).”

Tools and frameworks utilized in impact measurement• The most respondents answered “Sustainable Development Goals (SDGs)” (71%) as tools and frameworks utilized in impact measurement, followed by “IRIS+ Core Metrics Sets” (38%) and “5 dimensionsof impact of Impact Management Project (IMP)” (35%).
• In the GIIN Survey 2020 (Figure 36) also, the most respondents answered “Sustainable Development
Goals (SDGs)” (73%).

78

Chapter 2• 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.
• Not a negligible number of banks cited the “Principles for Positive Impact Finance,” which was worked out
in an eﬀort led by the United Nations Environment ‒ Finance Initiative (UNEP FI), in “other” responses.
Figure 45. Tools and frameworks used in impact measurement 81■ GIIN Survey 2020 (n=294)■ Institutions engaged in impact investing + Organizations deemed to be engaged in impact investing (n=34)

73%
71%

UN Sustainable Development Goals (SDGs)
36%
38%

IRIS+ Core Metrics Sets
5 dimensions of impact of
Impact Management Project (IMP)

32%
35%

IRIS Catalog of Metrics

46%

29%

Operating Principles for Impact Management

18%
21%

UN Principles for Responsible Investment(UNPRI)21%

Sustainability AccountingStandards Board(SASB)

9%
12%

Global Reporting Initiative (GRI)

11%
12%

B Analytics, GIIRS

18%

0%

Aeris CDFI Rating System

11%

0%

17%

Other

11%

Do not use external tools or frameworks

0

29%

10

20

26%
24%
30

40

50

60

70

80

90

100(%)

Source: These ﬁgures have been created based on the “Questionnaire Survey regarding Impact Investment (2021)”(GSG National Advisory Board) and the “GIIN Annual Impact Investor Survey 2020.” - Question: “C1. Do you use thefollowing tools and frameworks for measuring impact of your impact investing activities? Please select all that apply.
(MA)”

81 Figure 45 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforemen-tioned inclusion criteria. The organizations that provided no answer were excluded. Also, as stated above, note that seven of the“institutions not engaged in impact investing” were in eﬀect “institutions engaged in impact investing” when they responded to theSurvey (i.e., not during the period covered by the Survey), and thus their responses were counted as those from “institutions deemed

to be engaged in impact investing” for analysis of answers to this question. For detail, see “About ʻInstitutions deemed to be engaged
in impact investingʼ” in the opening of “Questionnaire Survey Result” discussed earlier.

79

Purpose of using tools and frameworks• The largest number of respondents answered “setting goals” (71%) as the purpose of using “Sustainable
Development Goals (SDGs),” which is most frequently used for measurement of impact, followed by“measuring results” (47%) and “reporting results” (38%).
• The tool sets of IRIS (IRIS Catalog of Metrics and Core Metrics Sets) were used for setting goals andmeasuring results.

Figure 46. Purpose of using tools and frameworks 82■ To set goals■ To measure results

UN Sustainable Development Goals (SDGs)

38%

IRIS+ Core Metrics Sets

21%

5 dimensions of impact of
Impact Management Project (IMP)

29%

24%
21%

IRIS Catalog of Metrics

15%

Operating Principles for Impact Management

15%
15%

UN Principles for Responsible Investment(UNPRI)3%

Sustainability Accounting Standards Board (SASB)

71%

47%

35%

29%

26%
24%
21%

9%
6%
12%

0%
0%

0

n=34

21%

12%
12%

Global Reporting Initiative (GRI)■ To report results

10

20

30

40

50

60

70

80

90 100 (%)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (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)”82 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. Also, as stated above, note that seven of the“institutions not engaged in impact investing” were in eﬀect “institutions engaged in impact investing” when they responded to theSurvey (i.e., not during the period covered by the Survey), and thus their responses were counted as those from “institutions deemed

to be engaged in impact investing” for analysis of answers to this question. For detail, see “About ʻInstitutions deemed to be engaged
in impact investingʼ” in the opening of “Questionnaire Survey Result” discussed earlier.

80

Chapter 2

Types of Impact Indicators• “Both output and outcome” (32%) was cited the most as a pattern among the types of impact
indicators, followed by “all of output, outcome, negative impact” (26%).
• At the same time, there was a small number of respondents selecting “output alone” (15%).

Figure 47. Types of measurement metrics adopted for implementation of impact investing 83
3%
15%
32%
24%
26%

■ 32%

Both output and outcome■ 26%

All of output, outcome, negative impact■ 24%

Outcome alone■ 15%

Output alone■ 3%

Outcome and negative impact alone

n=34

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National
Advisory Board) - Question: “A5 ⑦. Type of measurement metrics (MA)”

Status of information sharing with investees regarding impact measurement results• In terms of status of information sharing with investees regarding impact measurement results, 57% of
impact investing institutions answered that they “share measurement results with impact investees.”• Upon sharing results, 47% of the respondents said they “jointly consider how to improve the project,”
while 33% were limited to “interviewing how to improve the project.”• At the same time, although few, some responded that they “do not share the measurement results with
the investees” (13%).
Figure 48. Status of information sharing with investees regarding impact measurement results 84

Share measurement results with investees

n=30

57%

Share measurement results with investees andjointly consider how to improve the project47%

Share measurement results with investees andinterview how to improve the project

33%

Other

17%

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 (2021)” (GSG National Advisory
Board) - Question: “C3. Do you share impact measurement results with investees? Please select all that apply. (MA)”81

Status of information sharing with investors regarding impact measurement results• In terms of sharing of information about impact investing, some 47% of the impact investing institutions
said they “publicly disclose” such information. Some 33% said they “share information with some investors in a limited manner (do not publicly disclose it),” and 23% said they “do not disclose (in-house
operation).”Figure 49. Status of information sharing with investors regarding impact measurement results 85

Publicly disclose it

n=30

47%

Disclose information to some investors in a limited manner(do not publicly disclose it)

33%

Do not disclose it (in-house operation) *See note

23%

0

10

20

30

40

50

60

70 (%)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “C4. Do you share impact measurement results with investors? Please select all that apply. (MA)”83 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. Also, as stated above, note that seven of the“institutions not engaged in impact investing” were in eﬀect “institutions engaged in impact investing” when they responded to theSurvey (i.e., not during the period covered by the Survey), and thus their responses were counted as those from “institutions deemed

to be engaged in impact investing” for analysis of answers to this question. For detail, see “About ʻInstitutions deemed to be engaged
in impact investingʼ” in the opening of “Questionnaire Survey Result” discussed earlier.

84 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.

85 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. In this yearʼs survey, we introduced new criteria,“the results of the Impact Measurement and Management (IMM) are shared with investors.” As we stated in the note, “as for impact

investing that an investor does on his/her own account, this criteria is not applicable because the investor obviously knows theresults of the impact measurement,” not all impact investing institutions disclose such information, neither are there always ﬁnal
investors with whom they should share results.

82

Chapter 2

SDGs-linked impact measurement• Regarding the implementation status of SDGs-linked impact measurement, 33% of the impact investing
institutions said they “link all impact measurement with SDGs.” Some 37% said they “link some impact
measurement with SDGs” and 10% replied that they “currently do not link them with SDGs but plan to
do so in the future.”

Figure 50. SDGs-linked impact measurement 86
0%10％

FY2021 Survey（n=30）

20％

30％

40％

33%

FY2020 Survey（n=23）

50％

60％

70％

37%

39%

80％
10%

30%

13%

90％

100％

20%

13%

4%

■ Link all impact measurement with SDGs
■ 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 (2021)” (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 with SDGs, the largest number of the respondents said “itis a framework that is widely recognized and it is helpful when explaining impact investing externally”(100%), followed by “it is important to link with the international development paradigm, as an impact
investor” (60%).
• As SDGs are widely utilized globally (Figure 45), 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 questions.

86 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. Note that “impact measurement” in this yearʼssurvey were referred to as “social impact measurement” in the 2020 survey form.

87 Figure 51 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.

88 Figure 52 targets the impact investing institutions that said they “link all or some social impact measurement with SDGs” in Question C5.

83

Figure 51. Reasons for linking impact measurement with SDGs 87

n=20

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

60%

It makes it possible to attract investors (it helps to acquire investors)

40%

It makes it possible to attract investee companies(it helps to develop investee companies)

35%

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

30%

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

20%

It helps to identify joint investors and joint investment opportunities

10%
0

20

10

30

40

50

60

70

80

90 100(%)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “C5SQ1. Please select all that apply as reasons for linking impact measurement with SDGs. (MA)”

Method of linking impact measurement with SDGs
• As a method of linking impact investing and SDGs, the largest number of institutions answered that they
“incorporated SDGs into Impact Measurement and Management” (50%), followed by “mapped existing
portfolio on SDGs” and “measure impact by setting indicators for measuring contributions to SDGs”(both 40%).
• These results conﬁrmed that, while eﬀorts to integrate Impact Measurement and Management (IMM)with SDGs represent a half, SDGs are also used primarily in eﬀorts to align such eﬀorts with existing
initiatives.

Figure 52. Method of linking impact measurement with SDGs 88
n=20

Incorporated SDGs in Impact Management and Management

50%

Mapped existing portfolio on SDGs

40%

Measure impact by setting indicatorsfor measuring contributions to SDGs

40%

Procured new funds by clearly targeting SDGs

25%

Incorporated alignment with SDGs as a ﬁlter for selecting investments

15%

Set SDGs targeting as a core factor of investment strategy

10%

0

10

20

30

40

50

60 (%)

Source: Created based on the “Questionnaire Survey regarding Impact Investment (2021)” (GSG National Advisory
Board) - Question: “C5SQ2. How did you link impact investing with SDGs? Please select all that apply. (MA)”84

Chapter 2

Impact measuring method and process 89
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. As basically response contents that overlap with last ﬁscal yearʼs questionnaire survey are notincluded here, check out the corresponding parts in the last ﬁscal yearʼs report, as necessary.

“

We work out a logic model for each companyʼs business before making investments, and set
output/outcome indicators based on it. Quantitative measurement is carried out using these”

indicators. In addition, we record impact stories in reports based on interviews with each company
and on-site inspection.

“

Having targets indicated in logic models and monitoring their outcomes is the main part. This is an
issue that should be examined along with the method of measuring impacts, costs associated with”it, etc., in our view.

“

We identify positive and negative impacts by comprehensively analyzing supply chains and areas
for all sectors and use UNEP FIʼs tools to categorize the impacts thus identiﬁed. Impacts are”measured relative to global targets, industry standards, etc.

“

We set impact indicators by referring to materiality issues indicated in the impact radars of SASB
and UNEP FI for each company and also check their relevance with SDGs. For measuring and”disclosing impacts, we use principles regarding sustainable ﬁnance and guidelines by government
ministries and agencies as guides.

“

We work to gain global knowledge through the sociality project of the GSG National Advisory Boardand activities of SIMI and try applying them.

”

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 (2021).”89 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. These comments are the respondentsʼ personal or organizational views and do not
represent the view of the GSG National Advisory Board.

85

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” (63%), while there were certain number of
institutions that said “below the return of market level (however, it is closer to the market level)” (14%)
and “below the market level (however, it is closer to investment principal preservation)” (9%).
• More equity-focused investment institutions said they would allow “below the return of market level”
compared with the overall institutions.
• On the other hand, “return exceeding the market level after adjusting risks” was the most frequentanswer from debt-focused investment institutions (80%).90• 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 slightly more than in Japan.

Figure 53. Expected level of ﬁnancial returns 91
0%

GIIN Survey 2020（n=294）

10%

20%

30%

40%

50%

60%

70%

67%

Institutions engaged in impact investing+ Organizations deemed to be engaged
in impact investing（n=35）63%Equity-focused（n=25）

56%

Debt-focused（n=10）

80%

90%

18%

14%

16%

15%

9%

12%

80%

100%

14%

16%
10%

10%

■ 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 (2021)”(GSG National Advisory Board) and the “GIIN Annual Impact Investor Survey 2020.” - Question: “A9. What level is
your goal for ﬁnancial returns of impact investing? Please select one answer that most accurately describes yourview. (SA)”90 The sample count of debt-focused investment institutions is small, so they are treated as a reference.

91 Figure 53 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria. Also, as stated above, note that seven of the “institutions not engaged in impact investing” were in eﬀect “
institutions engaged in impact investing” when they responded to the Survey (i.e., not during the period covered by the Survey), andthus their responses were counted as those from “institutions deemed to be engaged in impact investing” for analysis of answers tothis question. For detail, see “About ʻInstitutions deemed to be engaged in impact investingʼ” in the opening of “Questionnaire Survey
Result” discussed earlier.

86

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 “as expected” (67%), but there were certain numbers of institutions answering “notsure” (17%), “more than expected” (13%), and “less than expected” (3%).
• Slightly more equity-focused investment institutions said the returns were “as expected” (71%)
compared with the overall institutions.
• Meanwhile, debt-focused investment institutions were equally divided between those answering thatthe returns were “as expected” (56%) and “not sure” (44%).92• In the GIIN Survey 2020 (Figure 47), those who answered “in line with expectations” was also the highest(68%), but those who replied “more than expected” (20%) accounted for more than in Japan. Comparedwith 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.93

Figure 54. Rate of achievement of ﬁnancial returns 94
0%

GIIN Survey 2020（n=282）
Institutions engaged in impact investing+ Organizations deemed to be engaged
in impact investing（n=30）
Equity-focused（n=21）

10%

20%

30%

40%

20%

70%

67%

19%

■ More than expected

60%

80%

68%

13%

Debt-focused）
（n=9）

50%

71%

■ As expected

100%

12%

3%

56%

90%

17%

5% 5%
44%

■ Less than expected■ Not sure

Source: These ﬁgures have been created based on the “Questionnaire Survey regarding Impact Investment (2021)”(GSG National Advisory Board) and the “GIIN Annual Impact Investor Survey 2020.” - Question: “A10. How muchﬁnancial returns and impact in impact investing have been achieved compared with the expectations? Please selectone answer that most accurately describes your view. (SA)”92 The sample count of debt-focused investment institutions is small, so they are treated as a reference.
93 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 54, 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.
94 Figure 54 shows the results of responses only from the organizations that are engaged in impact investing and meet the aforementioned inclusion criteria.

87

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 “as expected” (66%), but there were certain numbers of institutions answering “not sure” (31%) or “more than expected” (3%).
• Slightly more equity-focused investment institutions said the returns were “as expected” (71%)
compared with the overall institutions.
•On the other hand, debt-focused investment institutions were equally divided between those answeringthat the returns were “as expected” (50%) and “not sure” (50%).95• 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.96
Figure 55. Rate of achievement of impact 97
0%

GIIN Survey 2020（n=274）

10%

20%

30%

40%

50%

21%

70%

80%

90%

78%

Institutions engaged in impact investing+ Organizations deemed to be engaged 3
in impact investing（n=29）

31%

71%

24%

50%

■ More than expected■ As expected

100%
1%

66%

Equity-focused 5%（n=21）
Debt-focused
（n=8）

60%

50%

■ Less than expected■ Not sure

Source: These ﬁgures have been created based on the “Questionnaire Survey regarding Impact Investment (2021)”(GSG National Advisory Board) and the “GIIN Annual Impact Investor Survey 2020.” - Question: “A10. How muchﬁnancial returns and impact in impact investing have been achieved compared with the expectations? Please
select one answer that most accurately describes your view. (SA)”95 The sample count of debt-focused investment institutions is small, so they are treated as a reference.
96 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 55, 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.
97 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. In the sub-analysis of equity-focused anddebt-focused investment institutions, the sum of the count n does not match the total because four institutions falling under outliers
are excluded.

88

Chapter 2

Summary: Vision of Impact Investing in Japan Based on Questionnaire Survey Result
According to the results of the Questionnaire Survey (FY2021), the total of Japanʼs impact AUM and asset manager
AUM as of the last ﬁscal year-end was approximately 1.3204 trillion yen. The impact AUM as ascertained in the same
survey of the previous ﬁscal year (FY2020) was 328.7 billion yen (new FY2021 criteria was applied for the purpose ofcomparison), so major progress has been made.98 At the same time, with regard to the evolution of impact investing inJapan, impact investing institutions that see the market as “growing steadily” remains small while many investors see it as“about to take oﬀ.” This outcome conﬁrmed that the Japanese market is still at the stage immediately preceding growth,compared to the international investing market, which was viewed as “growing steadily” by the majority (Figure 26).
Regarding the motivation for impact investing, the most common response was “responding to client demand,” andsecond was “part of our commitment as a responsible investor.” This may suggest that Japanʼs impact investing market
is poised for further growth going forward (Figure 24).
On the other hand, most respondents view Japanʼs impact investing market as having progressed over the past year in“the publicʼs awareness of and interest in impact investing,” “top managementʼs interest in and understanding of
impact creation,” and “each companyʼs stakeholdersʼ interest and engagement (e.g., asset owners, shareholders,investors)” (Figure 27), whereas “fragmentary and unsystematic approaches to Impact Measurement and Management(IMM)” was the most commonly cited challenge going forward for two consecutive years both by institutions alreadyengaged in impact investing and those considering entering the market in the future (Figure 28). After unsystematic
IMM, the second most commonly cited challenges were “limited data on potential impact investee companies andinvestment products,” “a limited number of impact companies to invest in,” and “limited availability of professionals
capable of helping impact companies make proﬁts and exit.” These responses made it clear that Japan still has
relatively few impact companies in which investors wish to invest and only a small pool of talent for operating impact
investing (Figure 28). And, as the market grows, there is a concern of ʻimpact washingʼ (regular investments 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 thatthe impact investing market will face over the next ﬁve years.
The Survey asked organizations that fall into the category of impact investing institutions to describe what they think
about “conditions that facilitate impact investing” in the open-ended question. Their demands included the accumulation of model businesses and successful examples around a variety of themes; training of talent for impact investing;the governmentʼs incentives and encouragement for ﬁnancial institutions, investors, and major corporations; top
managementʼs better understanding of impact investing at not only large enterprises but also small- to medium-sizedbusinesses; and the standardization of aﬀordable and simply-designed impact measurement and management.99
There is likely to be more discussion and practice of impact investing in Japan going forward, and we believe that thisreport, a kind of ﬁxed-point observation of the current location of impact investing in Japan, 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 (2021).”
It is our hope that this report contributes to solving social issues through impact investing.

98 The impact AUM grasped through last yearʼs questionnaire totaled 512.6 billion yen when it was calculated based on the impact AUM

inclusion criteria used in the last yearʼs Survey (FY2020). In order to compare last yearʼs ﬁgure with this yearʼs, this yearʼs new
criteria was applied to the last yearʼs ﬁgure of the Survey, and the last yearʼs ﬁgure became 328.7 billion yen.

99 Selected from responses to Question D10. “Please describe what you think is needed to facilitate more impact investing.”

89

List of Organizations that Responded to the Questionnaire Survey
The list shows the 77 organizations that responded to the “Questionnaire Survey regarding Impact Investment” (including 14 organizations which declined to disclose their names; in Japanese alphabetical order).
However, not all organizations that responded to the survey listed below are engaged in impact investing
as of the preparation of this report.
Figure 56. List of Organizations that Responded to Questionnaire Survey• Asset Management One Co., Ltd.

• Tajima Shinkin Bank

• SG Incubate Inc.

• taliki, Inc.

• NPO Yume Bank

• DBJ Asset Management Co., Ltd.

• The Ehime Bank, Ltd.

• Digisearch and Advertising, Inc.

• Oita Venture Capital Co., Ltd.

• The Tottori Bank, Ltd.

• Kamakura Investment Management Co., Ltd.

• Nanto Capital Partners, Inc.

• Energy & Environment Investment, Inc.

• Nissay Asset Management Corporation• JAPAN POST INSURANCE Co., Ltd.

• Development Bank of Japan Inc.

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

• Capital Medica Ventures Co., Ltd.

• Nomura Real Estate Asset Management Co., Ltd.

• Kyoeki Investment Fund Japan• Beyond Next Ventures Inc.

• The Kyoto Shinkin Bank

• Fidea Lease Co., Ltd.

• Crowd Credit, Inc.

• Fukoku Capital Management, Inc.

• GLIN Impact Capital• Future Venture Capital Co., Ltd.

• Global Brain Corporation• Plus Social Investment Co., Ltd.

• KSP, Inc.

• Breakpoint Co., Ltd.

• Japan International Cooperation Agency• Hokkaido Rokin Bank

• Gojo & Company, Inc.

• Mizuho Financial Group, Inc.

• The Sasakawa Peace Foundation• Mitsui Sumitomo Insurance Co., Ltd.

• Shizuoka Yaizu Shinkin Bank

• Sumitomo Mitsui Banking Corporation• The Shizuoka Bank, Ltd.

• Sumitomo Mitsui Trust Bank, Limited• The Japan Social Innovation
and Investment Foundation• Sumitomo Mitsui Trust Asset Management Co., Ltd.

• Sophia School Corporation• Shonan Shinkin Bank
• Shinsei Corporate Investment Limited• Sumitomo Life Insurance Company• Zebras and Company• Dai-ichi Kangyo Credit Cooperative• The Dai-ichi Life Insurance Company, Limited• Daido Life Insurance Company• Daiwa Securities Group Inc.
• Takayama Shinkin Bank• MUFG Bank, Ltd.
• Mitsubishi Corporation Disaster Relief Foundation• Mitsubishi Corp. - UBS Realty Inc.
• Mitsubishi UFJ Trust and Banking Corporation• Music Securities,Inc.
• Meiji Yasuda Asset Management Company Ltd.
• Resona Asset Management Co., Ltd.
• The Ritsumeikan Trust• Rheos Capital Works Inc.
• 14 organizations declined to disclose their names.

90

Chapter 2

Potential of Japanʼs Impact Investing Market‒ Estimated Maximum and Methodology ‒As stated earlier, along with the annual Questionnaire Survey, a market estimate survey based on publicly
available information was conducted, continuing from the last ﬁscal year, to ascertain aspects of thecurrent state of impact investing that cannot be grasped from the survey responses alone. The estimatedmaximum (potential) of Japanʼs impact investing market is as shown below. This section reintroduces themethodology used for the market estimate survey, which has been conducted on a trial basis since lastﬁscal year.
(Reposted) Marketʼs estimated maximum (potential): 5.33 trillion yen
In addition to the ﬁgures ascertained through the Survey, this ﬁgure was conﬁrmed based on publisheddata. It is the sum of the amounts generated by “products” for which an evaluation based on impact
measurement is conducted before and after the investment, and is the estimated maximum of what canbe impact investing.
As stated earlier, the estimated maximum of the market based on the “GIIN Annual Impact Investor Survey
2020” 100 (GIIN) 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” 101 (IFC) was 505.0 billion
dollars (approx. 56 trillion yen).

Figure 57. Scale of Impact Investment Balance (Reposted)
Marketʼs estimated maximum (potential)

Reference:
Marketʼs estimated maximum

5.33 trillion yen

2. Ascertained by
the Survey (old criteria)

Estimated maximum of potential impact investments. In addition to the ﬁgures
ascertained through the Survey, this ﬁgure was conﬁrmed based on publisheddata. It is the sum of the amounts generated by “products” for which an evaluation based on impact measurement is conducted before and after investment. (Details are in the “Market Estimate Survey” section below.)

Impact AUM calculated when the results of IMM ascertainedby this Questionnaire Survey were not required to share(oldFY2020 criteria)

1.4814 trillion yen

The ﬁgure is the sum of the impact AUM of the responding organizations of
the Questionnaire Survey whose intermediaries were not required to share thedetails of measurement with the ﬁnal investors.(Inclusion Criteria ① to ③
were fulﬁlled but ④ was unfulﬁlled)

1. Ascertainedby the Survey(new criteria)

Impact AUM, as ascertained by this Questionnaire Survey (newFY2021 criteria)

1.3204

trillion yen

The ﬁgure represents the sum of the investment balances which are based on
the Survey, and for which IMM was conducted both before and after the investing, and when the results of the IMM were shared with the ﬁnal investors.(All
Inclusion Criteria ① to ④ were fulﬁlled)

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

101 “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&CVID=naZESt9

91

The following is a simpliﬁed explanation of the methods used by these two global market estimate
surveys. The GIIN survey makes its estimates based on disclosure data from institutional investors by
combining a database it created based on its annual questionnaire survey and the impact investor
databases of other companies. On another hand, 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. Details on the speciﬁc methods of estimation for both global surveys were provided in the lastﬁscal yearʼs report.102。
Our survey uses the same method as last ﬁscal year that makes reference to both surveys of 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 Investing (2021)” is combined withthe amount of money originated from (impact investing) products for which assessment based on impact
measurement is conducted before and after making investments as found in publicly available information
we have desk researched, 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.

102 Refer to Figure 63. on page 85 of “The Current State and Challenges of Impact Investing - FY2020 Survey.”

92

Chapter 2

Methodology of the market estimate survey ‒ Combined approach on investor and product basis ‒Step 1. Summary of responses to “Questionnaire Survey regarding Impact Investment (FY2021)”
The impact investment balance of institutions engaged in impact investing has been compiled based on
the result of the responses to “Questionnaire Survey on Impact Investing (FY2021)” (only 2021 response
data were referenced due to updating inclusion criteria in this yearʼs survey). Regarding impact investing
through an investment management institution or other intermediary, double-counting with the investment balance of ﬁnal investors was eliminated to the extent possible.
Step 2-1. Specify product categories for which the assessment based on impact measurement is conducted before and after investing, based on the principles and guidelines of each ﬁnancial product category
The principles and guidelines for each ﬁnancial product category (bonds, loans, etc.) were conﬁrmed andproduct groups identiﬁed for which matters applicable to assessment based on impact measurement are
conducted before and after making investments (sustainability-linked loans, positive impact ﬁnance,sustainability-linked bonds, impact investment funds, etc.). Speciﬁcally, it was conﬁrmed whether the
principles and guidelines clearly state that matters applicable to assessment based on impact measurement should be conducted before and after making investments, including whether or not impact indicators are set and monitored at the time of product origination.
Step 2-2. Specify individual product for which the assessment based on impact measurement is conducted before and after making investments
Individual ﬁnancial product and fund were identiﬁed for which assessment based on impact measurement
is conducted before and after making investments, based on publicly available information and questionnaire survey (question group on a ﬁnancial product basis) in Step 2-1. Speciﬁcally, a list was made ofindividual ﬁnancial products for which assessment based on impact measurement has been establishedbased on corresponding information (measurement reports, press releases, etc.) published by third-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 loans, 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 survey,
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 their own version of impact measurement and management are not known, so it diﬀers from theimpact investing balance grasped via the questionnaire survey. On this point, it will be necessary toconsider revising the methodology going forward based on whether or not to make the intentionality ofﬁnal investors a requirement for inclusion in impact investment.

93

Column #2

Column 2 : Introduction of a consumer survey on impact investing
Every year since 2019, SIIF has conducted the General Consumer Awareness Survey on Impact Investment(hereinafter, “Consumer Survey”) with consumers responding to the questionnaire in addition to “The
Current State and Challenges of Impact Investing in Japan” with businesses responding the questionnaire.
The Consumer Survey explores the future potential of impact investment in retail market such as thegeneral consumersʼ awareness of impact investment and their interest in purchasing impact investments.103
This column provides an overview of the main ﬁndings of the Consumer Survey conducted in August 2021.
Read in combination with the main body of “The Current State and Challenges of Impact Investing inJapan,” it is considered to aid the readerʼs understanding of the trend of impact investment.
[Summary of the survey]

Survey period:

August 8-9, 2021

Respondents:

4,127 general consumers across Japan, age 20 to 79

1. Awareness of impact investing
SIIF deﬁnes the “awareness of impact investing” as the sum of the number of respondents who have“heard of the term ʻimpact investingʼ and have a ﬁrm understanding of its meaning” and “heard of the termand have some understanding of the meaning.” The awareness in 2021 was 6.6%, which shows a ﬂat trend
compared to the results of 2020 (6.1%) and 2019 (6.8%). Although impact investing is becoming a buzzword in the world of ﬁnance and government, awareness among the general consumers is yet to occur.
Figure 58. Awareness of the term “impact investing”
02021

1.7% 10
4.9%
1.7%

2020

4.4%
1.7%

2019

5.1%

20

30

40

50

60

11.0%

70

80

90

100 (%)

82.5%

n=4,127

6.6% understand the meaning to some extent
11.1%

82.8%

n=3,098

6.1% in 2020
11.3%

81.9%

n=2,071

6.8% in 2019
■ Have heard the term “impact investing” and have a ﬁrm understanding of the meaning■ Have heard the term “impact investing” and understand the meaning a little■ Have heard the term “impact investing,” but donʼ t know what it means■ Have not heard of the term “impact investing”

103 The entire report of the Consumer Survey can be found by searching the website using the keywords, “SIIF 2021 Consumer Survey.”94

Column #2

The average awareness is 6.6%, however, an examination of the result by the respondentsʼ investment
experience and age range shows a signiﬁcant diﬀerence.
Speciﬁcally, the respondents with investment experience in their 20s and 30s, the so-called Generation Z
and the millennial generation, have high degree of awareness. In particular, the awareness among men in
20s reaches nearly 30%. On the other hand, even among those with investment experience, the awarenessdrops signiﬁcantly among the 40s, for both men and women.
Figure 59. Awareness of Impact Investment: Cross analysis by investment experience, gender, and age
Awareness among 20s and 30s (Gen-Z and millennials) with investment experience is highNO INVESTMENT EXPERIENCEWITH INVESTMENT EXPERIENCE

0

10

2021 Total

4.9

Men in 20s

9.8

30s

20

40s
50s

3.5

11.0

4.9

80

90

100 (%)
n=4,127

45.9

178
223
172
463

75.8
15.1

14.3

59.6

72.1

15.8

n=122

62.3

14.6

13.4

15.1
4.8

70

23.3

6.7

40s

60

25.4

17.4
10.3

30s

50

82.5
18.9

8.4

60 and above

40

11.0

4.0

Women in 20s

30

53

69.8

16.2

64.8

18.9

105

76.2

122

77.4

115

50s

7.0

60 and above

3.6

Men in 20s

2.8 5.7

30s

6.5

91.6

154

40s

6.9

91.4

175

14.8
11.4

83.5

9.9

81.6

413
n=141

50s

2.9

96.5

170

60 and above

4.4

95.6

225

Women in 20s

8.4

90.1

203

30s

7.5

90.7

226

40s

7.2

92.1

277

50s

5.6

94.4

234

60 and above

5.1

94.7

356

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

2. Consumersʼ interest in purchasing impact investments
SIIF deﬁnes “consumers interested (in impact investment)” as the sum of the respondents who answered,“very interested” and “somewhat interested.” In 2021, it was 17.2%.
Although the ﬁgure decreased slightly from 19.1% in 2020 and 20.7% in 2019, it is assumed that the
decline was caused by the reduction in the general appetite for investment during COVID-19.

95

Figure 60. Consumersʼ interest in purchasing impact investments02021

2.0% 10

20

30

15.2%

60

70

80

24.9%

90

100(%)
n=4,127

31.6%

17.2% are interested
16.3%

27.6%

23.7%

29.6%

n=3,098

22.3%

29.8%

n=2,071■ Not very interested■ Not interested at all

19.1% in 2020

2.8%
2019

50

26.3%

2.8%
2020

40

17.9%

27.3%

20.7% in 2019
■ Very interested■ Somewhat interested■ Not sure

The average in total of interested consumers was 17.2%. Similar to the response for awareness, therespondents in their 20s and 30s with investment experience tend to have higher interest.

Figure 61. Interest of consumers in purchasing impact investments: Cross analysis by investment
experience, gender, and age

Respondents in their 20s and 30s with investment experience tend to have higher interest.
010

NO INVESTMENT EXPERIENCEWITH INVESTMENT EXPERIENCE

2021 Total
Men in 20s
30s

20

30

15.2

50s

4.7

30s

5.7

50s

37.7

12.1

26.7

Men in 20s

13.5

30s

14.9
12.0

50s

3.5

60 and above

2.2

28.7

29.1

15.6

24.0

Women in 20s

13.3

24.6

30s

11.5

24.3

40s

9.0

50s

18.8

60 and above

3.9

15.7

■ Very interested■ Somewhat interested■ Not sure

5.7

53

9.5

105
122
115
413

36.9

n=141

39.6

154

41.7

175

55.9

170

57.8

225
31.0

203

41.6

226

40.4

277

25.3

28.7

463

21.8

31.0

26.9

172

18.1

23.5

20.8

24.9

3.4

19.2

27.8

18.3
21.2

223

32.0

22.7

27.4
19.4

178

18.0

19.1

22.1

9.6
12.6

26.7
27.0

31.7

n=122

26.4

32.0

19.1

60 and above

40s

17.4
30.5

31.4

7.4

16.9

40.1

21.3

n=4,127

20.2

27.9

26.4

100(%)

12.3

30.9

18.6

40s

90
31.6

32.7

21.8
3.8

80

36.1

33.7

60 and above

70

24.9

31.8

Women in 20s

60

35.2

9.0

40s

50

26.3

9.0

2.7

40

50.4

234

51.1

356

■ Not very interested■ Not interested at all

96

Column #2

3. Areas of interest to general consumers who are potential impact investors
Respondents who were interested in impact investment were asked which areas of investment they wereinterested in, and companies promoting renewable energy, environment, medicine, and nursing care werein the top. Looking at the businesses that ranked below fourth, the respondents had higher appetite forinvesting in companies that worked on implementing SDGs including ensuring safe water resources.

Figure 62. Type of businesses that the consumers interested in impact investment want to invest
for solving social issues

High interest in renewable energy, environment, medicine, and nursing care

n=709

Companies that develop and provide
renewable energy

29.8

Companies that provide products and services
that contribute to environmental protection

23.0

53.3

16.9

4.5

2.3

Companies that provide high-quality medical andnursing care services or work to reduce
medical and nursing care costs

26.2

50.1

15.9

5.9

1.8

15.5 3.8 1.8

49.1

Companies that provide products and services
for sustainable agriculture

20.6

55.6

17.6

4.7 1.6

Companies that provide products and services that contribute tosolving social issues by applying IT and advanced technology

25.1

47.4

20.5

4.9

2.1

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

22.3

47.2

21.4

6.5

2.5

Companies that provide products and services
for public sanitation and ensuring safe water resources

19.7

49.1

22.8

6.3

2.0

Companies that provide products and services
for quality education and parenting

21.0

45.4

24.0

7.6

2.0

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

21.4

43.9

24.3

7.8

2.7

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

20.2

44.3

26.1

6.3

3.1

26.8

6.6

2.3

27.8

6.3

2.3

28.2

7.9

2.1

Companies that work to reduce environmental impact
in corporate activities

16.8

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

20.5

Companies that provide products and services
for infrastructure and urban development

15.8

46.0

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

11.7

48.1

24.3

12.8

3.1

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

15.9

43.3

27.8

9.9

3.1

Companies that provide aﬀordable, high-quality housing

15.2

38.5

31.2

11.4

3.7

Companies that provide products and services
that support small- and medium-sized enterprises

11.8

37.4

36.2

11.7

2.8

Companies that provide innovative ﬁnancial services using ﬁntech, etc.

13.0

34.0

38.2

11.1

3.7

■ Very interested■ Somewhat interested■ Not sure

47.5
43.2

■ Not very interested■ Not interested at all

97

4. Positive response to institutional investors purchasing impact investment products
More than 70% of the respondents interested in impact investment were positive about the institutional
investor managing his/her asset to purchase impact investment products. The higher the amount the
respondent agreed to allow being invested in impact investment products, the higher the rate of positivity
for institutional investors to purchase impact investment products. This is considered to have an implication for the future retail strategy of ﬁnancial institutions.

Figure 63. Positive response of the respondents interested in impact investment to institutional
investors purchasing impact investment products
0
Total

1.7%
10

20

14.7%

30

40

50

60

70

61.6%

80

90

100(%)

7.9%

14.1%

n=709

More than 70% of the respondents interested in
impact investment are positive about institutional investors
purchasing impact investment products.
Investment experience, approve
1 million yen or moreinvested in impact investment products
Investment experience, approve
0.5 million yen or more but less than 1 million yen
invested in impact investment products

25.3%

61.3%

5.3 8.0%

n= 75

2.7%
19.6%

64.3%

7.1%

6.3%

112

1.4%

Investment experience, approve
0.1 million yen or more but less than 0.5 million yen
invested in impact investment products

12.2%

Investment experience,
approve less than 0.1 million yen
in impact investment products

12.3%

54.4%

10.5%

Interest in impact investment
but no investment experience

11.8%

54.0%

8.6%

70.6%

7.2%
2.6%

8.6%

20.2%

1.6%
24.1%

221

114

187

The higher the amount to be invested in
impact investment products, the more positive they are■ Approve of institutional investors purchasing impact investment products■ Somewhat approve of institutional investors purchasing impact investment products■ Somewhat disapprove of institutional investors purchasing impact investment products■ Disapprove of institutional investors purchasing impact investment products■ Not sure

The survey ﬁndings give various interesting insight other than those introduced in this column. It isstrongly recommended to read the main report.
It is available by searching withSIIF 2021 Consumer Survey

or via QR code here.

98

Case Studies

Case Studies of Impact Investments/Impact Companies
In this chapter, we will introduce four case studies to understand impact investment trends. Two of thefour case studies are from ﬁnancial businesses that invest and the remaining two are from operatingcompanies that receive investments from ﬁnancial businesses.
The four case studies are based on interviews conducted and the details are presented as case studies.
The interviewee name and proﬁle, and the highlights of the case studies are as below.

Figure 64. Case study examples selected and reasons for selection

Interviewee

Interviewee Proﬁle & Highlights of Case Study
A life insurance company established in 1902. Its assets under management at theend of March 2021 totals approx. 38 trillion yen. Dai-ichi Life began impact
investing in 2017 as one of the ﬁrst institutional investors in Japan to do so.

The Dai-ichi Life

Insurance Company,
Limited• Dai-ichi Life has contributed to setting examples for the industry since the earlydays of impact investing.
• It has an established system in which multiple departments work together for
impact investing.
• The company practices impact investing across multiple asset classes, including
direct investments in unlisted and listed companies, and investments in funds.

A Kyoto-based venture capital ﬁrm established in 1998. The company has acted asa pioneer providing local models of venture capital funds.
Future Venture

Capital Co., Ltd.

• With the intention of creating impacts, Future Venture Capital oﬀers ﬁnancial
products designed to revitalize local economies.
• The company started local revitalization funds after the Great East Japan
Earthquake in 2011. It has managed these funds across diﬀerent regions since,
acquiring unique know-how in how to agree on impact KPIs with investees.

Established in 2014, CureApp is the developer and operator of “Digital Therapeutics (DTx)®.” The companyʼ s mission is “Re-evolving ʻtherapeuticsʼ with
software,” and the company receives investments from several impact investors.
CureApp, Inc.

• CureApp is a good example of an impact-oriented business in that thesoftware it oﬀers is designed to urge users to change their behavior in such a
way that helps solve various issues in the healthcare and other related ﬁelds.
• The company considers Impact Measurement and Management (IMM) as
one of its business management tools and is working to make it acompany-wide practice.

99

Interviewee

Interviewee Proﬁle & Highlights of Case Study
A joint-stock company established in 2015. With the mission of “Connecting thePieces,” Pocket Marche runs a website that oﬀers consumers primary products(e.g., fruit, vegetables, meat, and ﬁsh) for direct purchase from producers. It
also operates an electricity business.

Pocket Marche, Inc.

• The business attempts to solve the issue of the divide between urban andrural areas.
• Investors who invest in Pocket Marche are enticed by the companyʼ smission and make their investments in the hope that the connection will be areality through the business. The company also practices Impact Measurement and Management (IMM).

CASE STUDY #1
The Dai-ichi Life Insurance Company, Limited.
Reason for selecting The Dai-ichi Life Insurance Company, Limited.
In Japan, impact investment by major ﬁnancial institutions has expanded in line with the increase in ESG
investment and as corporations seek solutions for social issues. The signing of "Japan Impact-driven
Financing Initiative” in November 2021 is likely to further enhance the interest in impact investment.
In the case study for this report, The Dai-ichi Life Insurance Company, Limited. (hereinafter, “Dai-ichi Life”)
has been selected as the company is an early adopter of impact investing among the large life insurancecompanies investing in multiple asset classes. This study reviews the development from the time when theconcept of impact investment was not well known until today, followed by an examination of Dai-ichi Lifeʼsdecision process of impact investment and the diﬀerence in investment decision and monitoring per asset
class. Finally, the relevant points for further expansion of impact investment are summarized.

Proﬁle of The Dai-ichi Life Insurance Company, Limited.
Dai-ichi Life and ESG investment
Dai-ichi Life is a life insurance company established in 1902. It manages the funds of customers from allover Japan, with approximately 38 trillion yen of assets in custody as of the end of March 2021. As a“universal owner” of a wide range of assets, the company manages its assets conscious of a wide variety
of stakeholders. Dai-ichi Life has promoted responsible investment (ESG investment and stewardship
activities) as one of the important issues for sophisticating asset management as a life insurance company, and it seeks to strike a balance between earning medium- to long-term investment return and solvingsocial issues. In April 2020, the company formulated and announced its “Basic ESG Investment Policy” inorder to commit to enhancing eﬀorts to realize sustainable society, including “Incorporate ESG factors in

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investment policies and processes for all assets (target completion by FY2023).” Dai-ichi Life classiﬁes
impact investment as part of its ESG investment (ESG-themed investment). As of the end of August 2021,
its impact investment asset is approximately 30 billion yen.
History1902

Dai-ichi Mutual Life Insurance Company was founded

2015

Signed the Principles for Responsible Investment (PRI)

2016

Started formulating basic ESG investment policy

2017

Established a unit dedicated to the responsibility (Responsible Investment Department)

2017

Initiate impact investment

2020

Appointment of ESG analyst

2021

Became signatory of Japan Impact-Driven Financing Initiative

Impact Investment
Trend of Impact Investment
Dai-ichi Life initiated impact investment in October 2017 and became one of the pioneers among institutional investors in Japan. Looking back, Dai-ichi Life remembers how the term “impact investment” washardly known at the time and feels that awareness and scale (impact investment amount) of impact
investment have grown rapidly. In August 2018, Principles for Responsible Investment, an investor initiative in partnership with UN, published “Impact investing market map,” summarizing the international
trend of impact investment, and Dai-ichi Life believes that impact investment will be mainstreamed andwidespread in the future.
The start of impact investment and the paths until today
Dai-ichi Life embarked on impact investing by investing in an unlisted company in 2017. The company
feels that its identity going back to its establishment is the motivation for starting impact investment.
Dai-ichi Life has invested in unlisted companies including start-ups since its establishment. Investments
to start-up companies tend to take long before payout. By nature, life insurance companies can provide
long-term ﬁnancing, and such investments ﬁt the characteristic. Dai-ichi Life has been active in ESG
investment since the early 2010s when it was still in its infancy. This was also based on the companyʼswish to provide funds to start-ups that bring about innovation in social structure.
Dai-ichi Life engaged in internal discussions from varied viewpoints before starting impact investing.
There were many issues that needed consideration, including investments to which companies could bedeﬁned as “impact investment,” how to make decisions and the diﬀerence with existing ESG investment,
etc. As a result, Dai-ichi Life deﬁned impact investment as “an investment method in which decisions forinvestments are made through intending to both obtaining income from investments and creating social
impact (structural changes to society, etc.).” Today, the decision-making method for impact investment
has been established. Impact investment started from investing in unlisted companies, however, Dai-ichi
Life also invests in listed companies and funds today.

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Framework for impact Investment
Decision-making process of impact investment
Dai-ichi Life has established various processes before deciding that a certain case is impact investment.
Normally, the front section or its staﬀ with direct contact with the company subject to investment makesa request to categorize it as “impact investment stock name.” The Responsible Investment Meeting
reviews the request and judges if it is an impact investment. The Responsible Investment Meeting iscomprised of Responsible Investment Department and the general managers and managers of relevant
departments. It also aims to standardize the views on impact investment among relevant division andstaﬀ. Each stock name requested to be recognized as impact investment is reviewed against
decision-making standards for impact investment (described below) and other materials and the ﬁnal
decision is made by the head of Responsible Investment Department. Subsequently, the decision isreported to the Responsible Investment Committee which includes external committee members.

Figure 65. Structure to promote responsible investments
Board of directors
Management meeting
Reporting of activities such as revising important policies,
exercising voting rights, and engaging in dialogues

Responsible Investment Committee

3 external committee members and2 internal committee members

Main agenda: formulating responsible investment-related policies
and deliberation of important exercising of voting rights
ReportingResponsible Investment Meeting
Main agenda: formulating responsible investment-related policies,
looking back at PRI assessment, following up on the progress of individual eﬀorts
Sharing global trends, etc.
for responsible investment

ESG investment

Receive
results ofassessment

Reporting results ofeﬀorts and progress

Responsible
investment

Stewardship Activities

Providingannualreports

https://www.dai-ichi-life.co.jp/dsr/investment/ri.html

The decision-making standards for impact investment are as follows.
[List] Decision-making standards for impact investment❶ The management of the company possesses a clear vision for solving social issues❷ An appropriate monitoring metrics for social impact may be designed❸ Whether the companyʼs business exhibits “innovativeness” and “originality and certain barriers toentry,” and it has the capacity to create social impact Dai-ichi Life expects❹ Impact business is (or could become in the future) the main business of the company

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Especially important among the decision-making standards for impact investment is whether the
management of the investee candidate possesses a clear vision for solving social issues (No. 1 above).
Dai-ichi Life makes sure to meet with the management of the investee candidate in order to conﬁrm thethoughts of the management and the intention to create impact in society. This step is taken in the caseof investing in listed companies as well. Dai-ichi Life also conﬁrms whether a monitorable impact indicator is disclosed or not. If not, Dai-ichi Life engages with the company and includes the prospect of disclosure in the check items for the investment candidate. The match with the ﬁve important themes of
Dai-ichi Life (QOL improvement, regional development and revitalization, mitigation of climate change,sustainability of natural capital, and respect of human rights and promotion of diversity) are also reviewed
before it a certain case is determined to be an impact investment.

About Impact Measurement and Management
In impact investment, Dai-ichi Life prioritizes impact measurement and management (IMM). When
Dai-ichi Life engages with the company as an investor, it requests for the establishment of monitorable
and understandable indicators and information disclosure. Some companies are actively engaged in IMM.
However, as the number of impact investees increases, the monitoring cost for the IMM to Dai-ichi Lifeas an investor also increases, creating another issue. In Dai-ichi Life, the front departments that primarily
engage with the investee is responsible for IMM. The Responsible Investment Department collects information on IMM related moves outside of the company and share such information with the front departments. Dai-ichi Life recognizes that, in order to reduce its IMM cost through eﬃcient measurement andmanagement, it is necessary to standardize impact measurement indicators, develop rules for IMM suchas deciding the medium used by investees to disclose their IMM activities and sharing best practices on
impact indicators and information disclosure among ﬁnancial institutions (including asset managementcompanies, etc.).
Diﬀerence by asset class ‒ Comparison between listed companies and unlisted companies ‒The basic thinking for impact investment such as its decision-making standards is common, notwithstanding whether a company is listed or not. On the other hand, there are some diﬀerent points in eachprocess.
Let us look at the decision-making standards. In the case of listed companies, it is the “originality” of thebusiness rather than its “innovativeness” that tends to have higher priority in decision making. Here,“originality” refers to the uniqueness of the way the approach of the business contributes to the sustainability of global environment and society. For example, in the case of a listed company that provides newtechnology, service and business model, Dai-ichi Life emphasizes the novelty of the companyʼs technology, service and business model. In addition, it also considers whether the company has suﬃcient share in
the relevant industry and its impact to the whole market in making decision. Listed companies often
engage in multiple businesses. Therefore, Dai-ichi Life requires the business creating impact to be themain business of the investee company as a necessary condition for deciding whether it meets thestandard of impact investment. Whereas in the case of unlisted companies, few companies engage in
multiple businesses, and thus, this point rarely becomes an issue.

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Dai-ichi Life thinks that there is a diﬀerent approach for IMM and exit strategy of listed and unlistedcompanies it invests in. In IMM of the companies that Dai-ichi Life currently determines as impact investment, there is not much diﬀerence in measurement and monitoring between listed and unlisted companies. However, management is diﬀerent. In impact investment for unlisted companies, Dai-ichi Life is the
major stockholder in many cases, and it engages with these companies by getting inside access such as
participating in or observing the Board of Directors meeting when necessary. Since it is diﬃcult to sell
stocks of unlisted companies before public trading, the company makes eﬀorts to thoroughly follow-up on
the activities of these unlisted companies. In the case of impact investing in listed companies, Dai-ichi
Life is rarely the largest shareholder. Therefore, it is aware that the extent of reﬂecting its wish in thecompanyʼs business is uncertain. This tendency becomes more pronounced as the size of the company
gets bigger. Dai-ichi Life clariﬁes its thinking on exit strategy and standards for divestiture to ensure its
investment to deviate from its deﬁnition of impact investment.
Another diﬀerence is when the investment could not create the expected impact after making IMM
eﬀorts. In the case of unlisted companies, Dai-ichi Life can make active intervention through engagement. With listed companies, however, there are cases where it is diﬃcult for engagement to be eﬀective.
For example, if the business intended to create impact has not become the main business or if expected
IMM and information disclosure cannot be expected, Dai-ichi Life says it may consider exiting by divestiture, etc.
Dai-ichi Lifeʼs philosophy on exit strategy is unique. It understands that its impact investment is made up
of two elements; supplying funds from the viewpoint of risk vs. return and recognition as an impact investment stock name. Thus, the exit strategy for impact investment does not mean just dissolving the ﬁnancial relationship by selling oﬀ the stock of the investee, etc. Another option for exit is to rescind the recognition as an impact investment stock name. In other words, if the impact investee has failed to satisfy theconditions for impact investment as a result of activities such as IMM, Dai-ichi Life can rescind its recognition as an impact investment stock name but continue to hold the shares in some case.
Diﬀerence by asset class ‒ Fund investment ‒Dai-ichi Life also conducts impact investment in managed funds. For example, in July 2021, Dai-ichi Life
invested approx. 5.5 billion yen in “Climate Finance Partnership Fund,” a BlackRock® fund focusing on
investments to renewable energy related infrastructure in developing countries as its impact investment.
In impact investment through investing in funds, Dai-ichi Life considered the diﬀerence with impact
investing in companies, and adopted decision-making criteria such as the companies the fund plans toinvest in and their selection criteria as well as the originality and the innovativeness of the fundʼs scheme.
In addition, Dai-ichi Life makes supplementary conﬁrmation on whether the majority of the companies
and the projects the fund invests are capable of creating the impact expected by Dai-ichi Life.
As for monitoring, if the management company of the fund is a foreign company, physical constraints
make it diﬃcult to hold frequent meetings. Therefore, Dai-ichi Life continuously monitors whether thefund satisﬁes its impact investment standards by other means including written reports.

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To avoid “Impact-washing”
As described above, Dai-ichi Life has conducted impact investment in listed companies, unlisted companies, and funds. The company is aware that the diversiﬁcation of asset class has led to varied discussions
within the company. For example, especially when considering impact investing to a listed company, thecompany undergoes signiﬁcant discussions on whether the investee may be recognized as an impact
investment stock name. Even in a case where other fund management companies recognize the investee
as “impact investment,” Dai-ichi Life, mainly its Responsible Investment Department, compares theinvestee against its deﬁnition of impact investment and decides if it can be recognized as an impact
investment from the viewpoint of a third-party. The reason for adopting the scheme is to avoid“impact-washing,” that is, investments that are impact investment only in appearance. Dai-ichi Lifeʼs
Responsible Investment Department promotes responsible investment including ESG investment andplays a central role in providing a thorough and detailed explanation to the front sections and internal
stakeholders on why a certain stock brand is recognized as an impact investment or not.
At the same time, the company is aware that there are multiple standards for “impact investment,” there
is no international consensus and investors do not have uniform view on what is considered an “impact
investment.” Thus, Dai-ichi Life believes it is important to set its own standards for decision-making andapproach on impact investment. In addition, Dai-ichi Life considers it necessary to constantly review andrevise its decision-making standards and keeps brushing up incorporating the views of the front sections.

Summary
Prospects
Currently, Dai-ichi Life aims to work on standardizing indicators on the eﬀect created by impact investment so it may be communicated to the ﬁnal beneﬁciaries in an easy-to-understand fashion. For example,
mitigation of climate change, one of the ﬁve priority themes of Dai-ichi Life, has standardized indicatorssuch as the volume of greenhouse gas emission and its reduction rate, thus it is possible to add the eﬀect
across various impact investment projects. Even for themes that are diﬃcult to standardize indicators,
Dai-ichi Life will continue to work so it will become possible to visualize how much change its impact
investment projects caused the overall society.
Towards expanding impact investment in Japan
Dai-ichi Life believes that, to expand impact investment in Japan, it is essential that a consensus will be
developed and shared among the investors and the investee companies on the deﬁnition on impact,decision-making standards and ﬂow for “impact investment,” standardization of indicators, knowledge-sharing for IMM. Speciﬁcally, it feels that investors and corporations must share the same recognition on the design of impact key performance indicator (KPI) for smooth disclosure and communication
to become possible.
Dai-ichi Life is one of the signatories of Japan Impact-Driven Financing Initiative in November 2021.
The initiative includes a goal to share the best practices of ﬁnancial institutions (fund management

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companies). Dai-ichi Life believes that expanding common awareness of impact investment, evenincrementally, will aid its further growth.
Dai-ichi Lifeʼs impact investment has centered on unlisted companies and its impact asset balance is not
so large compared to its total assets. ESG-themed investments, including sustainability-linked loans andbonds, will have more investments that Dai-ichi Life can measure and monitor KPIs. The company hopes
to apply the insights and experience accumulated through impact investment to the entire ESG-themed
investment and enhance the measurement of impact of these investments. This will in eﬀect contributeto the mainstreaming of impact investment.

Hint for impact investment from the case study of Dai-ichi Life
Dai-ichi Life has been conducting impact investment since its infancy. As the whole world has
engaged in trial and error, Dai-ichi Life is considered one of the leading impact investors as oneof the largest institutional investors in Japan who has contributed to the ﬁnancial industry
through actively promoting impact investing cases. Especially noteworthy is how Dai-ichi Life
implements impact investment with multiple sections cooperating in its large organization. The
division of roles where the front sections are responsible for IMM and Responsible Investment
Department for providing coordination and support to the front sections is the key to thesuccess of the company to increase impact investment assets. Formulating internal operational
processes such as the criteria for recognition as impact investment and the implementation
method of IMM became necessary as impact investment grew. During Dai-ichi Lifeʼs commitment to impact investment over the years, these processes have been developed and have now
become the companyʼs source of competitiveness in impact investment.
Dai-ichi Life has promoted developing organizational structure for impact investment as well. It
recognizes that it is now in a stage where building consensus within the ﬁnance industry including the deﬁnition of terminology, standardization of decision-making standards, ﬂow and indicators for impact investment and knowledge sharing on IMM are necessary. As a signatory ofJapan Impact-Driven Financing Initiative in November 2021, it believes that society expects
further enhancement of the initiative.

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Case Studies

CASE STUDY #2
Future Venture Capital Co., Ltd.
Reason for presenting a case study of Future Venture Capital Co., Ltd.
Impact investing by regional ﬁnancial institutions will likely increase. This is because impact investing,which is to invest in businesses that intend to make certain impacts on society, is thought to be highly
compatible with the business of regional ﬁnancial institutions whose aim is to help revitalize local
communities and develop local economies.
This report discusses the case study of Future Venture Capital Co., Ltd. (hereafter, “Future Venture Capital”), a business that has been a pioneer of local models of venture capital funds. This case study allows
us to observe what issues the company perceived and what realization it had, and what social impact
regional ﬁnancial institutions can make through local venture capital funds. It also presents what is
expected of impact investing and impact measurement and management (IMM), along with implicationsof what value the use of impact investing and IMM oﬀers, which became apparent through the management of various funds.

Proﬁle of Future Venture Capital
Summary
Future Venture Capital is a venture capital (VC) based in Kyoto. It was established in 1998 with the aimof oﬀering risk capital to businesses that have diﬃculty raising funds due to lack of credit but have great
growth potential if they have capital, thereby supporting these business owners in fulﬁlling their dreams.
History
Sep. 1998

Future Venture Capital Co., Ltd. (FVC) is established.

Nov. 1998

The “Future No.1” fund, Japanʼs ﬁrst investment limited partnership, is established.

Feb. 2001

The Ishikawa Investment Limited Partnership for Venture Development is established in
Kanazawa, Ishikawa Prefecture. It is Future Venture Capitalʼs ﬁrst fund ﬁnanced by a local
government.

Oct. 2001

FVC becomes listed on the NASDAQ Japan (currently JASDAQ).

Aug. 2012

The Morioka Investment Limited Partnership for Entrepreneurs is established to help thereconstruction of the region devastated by the Great East Japan Earthquake. Exiting throughstock listing is not part of the plan for this partnership.

Sep. 2017The Osaka Investment Limited Partnership for Resolution of Social Issues is establishedjointly with Osaka Shinkin Bank to support entrepreneurs who have business models
designed to solve social issues.

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Jan. 2020

The “Kyoto Omoi o Tsunagu Partnership (Kyoto Investment Limited Partnership for Connecting Hopes)” is established jointly with the Kyoto Shinkin Bank, Kyoto Chuo Shinkin Bank,
Kyoto Hokuto Shinkin Bank, and Credit Guarantee Corporation of Kyoto to support smalland medium-sized enterprises in business succession. This partnership is Japanʼs ﬁrst fundspeciﬁcally for business succession that is ﬁnanced by shinkin banks and a credit guarantee
corporation all based in the same prefecture.

Apr. 2021

Future Venture Capital operates 32 regional revitalization funds in partnership with
regional ﬁnancial institutions across Japan, hosted the ﬁrst Matching Event for Regional
Revitalization, an event for pitches that is designed to connect start-ups as investees andthe regional ﬁnancial institutions.

Sep. 2021

The Kyoshin Innovation C2 Investment Limited Partnership is established jointly with the
Kyoto Shinkin Bank and Kyoshin Social Capital Co., Ltd. to support small- and medium-sized enterprises. (This partnership is a fund that has succeeded the Innovation C
Investment Limited Partnership, which was set up in August 2018 to support the growthof businesses contributing to the revitalization of the local economy.)

Figure 66. Regional Revitalization Funds Established by FVC

32 regional revitalization funds■ Location of major LP

As of the end of December 2021. FVC Group

Akita Start-up Support Fund
Akita Vitality Creation Fund
Akita Renewable Energy Fund

■ Area for investment

Kyoto Start-up Support Fund 2
WAOJE Support Fund for International Operation
Kyoto Omoi o Tsunagu Fund
Kyoto Start-up Support Fund
Innovation C Fund
Kyoshin Innovation C2 Fund
Daishin Start-up Support Fund
Osaka Social Issue Solving Fund
Osaka Business Succession and Start-up Support Fundin providing funds tosupport start-ups andbusiness succession in
partnership with regional
ﬁnancial institutions

Morioka Fund for Entrepreneurs
Hitakaminokuni Regional Development Fund
Morioka SDGs Fund

Kobe Shinkin Regional Restoration Fund
Kobe Shinkin Step-up Fund

Iwakinokuni Regional Development Fund
Fukushima Dream Bridge Fund

Tomato Start-up Support Fund

Keiyo Business Succession FundSUWASHIN Regional
Support Fund 1
Biwako Future Revitalization Fund
Howa Start-up andBusiness Succession
Support Fund

No.1 track record

Kanshin Future Fund
Kanshin Future Fund 2
Credit Unions Joint Future Fund for Agriculture
Jonan Start-up Support Fund
Kanshin Business Succession FundHigashi Nippon Bank Fundfor Revitalization of Regional Enterprises

Fund for Local Communities
Ehime Regional Revitalization Fund

Source: Data provided by the company

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Case Studies

Currently, Future Venture Capital sets up and manages regional revitalization funds and corporate venture
capital (CVC) funds to accomplish its mission “creating businesses that will last 100 years.” These regional revitalization funds in particular are funds for start-ups and/or business succession that are designed
speciﬁcally for the local communities. Future Venture Capital creates funds jointly with local shinkinbanks or other institutions to oﬀer hands-on support to closely work with investee companies. The
company does not limit these fundsʼ exit strategies to an initial public oﬀering (IPO) or M&A. The main
approach is to collect each fundʼs equity stake through a share repurchase by an investee company after
a three- to ﬁve-year investment period. The focus is always on raising the percentage of local start-ups,
revitalizing local economies, and smooth business succession. In the process of supporting businesses,
Future Venture Capital imparts to regional ﬁnancial institutions how to use its unique ﬁnancial schemes
and how to communicate with future-oriented business owners. Many regional ﬁnancial institutions
provide loans as the only means of supporting businesses. Future Venture Capital hopes that these local
institutions will become knowledgeable about the potential of equity capital.
Future Venture Capital invests only in unlisted companies. While all listed companies work to increase thevalue of their own shares in order to meet the demand from the stock market, unlisted companies do nothave this constraint, and they may be encouraged to do the opposite of what listed companies do when
they consider what is involved in succession. This would limit the growth of these companies and might
have a negative impact on economic revitalization in the regions where the businesses are located. Future
Venture Capital is aware of this potential problem, and thus it creates funds designed for regional ﬁnancial institutions to become (non-voting) shareholders of unlisted companies in the region, thereby helping
boost the value of companies across Japan.

How regional revitalization funds have drawn attention as hope for the future
It was the Great East Japan Earthquake that had Future Venture Capital fully realize the need for the useof equity capital in local communities. The disaster left many people unemployed, and regional ﬁnancial
institutions explored ways to support those who lost their jobs and planned to start a new business. Oﬀering a loan was not the best solution, as it would require each borrower to have good credit history. Hence,
Future Venture Capital launched a fund jointly with regional ﬁnancial institutions on an experimental
basis as an alternative to a loan.
The abolition of the Financial Inspection Manual in 2019 also facilitated the creation of funds with regional ﬁnancial institutions. The Financial Inspection Manual was used when the Financial Services Agency(FSA) inspected ﬁnancial institutions. It presented guidelines for checking the health of an institutionʼsbusiness management. The manual led ﬁnancial institutionsʼ credit management to center on eachbusinessʼs current ﬁnancial statements, ﬁnancial history, and whether the company has a collateral,making it diﬃcult to grant loans to high-risk business ventures. Once the Financial Inspection Manual
was abolished, the FSA began to expect ﬁnancial institutions to adopt the approach of extending a loan
based on the evaluation of business feasibility. This is how a businessʼs long-term sustainability became
one of the metrics used to evaluate a business asking for a loan. Assessing what type of activities a

109business plans to engage in going forward goes well with investment strategies, and this is why regional
ﬁnancial institutions and VCs turned their attention to the potential of equity capital.

Signiﬁcance of the term “region” as the keyword
Potential of regional businesses and regional ﬁnancial institutions
Becoming a VC for solving social issues was not Future Venture Capitalʼs initial intention. After analyzing
businesses with high probability of growth, the company concluded that many successful businesses look
to solve social issues, that is, businesses that focus on solving social issues have a competitive edge.
Future Venture Capital observes that most entrepreneurs and proprietors who run local businesses takeup a new challenge speciﬁcally because they wish to solve problems for people they know, and that thesebusinesses take a long-term view, rather than jump on the bandwagon. Furthermore, businesses thattackle social issues likely appeal to their local communities and receive support from them, and they
begin to take pride in their work that encourages people to get involved. Future Venture Capital believes
that this pride leads to motivate these businesses to do well in management as well as to boost theirsense of responsibility, creating a positive cycle that keeps the businesses running.
The current reality is that enough ﬁnancial support has not reached all these local entrepreneurs andbusiness owners. Moreover, with money becoming commoditized and interest rates remaining low, ﬁnancial institutions ﬁnd themselves in a situation where loans alone cannot represent the unique advantages
their products oﬀer. To regional ﬁnancial institutions, the decline of local economies meant their
existence would be jeopardized. Hence, they considered that local start-up support would be necessary.
However, an issue arose. It became evident that, if a regional ﬁnancial institution alone was to support a
start-up by granting a loan (i.e., the institutionʼs conventional ﬁnancial instrument) on its own, it had torecord an allowance for doubtful accounts because the risk was high, which would have a negative eﬀect
on the institutionʼs ﬁnancial statements, while the ﬁnancial climate necessitated the institution lending
at a low interest rate. Furthermore, it was possible that, if the institutionʼs start-up support improved alenderʼs ﬁnancial condition, the ﬁnancial rating of the lender would go up, which would prompt thebusiness to turn to a megabank or other institution that oﬀered a loan at an even lower interest rate as a
new loan provider. This all meant that a regional ﬁnancial institution providing a loan (a means of ﬁnancing) to support a start-up did not work as a business model, although the action was of great signiﬁcance.
Noting this problem, Future Venture Capital worked with local ﬁnancial institutions to design a uniquefund scheme and successfully created a process through which funds would be provided to businesses
across the region. Future Venture Capital involves regional ﬁnancial institutions in designing each fundbecause it believes that local ﬁnancial institutions have the largest data on local businesses. The company is aware that working on regional revitalization with these institutions as a leading player generates agreat social impact. The aim of Future Venture Capital is to create a new ﬁnancial ecosystem in which
regional ﬁnancial institutions and local businesses take a lead role. This can be achieved by leveraging
the advantages oﬀered by regional ﬁnancial institutions and the signiﬁcance of their existence while
carrying out Future Venture Capitalʼs ﬁnancial scheme.

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Case Studies

Figure 67. Case: Osaka Social Issue Solving Fund

Osaka
PrefecturePartnershipagreement

Japan FinanceCorporation

Assistance in
exploring projects

Osaka
Social Issue
Solving Fund

Investment

Investee

Osaka Shinkin Bank
Investment
recouped
F VC

https://www.fvc.co.jp/service/social̲fund.html

The Osaka Social Issue Solving Fund (oﬃcial name: Osaka Social Issue-solving Investment Limited
Partnership) is a good example of a system that enables a regional ﬁnancial institution and a local
business to take a lead role. This fund aims to support the growth of businesses that look to solve administrative or social issues in Osaka Prefecture, thereby advancing industrialization. It was established in2017 with investments by Osaka Shinkin Bank and Future Venture Capital. It is a 0.5 billion-yen fund andits duration is 10 years. The fund invests in companies engaging in businesses that look to solve social
issues, and they must be located in the region where Osaka Shinkin Bank conducts sales operations(including Osaka Prefecture (excluding certain areas), Amagasaki City, and Itami City).
Another key feature of this fund is a partnership with municipalities and Japan Finance Corporation, as it
is unlikely that Osaka Shinkin Bank and Future Venture Capital alone would create a signiﬁcant impact.
Osaka Shinkin Bank and Future Venture Capital have signed the Agreement on the Use and Promotion of
the Osaka Social Issue Solving Fund with Osaka Prefecture to publicize the fund on the website of thePrefecture. This is one of the actions they have taken to spread the information to as many local
businesses as possible. The collaborative eﬀort with Japan Finance Corporation is to tailor support toeach investee companyʼs ﬁnancing needs. This collaboration has enabled them to provide support thatcombines investments and loans. For example, they granted equity subordinated loans to the Osaka
Social Issue Solving Fundʼs investee companies to help them through the coronavirus pandemic.

Example 1

CI Partners◆ Investment ： 10 million yen◆ Founderʼs motivation for starting the business・The founderʼs ﬁrst daughter was born deaf. Not wanting his daughter to face a future where she would be unable
to choose schools or jobs she liked, he took a job in personnel aﬀairs to engage in the employment of people withdisabilities. The work made him painfully aware that it would be extremely diﬃcult for people with disabilities tolead the life they would like.
・ Only 0.07 percent of graduates from special schools enroll at regular vocational schools or universities. Most ofthese graduates work at social welfare institutions or workshops, and their average monthly income is 16,000 yen-- far from being enough to secure their ﬁnancial independence. The founder decided to start this business tohelp people with disabilities become as independent as possible.

111◆ Business overview
As a Type-B business to support continuous employment, CI Partners works with apartment/condominium
management companies to receive outsourced cleaning work as employment opportunities for people withdisabilities. The company has its employees work on each job as a team, providing an environment where they
feel comfortable working. It also has a quantitative and qualitative performance evaluation system so that theirsalaries are raised according to the ratings their work receives.
◆ KPI ： Rise in salary levels (improvements in ﬁnancial conditions are set as metrics for whether each employee
is more independent than before)

Example 2

BABY JOB Inc.

◆ Investment ： 20 million yen◆ Founderʼs motivation for starting the business
50 percent of working women today are part-timers. The reason behind womenʼs unsuccessful career paths ismost likely the diﬃculty women have in balancing work and parenting. Women are said to work 16 hours a day,four more hours than men do, unable to spend any minute doing something for themselves. The founderconceived the idea of this business to help people spend more time with their children so that they observe andperceive the childrenʼs growth, ﬁnding happiness in parenting.
◆ Business overview
BABY JOB oﬀers a service to which its customers subscribe for unlimited numbers of diapers and baby wipes ofany size delivered directly to their childrenʼs day care centers. The service is called “Just Bring Your Baby.” Theservice saves mothers time writing names on diapers to bring to their babyʼs day care centers, and the day carecenters managing diapers for each child. That is, the service aﬀords parents and day care centers more time andheadspace for communicating with children.
◆ KPI ： The number of users of the Just Bring Your Baby service, the number of subscribing day carecenters, and the number of partnerships with municipalities

Interpretation of an “impact” in the “regional” context
Regions with social issues that are rapidly becoming serious have the advantage of being able to set
precedents.
For example, social issues such as low birthrates combined with aging and declining populations are
rapidly becoming serious in regional communities. However, addressing a social issue serves as a processof creating a new market. A region can view this as an opportunity to set a precedent for ﬁnding a solution
before other regions do because a new market likely emerges when a social issue is clearly acknowledged. Social issues may also represent characteristics unique to each region. A solution that is developed according to the local situation likely ﬁnds acceptance in the local community, creating an impact
smoothly across the region.
In a “regional” community, a minority may be in the majority
As the case of the Osaka Social Issue Solving Fund shows, a regional ﬁnancial institution as an investor
and a municipality as the institutionʼs partner publish information about their fund as evangelists who

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understand the social signiﬁcance of their investeesʼ businesses. It is also hoped that businesses using
this type of fund will become genuine fund enthusiasts once they--highly problem-conscious
entities--experience the social signiﬁcance of the support, and that they will voluntarily encourage others
to take advantage of the fund. The cycle of activities for impact creation by the whole community of
supporters and users has the potential for leading a minority into the majority.

Impact investing
What IMM and KPIs should look like
Investing in businesses that look to solve social issues is not Future Venture Capitalʼs prime objective. The
company does not make an investment decision based solely on whether a potential investeeʼs business will
likely help solve a social issue. Future Venture Capital does not take the lead in deﬁning an impact, either,although one of the features of impact investing is impact measurement and management (IMM). This isbecause the company believes that an impact and key performance indicators (KPIs) may act as obstacles todiversifying on-the-ground social impact across each region if they are set primarily led by a ﬁnancial institution. Future Venture Capital maintains that its role is to advocate the issues and the performance indicatorsthat businesses identify on their own, so that it will run alongside each of the entrepreneurs toward the goal.
Moreover, the company thinks that the essence of a KPI lies in why the KPI is set, and assumes that the
KPIs for impact measurement set before investment are bound to change as the business makes
progress. It is often the case that a start-up changes its business activities. Therefore, what matters is notthat the original KPIs are kept, but that the idea behind each KPI set by the business remains unchanged.
Future Venture Capital and each of its investee discuss, as many times as needed, the social impact theinvestee aims to make and the background to the KPIs that should be set, thereby creating indicators thathave wide appeal to entrepreneurs who the company hopes will become enthusiasts for its funds.
Through fund management, Future Venture Capital is also committed to providing an environment thatallows each business to focus on its activities for impact creation. Business owners in general are said tooften ﬁnd themselves in a situation where they need to put a brake on social impact creation in order topursue proﬁts to keep their companies in business. However, if pressure from a ﬁnancial institution
causes mission drift to business owners whose business activities revolve around social impact creation,
the whole point of impact investing would be lost.
Challenges involved in impact investing
Impact investing requires investees to achieve speciﬁc social goals and produce ﬁnancial returns. Future
Venture Capital regards the following as challenges that entrepreneurs must overcome in order to fulﬁll
those two objectives.
1) Having a point of view that enables adjustments for product-market ﬁtBusiness owners who tackle social issues work with passion, which could lead them to be output-centric.
To develop a business from the start-up period to the growth phase, they should retain a point of view thatallows them to objectively examine the business model they have in mind and make necessary adjustments from usersʼ perspective. One of a fundʼs key roles is to help them become aware of the need forthis point of view.

1132) Sharing the essence of the business with stakeholders to create an ecosystem that is open to change
To secure ﬁnancial returns, it is vital to set KPIs according to changes in the business environment. The
degree of attention given to the external environment for a business tackling a social issue depends heavily on how fast the issue is becoming critical, how severe it is, what policy the municipality decides, andhow much media coverage the issue receives, among others. Depending on changes in the businessenvironment, not only KPIs but also the business model may need to be changed. The key to overcoming
this challenge is to “opt for the approach that will most likely lead the business to achieve the envisaged
social goal,” and to create an ecosystem of partnerships in which necessary changes are shared andaccepted by the investee and local supporters including the fund.

Outlook for Future Venture Capital
Awareness of the issues regarding the ﬁnancial market
Business activities involve uncertainty. However, despite businessesʼ eﬀorts to achieve growth, money ina ﬁnancial market tends to go exclusively to risk-free assets. VCs provide ﬁnancial support for businesses
with high degrees of uncertainty, yet their exit strategies are limited to IPOs. M&A can also be an exit
strategy other than IPOs. However, in most cases, M&A does not add value to most Japanese ventures,and this is why exit strategies are limited to IPOs. While an IPO often produces high returns, the strategy
tends to lead corporate management to adopt a short-term view, as the cycle of business popularity tends
to be fast. Hence, it is not always desirable that a local business works toward an IPO when it plans totackle a certain social issue over a long term.
Future Venture Capital also points out that, although the monetary easing in recent years helped increase
money in the market, the money has not reached regional businesses. That is, business owners who lookto make the world a better place does not have enough funds, which has created a massive void in themarket. In this context, money may be likened to blood that needs to reach every part of the body so thatnew cells are generated, otherwise the body begins to decay from extremities. If money does not reach
local and/or unlisted businesses, it is perfectly possible that Japanʼs economy as a whole will stagnate.
Given that 99 percent of Japanese companies are unlisted, Future Venture Capital believes that Japanʼseconomy will improve when unlisted shares in businesses that do not plan to go public are valued andgain more liquidity to revitalize regional economies.
What Future Venture Capital aims to achieve
Future Venture Capital believes that equity capital works in such a way that urges people in diﬀerent
positions to move toward the same goal. This is because equity capital enables shareholders and investors
to support businesses in achieving growth over a long term. Entrepreneurs and proprietors who run businesses in regional communities do not have enough supply of equity capital. Future Venture Capital hopes toprovide them with equity capital, which may be 1 percent of a loan from a regional ﬁnancial institution, thereby helping develop win-win relationships between regional ﬁnancial institutions and local businesses. By
continuing to develop a variety of fund products, the company intends to create a platform that connects local
businesses and regional ﬁnancial institutions, providing an environment in which these businesses can focus
on their growth and value creation. Future Venture Capital aims to generate a virtuous cycle in which thegrowth of local businesses beneﬁts regional ﬁnancial institutions to revitalize local economies.

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Case Studies

Tips for Impact Investing Picked Up from the Example of Future Venture Capital
Future Venture Capital oﬀers ﬁnancial products designed to revitalize local economies. The
company is a ﬁnancial business that has “the intention to generate an impact,” which is requiredfor impact investing. What is interesting about Future Venture Capital is that the company does
not require its investees to adopt the KPIs for the social impact that the funds it oﬀers aim togenerate. Valuing the diversity of investee companies, Future Venture Capital only helps its
investees set impact-related indicators themselves. The company also takes it for granted thatthe impact-related KPIs set by an investee before the investment change as the businesses
make progress. The company also makes sure that the idea behind the KPIs set by an investee,that is, what the investee aims to achieve, remains unchanged. Impact investing recommends
the use of IMM and, in the context of IMM, what characterizes Future Venture Capital is that thecompany is aware of how critical it is that investees remain committed to a speciﬁc medium- tolong-term impact, rather than stick to a short-term goal to produce a certain outcome.

CASE STUDY #3
CureApp, Inc.
Reason for selecting CureApp, Inc.
It has been quite some time since the term social business began to be used in Japan. And companies
that aim to solve environmental and social issues using the methods of business have increased bothquantitatively and qualitatively. Companies that aspire for impact and could be recipients of impact
investment, the so-called “impact-driven companies” have increased, and there are more cases where
they raised funds from investors. In light of this situation, the viewpoint of the recipient of investment is
considered to be ever more important for further development of impact investment.
In the case study for this report, CureApp, Inc. (hereinafter, “CureApp”) is taken up as a company that has
worked on creating social impact since its establishment. Through sincere pursuit of the companyʼs
mission and its dialogue with various investors and stakeholders, CureApp has acknowledged that it is an
impact-driven company and is working on impact measurement and management (hereinafter, “IMM”)
with advice from investors, too. Based on this experience, possibilities and issues of impact investment
and IMM from the viewpoint from the business-side are addressed below. In addition, through comparison with ESG investment, future requests for the impact investing market are also introduced.

Proﬁle of CureApp, Inc.
Summary
CureApp was established in July 2014. It develops and manages “Digital Therapeutics (DTx)." Based on

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its mission, “Re-evolving ʻtherapeuticsʼ with software,” CureApp aims to evolve new treatment with thepower of technology and solve social issues surrounding healthcare. “Digital Therapeutics (DTx)" developed and managed by the company aims to realize therapeutic eﬀect through a new approach, behavior
modiﬁcation for conditions that have not been eﬀectively treated by conventional therapies such as
addiction and lifestyle disease. In August 2020, CureAppʼs app-based prescription treatment for nicotine
addiction received the ﬁrst regulatory approval in Japan for digital therapeutic. Since December 2020, it
has become the ﬁrst digital therapeutic to be covered by Japanʼs public healthcare insurance system.
Eﬃcacy of CureAppʼs hypertension therapeutics app was conﬁrmed in a clinical trial and the company iscurrently applying for regulatory approval.

History
Jul. 2014

CureApp, Inc. was established.

Apr. 2017

Launched the “ʻascureʼ smoking cessation program” as the ﬁrst series of a mobile healthprogram for corporate users. (As of now, renamed “ascure smoking-graduation program”)

Mar. 2019

Established CureApp North America, Inc.

Sep. 2019

Started the worldʼs ﬁrst social impact bond for smoking cessation, “Toyonaka Sotsuen Project,”an anti-smoking project operated by the Toyonaka Municipal Government in Aichi, Japan.

Jun. 2020“Nicotine addiction treatment app with CO checker” received regulatory approval from Medical Devices and In-Vitro Diagnostics Working Group, Pharmaceutical Aﬀairs and Food
Sanitation Council of Ministry of Health, Labor and Welfare.

Aug. 2020“Nicotine addiction treatment app” received pharmaceutical approval.

Dec. 2020

Introduced “CureApp SC Digital Therapeutic for Nicotine Addiction” reimbursable by Japanʼshealthcare insurance system.

Aug. 2021

Clinical trial results of “CureApp Hypertension Therapeutics App” announced at ESC Congress2021 and published in the European Heart Journal, a leading cardiovascular journal

Figure 68. CureApp Business Model
Framework for medical treatment
covered by Japanʼs health insurance system
Issue accountSales amount

Medical cost

(Share coveredby medical insurance)

Health Insurance SocietyApp. prescribedthrough doctorʼs advice(Issue prescription code)

Medical institution

Patient
Medical cost

(Share paid by the patient)

Assistance andresponse
for the cloud-based
service

Service provided througha website for doctors
Cloud system for therapeutics app.

Source: Data provided by the company

Service for patientsprovided by the app.

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Case Studies

MissionRe-evolving “therapeutics” with software
We strive for the ideal of medical care,a world where all people can receive high-quality treatment without worry.
Evolving treatment with the power of technology,
we will solve the social issues surrounding healthcare and realize ideal medical care.
VisionPioneering the ﬁeld of digital therapeutics
We aim for a world where personalized digital therapeutics is widely recognized
and adopted by prescribing physicians,
and our mobile applications are a natural choicein the practice of evidence-based medicine.
Self as an impact-driven company
What led to the establishment of CureApp was a scientiﬁc paper which Kohta Satake, the companyʼsCEO, read while he was studying in the United States. The paper described a case that promoted lifestyle
behavior change for patients with diabetes using software. He realized the potential for digital therapeutics in clinical practice, and after returning to Japan, established the company with Shin Suzuki, the Chief
Development Oﬃcer (CDO).
Since establishment, CureApp has promoted business to create social impact. In Japan, with the expansion of ESG investment and the heightened interest of the Sustainable Development Goals (SDGs) which
the UN introduced in 2015, the company has drawn increasing attention as an impact-driven company.
Through its business, CureApp met with impact investors and started to implement IMM which made thecompany realize the importance of visualizing the social impact and the eﬀects derived from visualization.
Changes through its encounter with impact investment
CureApp recognizes the value of impact investors and investors who decide to invest in support of thecompanyʼs attitude to pursue impact creation. The company aims to build deep relationship with theseinvestors in the future. CureApp is engaged with themes that cannot be solved by money alone, therefore,
it understands that evaluation of factors other than ﬁnancial impact and trust for the company are thebasis for the companyʼs business growth. Impact investors seek ﬁnancial returns just as traditional investors; however, the companyʼs view is that the former does not seek the ﬁnal ﬁnancial proﬁt alone but alsoemphasize the importance of value-added that give back to the society over the long run. Impact investors
do not just focus on the annual management policy, or the most recent proﬁt and the company feels thatit has gained trust for deeper values that form the backbone and the core of CureApp.
In February 2015, CureApp raised funds for the ﬁrst time (through third-party allocation of shares).
Through a dialogue with Tsuyoshi Ito, Managing Partner & CEO of Beyond Next Ventures Inc. which was

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the lead investor in the funding, CureApp earned support for its vision and the importance of reducing
health care cost. At the time, CureApp was not aware of the term impact investment or such ﬁeld. However, looking back, the success at raising funds based on the support for its business direction and capability including impact creation allowed CureApp to reconﬁrm the importance of conducting business withsocial mission and creating social value through its business.
The ﬁrst time CureApp raised funds that were clearly marked as impact investment was from The Dai-ichi
Life Insurance Company, Limited (hereinafter, “Dai-ichi Life”) in 2018. Dai-ichi Life deﬁnes “impact
investment” as one type of investment method in ESG investment that makes investment decision aiming
for both earning returns and creating social impact (such as the change in social structure). Dai-ichi Life
selected CureApp as its third case and provided funding as impact investment. Dai-ichi Life considers
CureApp as an impact investment that contributes to the implementation of SDGs No.3, “Ensure healthy
lives and promote well-being for all at all ages.” 104
CureApp also implemented third-party allocation of shares in March 2021 to Japan Impact Investment II
Limited Partnership (hereinafter, “Hataraku Fund”). Focusing on urgent social issues, such as declining
birthrate and working-population, and aging population, Hataraku Fund was established in 2019 with afocus on “working people.” The Fund aims to support and promote the businesses creating environment
where people can continue working even through and after various life events, including childcare andnursing care. As a full-ﬂedged impact investment involving a diverse group of institutional investors, astyle which is still rare in Japan, Hataraku Fund aims to oﬀer a wide range of investment in order tocontribute to solving social issues through the practice of impact investing, and ultimately to creating
impact investment ecosystems.105 CureApp conducted discussions with impact investors that led to theverbalization of the social impact the company seeks, path to realize impact, and the clariﬁcation of themilestone for creation of social impact.
CureApp engages regularly with impact investors. They not only ask for the update of the current businessbut ask questions on the progress of setting up the internal structure and the status of review related to
impact. CureApp continues to discuss issues such as the monitoring system for impact, also introducing
practices of other companies.

104 https://www.dai-ichi-life.co.jp/company/news/pdf/2017̲071.pdf
105 https://hatarakufund.com

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Case Studies

Attitude towards impact measurement and management (IMM)
CureApp considers IMM as something necessary to realize the companyʼs ﬁnal goal and a tool directly
related to the actualization of its mission and vision. CureApp feels that IMM allows visualization of
implicit knowledge and is an eﬀective tool to share the same view―both internal and external―aimed atcreating impact. Actually, IMM brought change to CureApp. As described earlier, the companyʼs mission
and vision are the starting point of its founding, and its day-to-day business operation also places thecreation of social impact at its center.
The philosophy is widely shared by its employees and the culture to work towards fulﬁllment of its
mission and vision has been spread thoroughly. On the other hand, CureApp had not found ways to show
the rate of actualization of its mission and vision and the creation of impact quantitatively using ﬁgures.
In the past, its day-to-day operation was conducted based on its key message, “We strive for the ideal of
medical care, a world where all people can receive high-quality treatment without worry. Evolving treatment with the power of technology, we will solve the social issues surrounding healthcare and realize
ideal medical care.” Before learning of IMM, CureApp did not have means to set and measure indicatorsfor social impact and used traditional key performance indicators (KPIs) such as sales and proﬁt, or the
progress of its business.
When CureApp ﬁrst discussed KPIs for impact, various new indicators were considered although many of
the ﬁnal candidates were directly related to sales or proﬁt such as the number of prescriptions or
accounts of medical institutions that directly overlapped with business indicators. One of the characteristics of CureAppʼs business is that its pursuit of impact creation that leads to the realization of its mission
overlaps signiﬁcantly with the creation of business values. The exercise allowed CureApp to clearly seethat sincerely working on its business endeavors also led to the creation of impact.
CureApp recognizes that IMM should be utilized fully as a management tool from the viewpoint ofbusiness management. IMM is essential for the true realization of impact creation, thus CureApp believes
it is necessary to put IMM into the context of each business. For this reason, CureApp does not regard theimplementation of IMM as a “cost.” The company believes that merely going through the motion of IMM
just to impress investors who value impact is meaningless. It is because whether a company implements
IMM or not is not the factor that investors use to evaluate. They look at the sincerity of the companyʼseﬀorts and its positive impact on business management.
Currently, CureApp keeps track of its social impact KPIs, and also takes into account the decision rulesthat used to be shared only implicitly in the company. Information on impact KPIs and key goal indicator(KGIs) are proactively announced through CureAppʼs website, in the page on sustainability. CureApp aims
to implement PDCA cycle by receiving comments from the society through stakeholder communication
including IR.

119

Figure 69. CureAppʼs Impact Logic

Input

Activity

OutputInitial outcome

Intermediate outcome

Acceleration of infrastructure
including rulesApp.
development

Manpower

Clinicalresearch
trial

Goods

Funds

Regulatory
pharmaceutical
approval andrepaymentfrom medical
insurance

Advancementof R&D

Prescription
by doctors

Use bypatients

Acceleration of
accumulationof evidence
for therapeutic app.

Improvement of service
eﬀect by therapeutic appʼsfunction to support doctors

Provides evidence-based
therapeutic guidance
24/7 everywhere

Increase intherapeutic app
development

Distribution
platform of
the app.
becomes
widely available

Use bypatients

Available to all

Medical institutions all overJapan start using App
Prescription Service (APS)

Therapeutic app. becomesuseable in the universal
healthcare system

Prescription
by doctors

Prevents
worsening andsecondarysymptoms

The cost eﬀectiveness ofusing therapeutic app.
improves in comparison
with existing treatments

Sales

Accumulation of data improves app.
Society acknowledges
the usefulness of therapeutic app.

Super goal

Therapeutic beneﬁt oftherapeutic app
being enjoyed

Solves theissue of the
gap in regional
availability of
medicalresources
Available
anytime
Solves the issueof the time gap
in receiving
medicaltreatment
Available
without ﬁnancial
worries
Reducemedicalexpenses

Enjoy high-quality
medical care
Uniform levelof quality
medical carehttps://cureapp.co.jp/sustainability.html

Recognition of ESG investment and impact investment
CureApp understands the diﬀerence between ESG investment and impact investment as the area to befocused out of the various impact that corporations create in the environment and social arena. ESG
investment, whose framework for information disclosure is being developed and shared, tends to be
useful for reducing negative impact. Whereas the main focus of impact investment is in maximizing thepositive impact. Both ESG investment and impact investment cause impact to society. However, there isa big diﬀerence between minimizing or neutralizing the inevitable negative impact and maximizing thepositive impact. CureApp is aware of the diﬀerence, and, while the company focuses on maximizing thepositive impact of its investments, it also checks for any unintended negative impact.
CureApp believes that the trend seeking sustainability is irreversible. Its view is that incorporating theconcept of sustainability in management and business will become widespread and companies that havenot made suﬃcient eﬀorts in sustainability will likely ﬁnd diﬃculty in raising funds in future. CureAppʼsbusiness has been driven by R&D, and it is working on improving its total corporate value including theﬁnancial aspects. However, the company ﬁrmly believes that realizing its mission is the purpose of its
business. In future, CureApp expects there will be more investors who support its philosophy and investments that value the company. In fact, the company feels that the interest among investors is gaining
momentum on how the investee company can bring change to the environment and society.
Also, CureApp acknowledges that conducting business to create impact from the viewpoint of ESG and
SDGs can be a rationale for various stakeholders including doctors and employees to choose the company. CureApp believes that accurately grasping the trend to support sustainability and continuing to work
sincerely on its business will have positive eﬀect on the companyʼs business progress and fundraising.

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Case Studies

Requests for the impact investing market
Balanced and ﬂexible rule-making
For impact-driven companies to realize maximum impact, CureApp hopes that balanced and ﬂexible rules
will be developed in the impact investing market. The company is aware that impact may diﬀer signiﬁcantly according to business or industry. For example, businesses that use software like CureApp andthose dealing with steel have diﬀerent areas and scope of inﬂuence. Therefore, it is diﬃcult to evaluate
companies using a uniform standard, and it is necessary to conduct a ﬂexible evaluation according to acompanyʼs status. On the other hand, the company is aware that there are negative impacts that are
regardless of business or industry. It hopes that IMM and information disclosure will be developed so that
individual companies do not have to struggle needlessly, and to this end, promotion of proactive andeﬃcient sharing of knowhow and knowledge is desirable.
The need for “patient capital” to create impact
CureApp expects various forms of support from impact investors throughout the investment period, notlimited to funding. The companyʼs view is that IMM is still in its infancy and the rules will be establishedin future. Thus, support related to governance and other aspects will also be a support for CureApp toincrease its corporate value.
The company hopes that impact investors would clarify their stance as “patient capital” who invest witha long-term view. It takes a long time before CureApp to develop a new product. And it takes even moretime for the product to be widely used and generate positive impact. Impact investors have evaluatedcompanies from a medium to long-term viewpoint, and the company wishes they will continue to seek
returns from a long-term viewpoint, as a “patient capital.”

Prospects
Aim proactive announcement both ﬁnancial and non-ﬁnancial news
CureApp is working on sophistication of a logic model for impact. The logic model stylizes how the companyʼs business brings what kind of external change and creates what kind of ﬁnal environmental or social
impact. The logic model is essential for internal training to raise awareness of impact and to foster culture
to visualize mission and vision, and in future the company believes it will play an important role in managing impact KPIs. The model uses the accomplishment of the companyʼs mission and purpose as themodel objective and its impact is set linked with the business, thus impact KPIs are directly proportional
to ﬁnancial KPIs by its logic.
CureApp believes that it is necessary to announce information on materiality with the viewpoint of ESG
as well as negative impact. In the medium- to long-term, the company envisions summarizing theseeﬀorts in its sustainability report or integrated report that explains the process of value creation. In
addition, the company envisages to incorporate evaluation of ESG and social impact KPIs into its executive pay system so that eﬀorts on impact and incentive design are organically connected in CureAppʼsorganization.

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Expansion of impact investment will lead to social changes
CureApp thinks that the major diﬀerence between impact investment and traditional investment by ﬁnancial institutions is in the mindset of the investor and the investee. The investee company understands themeaning and believes that it is necessary to seriously work on how it could meet the expectation of
impact investors. At the same time, for the investor side, clarifying the social impact expected of theinvestee at the time of investment and committing to the social impact creation of the investee will leadto earning ﬁnancial return. Both the investor and the investee working sincerely in their respective roles
will lead to social changes, according to CureAppʼs belief.

Hint for impact investment from the case study of CureApp
CureApp is a good example of an impact-oriented business. The company focuses on its social
impact (ripple eﬀect of change) and the software it oﬀers is designed to urge users to change
their behavior in such a way that helps solve various issues in the healthcare ﬁeld, along withother related ﬁelds. The company recognizes IMM as one of its business management tools andis seriously working to make it a company-wide practice. CureApp set its impact linked with its
business for the purpose to accomplish its mission and vision. As a result, it realized a structure
where impact KPIs are directly proportional to ﬁnancial KPIs. Such feature is noteworthy as an
exemplary impact-oriented company. The company seeks “balanced and ﬂexible rule-setting”
and “patient capital” from the impact investing market. In other words, CureAppʼs message toinvestors is that they should not have a uniform measure on the social impact that investee
companies seek but engage more deeply by trying to understand, interpret, and patiently
support the investee company.

CASE STUDY #4
Pocket Marche, Inc.
Reason for presenting a case study of Pocket Marche, Inc.
Companies that look to solve social issues through their businesses are on the rise. These companies aim
to realize change (impact) in society and the environment through their businesses. They are called
impact-driven businesses and becoming increasingly common in Japan. Also increasing are cases inwhich these businesses receive funds from impact investors, which indicates that investeesʼ points ofview will become more important than ever as impact investing continues to grow.
This report discusses the case study of Pocket Marche, Inc. (hereafter, “Pocket Marche”). Pocket Marche

122Case Studies

runs a website that oﬀers consumers primary products (e.g., fruit, vegetables, meat, and ﬁsh) for directpurchase from producers (a “C-to-C platform”), and it also operates an electricity business. Throughthese activities, the company works to foster relationships between urban and rural residents. Pocket
Marche CEO Hiroyuki Takahashi has tackled challenges of revitalizing regional communities and developing relationships between urban and rural areas through various approaches. Receiving investments frominvestors and operating companies that advocate its vision, Pocket Marche is in the midst of growth as
an impact-driven business. By studying Pocket Marcheʼs experience and vision, this report observes whateﬀorts should be made toward impact measurement and management (IMM), what challenges animpact-driven business must overcome to maximize the impact it tries to make, and what is expected of
an impact investing market.

Proﬁle of Pocket Marche
Summary
Pocket Marche is a stock company that was established in February 2015 (it started as Kakaxi, Inc. andchanged the trade name to “Pocket Marche Inc.” in March 2016). With the mission of “Connecting thePieces,” the company aims to heal divisions in todayʼs society that values convenience and comfort (e.g.,divisions between consumers and producers, rural and urban areas, and humans and nature) and to help
deepen relationships between those groups, thereby overcoming these divides. It plans, develops, andmanages the C-to-C platform “Pocket Marche” designed to connect consumers directly to producers.
History
May 2013

NPO Tohoku-Kaikon is established (incorporated on October 16, 2013)

Jul. 2013

Tohoku Taberu Tsushin (Tohoku Food Monthly) is launched

Apr. 2014

Nippon Taberu Tsushin League (the Japanese Food Journal League) (general incorporated
association) is established. The “Taberu Tsushin” model starts to be rolled out across Japan.

Nov. 2014

Tohoku Taberu Tsushin wins the Good Design Gold Award

Feb. 2015

KAKAXI K.K. is established (the trade name is changed to Pocket Marche, Inc. on March 31, 2016)

Sep. 2016

Pocket Marche launches its services

Sep. 2017

Pocket Marche increases capital by allotting new shares to third parties, including Euglena
and Mercari, forming capital and business tie-ups.

Aug. 2019

Pocket Marche increases capital by allotting new shares to third parties, including Dentsu
and Kobashi Industries.

Aug. 2020

Pocket Marche increases capital by allotting new shares to third parties, including the Marui
Group and Orange Page.

Issues perceived and solutions oﬀered by Pocket Marche
Mix and stir the city and the country
Pocket Marche attempts to solve the social issue of divisions between urban and rural areas through its

123company management and business operation. The experience that motivated the founder to start thisbusiness dates back to the Great East Japan Earthquake that occurred 10 years ago. Representative
Director Hiroyuki Takahashi was a member of the Iwate prefectural assembly at the time, working to solve
issues facing local communities. Iwate Prefecture is one of the fastest-population-shrinking regions, andit was vital to maintain the primary sector that is the prefectureʼs key industry.
Mr. Takahashi witnessed how urban consumers and rural producers met and bonded when consumers from
cities visited the region devastated by the earthquake to work as volunteers. During their volunteer work in
the region, these urban consumers got to observe local problems that had existed since before the disaster,such as depopulation and aging communities, which they found disturbing. They also had a chance todirectly learn about food producersʼ philosophy and way of life that underlay food production. Mr. Takahashi
believes that these experiences urban consumers had led to continuous, not temporary, activities tosupport reconstruction. He also saw these volunteers feeling saved by disaster survivors through theirvolunteer work and other activities. These consumers awakened to the meaning of life and had a sense of
fulﬁllment, which was diﬃcult to attain in their lives in urban settings, as they experienced nature in Tohoku
and received gratitude after helping people who suﬀered before their eyes. Mr. Takahashi realized then thatpeople living in cities away from nature were as exhausted as people living in the provinces.
After that, Mr. Takahashi supported food producers in rural areas through non-proﬁt activities. When henoticed that non-proﬁt activities were not enough to help fast-declining regional communities, he turned
his organization into a stock company. The present state as he sees it is that, although regional revitalization is a national agenda, no workable solutions have been found. He hopes to keep advancing his
business so that the company as a private enterprise will be able to present an answer to society.
Pocket Marche believes that rural areas support urban areas that constitute a consumer society, and thatthe sustainability of rural areas underlies that of urban areas. However, there are divisions between thecity and the country, and the current reality is that it is diﬃcult to ﬁnd a connection between the two. This
is why Pocket Marche runs a C-to-C platform as a venue where urban consumers and rural food producers communicate directly to trade vegetables, fruits, meat, and ﬁsh, among others. Pocket Marche
receives fees out of producersʼ sales through the C-to-C platform as revenue.
The businessʼs aim to solve the social issue of the divisions between urban and rural areas has remained
unchanged since the time Mr. Takahashi was a member of the Iwate prefectural assembly. What haschanged is only the form of the organization. It started out as an NPO, changed to a general incorporated
association, and then to a stock company. Hence, Pocket Marche appreciates that it has been acknowledged as an impact-driven business since it was selected as an organization to subsidize in the dormant
deposit accounts utilization project 106 (FY2019), in which the Japan Social Innovation and Investment
Foundation (SIIF) acts as an organization distributing funds.

106 The dormant deposit accounts utilization project, which was launched in FY2019, is a system to utilize deposits that have not beentransacted for 10 years or longer since January 1, 2009 (i.e., dormant deposits) for solving social issues and promoting nongovernmental activities in accordance with the Dormant Accounts Utilization Bill.

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Case Studies

Impact investing
Challenge of visualizing an impact of a business
Now that it is subsidized by the dormant deposit accounts utilization project, Pocket Marche is working
to demonstrate how its C-to-C platform helps the business pursue its mission “Connecting the pieces.”
The company is trying to measure the degree of this help using speciﬁc metrics. It is also planning to set
up a new business and form partnerships with other businesses to make up for what the C-to-C platform
is unable to cover.
Through the business activities it has engaged in so far, Pocket Marche has perceived the positive eﬀects
that are generated on urban consumers and rural food producers when these two groups are connected.
However, the company was unable to put into words how positive those eﬀects were and what processes
and conditions were needed to produce them. Hence, Pocket Marche conducted an extensive survey toilluminate the quantitative and qualitative beneﬁts that the C-to-C platform creates for producers andconsumers. The company also organizes study tours on which urban consumers visit rural food producers
in order to observe the eﬀects that these tours have on the behavior of these consumers and producers.
This is part of its eﬀorts of “research, development, and veriﬁcation related to the visualization andexpansion of the relevant population in rural areas,” which cannot be easily done if a business focusessolely on proﬁtability. These actions prompted the company to internally set up the Rural Relevant Population Laboratory in order to establish a system as an impact-driven business. Pocket Marche hopes that,once the process in which urban consumers and rural food producers are connected and bonded
becomes scientiﬁcally clear, it will publish the knowledge and insight regarding the process to make themavailable for use by municipalities, businesses, and nonproﬁt organizations.
Todayʼs shareholders and “impact investing”
Pocket Marche has the sense that people called “Impact investors” are still limited in number in Japan,
and that the company has yet to meet any committed one. That said, the investors who have provided
funds for Pocket Marche have done so because the companyʼs vision of becoming a business that changes society appeals to them. Moreover, when receiving investments within the framework of an alliancewith another operating company, the company senses that the investments are expected for social value
as well as the ﬁnancial value that Pocket Marche creates, that is, the funding is part impact investing.
Hence, Pocket Marche does not clearly distinguish investors who are called impact investors and those
who are not. Consequently, the company does not have the sense of having met any committed impact
investors, as stated above. Pocket Marche believes that what ultimately matters is whether the company
and investorsʼ teams have the sense of unity as they work toward a common goal, rather than whether theinvestors claim to be “impact investors.” Pocket Marche has received funds only from investors andbusinesses who sympathized with the companyʼs vision. In the coming years, given that it may go public
and/or take other equally important actions, Pocket Marche plans to communicate with a wide range ofinvestors. In this communication process, the company hopes to ﬁnd out how, as an impact-driven
business, it should present its eﬀorts to create value that sets it apart from proﬁt-making corporations ingeneral, and how investors will evaluate the eﬀorts.

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About impact measurement and management (IMM)
It was the dormant deposit accounts utilization project mentioned above that enabled Pocket Marche towork on IMM. The company focuses on two important points as it works on IMM. The ﬁrst point is how to
use IMM in communication with investors. There is no standardized or generalized form of IMM to showwhat a so-called “impact investor” expects of an impact-driven business and what information the investor hopes to obtain from the business. Pocket Marche is trying to ﬁnd out how it should leverage IMM toentice impact investors to invest in its business. The second point is how much the company should
spend on IMM as costs. As it is also related to the ﬁrst point, there is no standardized or generalized formof IMM used between an investor and an impact-driven business. Given the present state where there arefew examples that show what returns a business can expect after spending how much on IMM, Pocket
Marche ﬁnds it diﬃcult to identify the optimum allocation of internal resources to IMM. A start-up like
Pocket Marche often sees its business move fast, which makes it tricky for the company to determine
when indicators should be set, how often the data for the indicators should be obtained, and when theindicators should be revisited.
On the other hand, the use of IMM prompted Pocket Marche to explore how the company can elucidate
the goal “mix and stir the city and the country” and the social beneﬁts of a larger relevant population inrural areas in a convincing way. The company used to believe that the quality and quantity of messages
exchanged between food producers and consumers on the C-to-C platform were the proof of the contribution the business made to relationships between the two sides, as many of those messages tell memorable stories. Yet IMM had the company realize that, to fulﬁll its corporate mission “Connecting thePieces,” it should adopt diverse approaches other than the C-to-C platform, and that various means areavailable to the company as a proﬁt-making business. Now that the range of its business has expanded,
Pocket Marche ﬁnds meaning in working on IMM.

Figure 70. Logic model for Pocket Marche
Input

Manpower

Goods

Funds

Activity and Output

ImproveC-to-C services

Expand and enhance
non-C-to-C services forthe relevant population

Outcome of First Half

More people “meet”
via Pocket Marche
Food producers andconsumers bond
via Pocket Marche
Companies andmunicipalities work
together to createa relevant population

Formulate a hypothesis forthe creation of a relevant
population by Pocket
Marche; develop a system
for the creation

Publicity of challenges
related to the relevant
population for
Pocket Marche

The hypothesis that
relationships begeta relevant population tostrengthen the sense ofwell-being is tested

Outcome of Second Half

VisionMore food producers
and consumers havegood relationships
A relevant population
are created incollaboration between
companies andmunicipalities

The city and the region
are mixed and stirred
to createa relevant population

How to createa relevant population
is known

Pocket Marche is known
to be tacking challenges
related to the relevant
population

Source: Dormant Deposit Project – Impact Report (Japan Social Innovation and Investment Foundation)

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Case Studies

The SDGs as a common language with institutional investors
Pocket Marche does not link its business to the Sustainable Development Goals (SDGs) set by the United
Nations. The company is also aware that some investors examine what a business does to help achieve
the SDGs as a yardstick to make an investment decision. Hence, Pocket Marche thinks it necessary to
publish information about its business and approach to be measured with the yardstick from time to time.
For example, SDG 13 “Climate Action” is closely connected to Pocket Marcheʼs business, and the company actively publishes information about a companyʼs challenge towards the goal. This is because primary
product producers engaging in agriculture or ﬁshing are most vulnerable to climate change. Since producers work in nature every day to produce food, they sense abnormalities due to climate change before mostothers do. Pocket Marche hopes to draw on its network to serve as a PA system that communicates
opinions and suggestions from people working on the ground for various occasions. The company
believes SDG 11 “Sustainable Cities and Communities” is also relevant to its business. Pocket Marche
intends to publish a wide range of information so that its views and ideas are communicated to so-called“impact investors” and other stakeholders in diﬀerent positions.
Requests for the impact investing market
Pocket Marche hopes that so-called impact investors actively provide information as to which ﬁelds they
particularly seek to invest in to make an impact, what they use as an indicator of an impact (i.e., astandard), what principles and ideas their investments are based on. Although it gathers information,
Pocket Marche senses the limit to what it can learn before communicating with these investors, and thecompany believes that the communication will be easier if it can be clear about what the investors arelooking for.
Pocket Marche also hopes that investors in Japan renew their awareness of where the country stands inthe international community. This is because the company believes that this awareness should be
retained on the part of investors as well as of companies that operate businesses in the years to come.
As it is generally said that Japan is an advanced country in facing unprecedented issues, Pocket Marche
thinks that Japan is currently fraught various issues that other countries will eventually face, including low
birthdates, an aging and declining population, and decreasing demand as a result. The world is watching
how Japan will achieve the inclusion of people and towns that have been left behind in society, in addition
to pursuing economic growth. Eﬀorts that end in failure will serve as bad examples, and those thatsucceed will make Japan an advanced country in solving unprecedented issues, that is, a role model for
the world. Pocket Marche hopes that investors acknowledge this critical position in which Japan stands.
Businesses like Pocket Marche in Japan, a country facing unprecedented issues ahead of any othernations, should be prepared to work toward the creation of impact business models for companies aroundthe world. Pocket Marche believes that investors should also share this awareness.

Prospects
What impact is made on society when a relevant population of food producers and consumers grows? Pocket
Marche aims to visualize and quantify what is currently unclear through IMM and other appropriate means.

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The company hopes to present a detailed picture of the signiﬁcance of its business in such a way thatconvinces various stakeholders including investors.
At the same time, it intends to contemplate the eﬀects that the impact has on not only rural areas but alsourban areas. Pocket Marche believes that consumers conventionally picked foods based on prices andwhat the produce looks like because the backgrounds of the foods were not provided. Trying to get the mostat the lowest cost possible is an attempt to maximize cost-eﬀectiveness, which is a logical action. The
pursuit of cost-eﬀectiveness and the resulting mass consumption led to economic overconcentration incities and the decline of regional communities. Then Pocket Marche oﬀered society a new option throughits C-to-C platform and other services. Producers are behind all foods. The company successfully presented to consumers the standards of value that go beyond cost-eﬀectiveness by visualizing how people workto oﬀer value to society through their production activities and connecting them to urban residents.
Consumers began to support local producers, and even visited them to have a variety of hands-on experiences in rural areas. Pocket Marche believes that it consequently helps urban consumers acquire a senseof well-being (i.e., a state where a person feels physically, emotionally, and socially content). It is expectedthat more and more people will work remotely, traveling between the city and the country.
Pocket Marche has been in the solar sharing business and electricity retailing business since January2022 in order to expand its eﬀorts to “connect the city and the country” to the area of electricity, in
addition the area of food that has been the primary focus of these eﬀorts. It will be increasingly importantfor Pocket Marche to broaden the range of impacts it creates, and to present the eﬀects of that eﬀort
visually and verbally to internal and external stakeholders.

Tips for impact investing picked up from the case study of Pocket Marche
Pocket Marche did not think it had met any “impact investors.” On the other hand, investors who
had invested in Pocket Marche sympathized with the companyʼs mission and made their investments in the hope that the mission would be fulﬁlled through the business. These facts suggestthat investors who plan to engage in impact investing should do something to have themselves
acknowledged as entities that carry out impact investing. Pocket Marche plans its businessaround the theme “connecting the city and the country,” which implies the need to address
diverse social issues. This means that rural food producers and urban consumers both receive
the beneﬁts of the impacts Pocket Marche aims to create. IMM respects what a business aims
to achieve, and it visualizes each impact and sets indicators based on the goal. Hence, Pocket
Marche feels certain that the use of IMM has helped the company acquire greater potential.
Pocket Marcheʼs current interest is in how to take advantage of IMM in communication withinvestors. Pocket Marche applied of its own accord for a subsidy from the dormant deposit
accounts utilization project that was on oﬀer from SIIF, and carried out IMM, with none of its
investors asking the company to do so. The company should actively inform investors about theresults of IMM, as a matter of course, and investors are also expected to communicate theexpectations they have of IMM by Pocket Marche.

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Contributions

Contributed Articles: Topics in Impact Investing
The year 2021 saw rapidly increasing interest in and attention to impact investing across Japan. The
Japan Impact-driven Financing Initiative, which was announced in November, symbolizes thisphenomenon. This Initiative was signed by 21 ﬁnancial institutions, ranging from megabanks, regionalbanks, shinkin banks, venture capitals, and insurance companies, among others (as of the launchdate). What is behind the interest in and attention to impact-driven businesses is the fact that specific activities based on the concept of sustainability, which include ESG investing and the SDGs, arebecoming increasingly common among companies and individuals. It is likely that these activities
served as the basis for advancing the understanding of impact investing that represents investorsʼ
intention to become actively involved in the creation of impact on society and the environment.
That said, the focus of impact investing is on the achievement of a goal, which is to solve a social
and/or environmental issue, whereas that of ESG investing is on assessment done mainly for investors according to speciﬁc criteria that each agency has in place. Therefore, what is mainly assessed
for impact investing is how a business works on and manages the planning, implementation, andenhancement of the process for measuring and managing the output and outcomes of its activities.
In the world of impact investing that has this characteristic, what kind of discussion is ongoing globally? Katsuji Imata, President of the Social Impact Management Initiative (SIMI) and Co-CEO of Blue
Marble Japan, Inc., gives us a summary of moves that were observed around the world in FY2021.
Most impact investing has been directed to the ﬁeld of private equity. As impact investing has become
increasingly known, the approach of impact investing has also begun to be applied to investments inpublic equity. Yuichiro Hanyu, Chief Fund Manager, Equity Management Department, Resona AssetManagement Co., Ltd., provides his view on the potential of the area that is called “impact investing
fund for investments in public equity.”
In addition, players of impact investing are becoming increasingly diverse. To study the potential andchallenge of impact investing by new players, Katsuya Sakai, Deputy Director, Division of Financial
Aﬀairs/Division of General Planning and Development, The Ritsumeikan Trust, gives us a summary of
the initiatives that have been launched at Ritsumeikan.
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
pg. 130
Global Trends in Impact Investing
Katsuji Imata, President, Social Impact Management Initiative,
Co-CEO, Blue Mable Japan, Inc.

Katsuji Imata, a contributor to The Current State and Challenges of Impact Investing in Japan - FY2020
Survey, illustrates global trends in impact investing in 2021. After presenting various international conferences and high-level meetings that have been held, along with changes in international aﬀairs, Mr. Imata
discusses the necessity of becoming involved in the transition to global economic and social systems, andhow the Copernican Revolution-like changes are happening in the trends in impact investing. He also
oﬀers his views on new trends and issues in sustainable ﬁnance in general as well as on impact investing
and Impact Measurement and Management (IMM).

pg. 138
Practicing Impact Investing in Public Equity
Yuichiro Hanyu, Chief Fund Manager, Equity Management Department, Resona Asset Management Co., Ltd.

In March 2021, Resona Asset Management began to manage an impact investing fund for investments inpublic equity in Japan. Mr. Hanyu illustrated issues and important points unique to impact investing inpublic equity that he faced as he worked on the fund, covering also Resonaʼs view. Mr. Hanyu alsopresents some of the fundʼs eﬀorts, as he believes that providing speciﬁc examples and views for accumulation is essential for further growth of impact investing.

pg. 144
Taking up the Challenge of Impact Investing at the Ritsumeikan Trust
Katsuya Sakai, Deputy General Manager, Division of Financial Aﬀairs and Division of General Planning and Development, Ritsumeikan Trust

Katsuya Sakai presents the objectives and history of asset management by private universities. Then heillustrates the background to Ritsumeikanʼs decision to create a social impact fund as an incorporated
school, using the Ritsumeikan Social Impact Fund (RSIF) as a real-life example that is part of the Ritsumeikan Impact-Makers Inter X (Cross) Platform (RIMIX). Mr. Sakai also elucidates compatibility between
impact investing and the education and research business, along with challenges related to social impact
measurement, as part of what is expected of impact investing by an incorporated school as well as theoutlook for the initiative.

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Contributions

Contribution No.1

Global Trend on Impact Investment
President, Social Impact Management Initiative
CEO, Blue Marble Japan, Inc.
Katsuji Imata

Eyeing the transformation of socio-economic system
From WHY? to WHY NOT?
To summarize the global trend on impact investment in 2021, it was a year when impact investment
received increased focus and expectation as a major initiative that can mediate a signiﬁcant transformation of the economic and social system.107 At least, as of the end of 2021, the stakeholders promoting
impact investment clearly take pride in the transformative power of impact investment.
For example, at SOCAP 21 (an international symposium on social impact investment, SOCAP is the abbreviation of social capital market) in October 2021, one of the speakers, Monique Aiken, Managing Directorof The Impact Investment Project (TIIP),108 noted that, considering the fragility of the social system
exposed by COVID-19 and the national healthcare systems even in developed countries, it is only naturalthat everyone, including those in ﬁnancial business, to question how they could get involved in changing
the current global social and economic system. She remarked that the key question is not “WHY one
should be involved in system transformation?” but rather “WHY NOT?”
Here we need to remember the deﬁnition of impact investment, that it is “an investment which is intended
to generate positive and measurable social and environmental impact as well as ﬁnancial returns.”109 Oneof the keywords is “intention.” As well known to the readers of this report, the investorsʼ intention (whythey invest) is at the core of impact investment. As various circumstances which show the world is notsustainable, not limited to COVID-19 but those rooted in climate change or economic disparity, constantly
make headline news, these words reﬂect a consciousness that it has become diﬃcult to think of ﬁnancethat does not question “why” system transformation is necessary. The entire world of ﬁnance needs toreverse its key question from “WHY?” to “WHY NOT?,” and this is not limited to impact ﬁnance.
The G7 Impact Taskforce
As an event that reﬂected such recognition most clearly during 2021, the G7 Impact Taskforce was established in July under the leadership of the UKʼs 2021 presidency of the G7. Stakeholders from relevant
countries including Japan participated in the steering committee and two working groups to discuss

107 Note: In writing this section, discussions in various international meetings (shown in Table 1) have been referenced, as well as
the works noted in the footnote. Links to the websites in the footnote were all accessed on January 10, 2022.

108 The Investment Integration Project (https://www.tiiproject.com)

109 Deﬁnition by Global Impact Investment Network (GIIN). https://thegiin.org/impact-investing/need-to-know/#what-is-impact-investing

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and write reports at full speed that delivered the reports in December.110
The awareness of the taskforce on this issue is stated in the foreword of the summary report “Time todeliver: Mobilising private capital at scale for people and planet.”111−− How can we accelerate the volume and eﬀectiveness of private capital seeking to have a positivesocial and environmental impact?
−− How do we make sure this mobilisation has a real impact and does not leave people and places
behind?
The report is aimed mainly at policy decision makers and regulators in G7 member states; however, thereport also refers to the lack of ﬂexibility of the economic and social system. In order to overcome thecurrent stalemate and to realize a sustainable society, the report points out that; 1)The urgent need tonarrow the gap between rhetoric and delivery, 2) Maximum mobilisation of private capital, enterprise,innovation, 3) Both private and public must make concerted eﬀort to deliver systemic change, are needed.
And, 4) There are two powerful tailwinds of change that create a window of opportunity today; the ﬁrst is
the shift in social values of consumers, talent and investors, which is already inﬂuencing corporate behavior, and, the second is the huge leaps in digital technology which are creating opportunities to deliver andmeasure social and environmental impact.112
In addition, the two working groups each published reports detailing the action plans for “Impact transparency, integrity and harmonisation,” and “Mobilising institutional capital towards the SDGs and a Just
Transition.” 113 Behind the reason why these reports were published in such a hurry was that the G7 presidency changed at the end of 2021 before which the works of the taskforce had to be completed, of course,
however, the size of the ambition displayed in such a short timespan tells of the sense of crisis among
those involved.

Mainstreaming of Impact
Copernican revolution of impact investment
In addition to the above, an overview of the various moves related to impact investment in 2021 tells usof the qualitative change in how to understand impact investment. Earlier, impact investment was aninvestment style that only applied to a tiny portion of private capital, and the focus of discussion used to
be its placement in the entire global investment practice. However, that stage is way past today. As theﬁeld of impact investment grew over the past ten years or so, stakeholders in impact investing have

110 https://www.impact-taskforce.com/reports The members who participated in the taskforce from Japan and other countries arelisted in the following list. https://gsgii.org/2021/08/g7-impact-taskforce-announces-membership

111 https://www.impact-taskforce.com/media/brzkvcvx/time-to-deliver-1.pdf
112 Footnote 5 Report, pp.5-6.

113 https://www.impact-taskforce.com/media/io5ntb41/workstream-a-report.pdf

https://www.impact-taskforce.com/media/xe5dsend/workstream-b-full-report.pdf

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Contributionsorganized the deﬁnition of impact and impact investment and built up the actual investment examples. As
introduced in my contributed article in “The Current State and Challenges of Impact Investing in Japan FY2020 Survey,” impact measurement and management (IMM) has become widely shared, and is theimportance of asking “WHY?” and “WHAT?” before asking “HOW (to measure impact)?”
Looking at the moves in the wider world beyond private investment, concerns for the sluggish pace ofimprovement in climate change and SDGs are ever-increasing. In addition, the widening domestic andinternational disparities caused by the novel coronavirus pandemic and the deterioration of the living
conditions of the already fragile communities are at an intolerable level. To achieve the SDGs, it used tobe said that investments in developing countries were short by 2.5 trillion dollars per year, but COVID-19
further widened the gap.114
In such world, the thinking on impact investment is undergoing a Copernican revolution where the key
question on impact investment is changing from the traditional “How can impact investment contribute tobuilding a sustainable and fair society?” focusing on itself to that from a wider viewpoint “How best to use
impact investment as a booster to building a sustainable and fair society.”
Heightened concern for “washing”
This transformation of thinking is not unrelated to the acceleration of the trend where impact is given highpriority in sustainable ﬁnance, for example, in ESG investment. The ratio of sustainable investment in
total global investment depends on the deﬁnition of sustainable investment, however, according to the2020 report of Global Sustainable Investment Alliance (GSIA) published in 2021, the total amount ofsustainable investment grew 15% in two years and reached 35.3 trillion dollars.115 Some estimate that thisrepresents more than one-third of the global asset under management, and it is expected to grow further.
Therefore, the ratio will grow to more than half the total in a not-so-far future.
However, the publishing of such investigative report makes the issue of “the gap between rhetoric anddelivery” as pointed in the G7 Impact Task Force Report more critical. If such huge amount of funds has
been invested to build a sustainable and fair world, why does it seem that the world is not going in the
direction where those problems have been solved? The huge gap between delivery and result called“green-washing” or “SDGs washing” has become the focus of attention. In 2021, there are more than
4,000 signatories of Principles for Responsible Finance (PRI) partnership supported by UN, and the total
asset under management of those institutions is said to be over 121 trillion dollars.116 A speaker at the
Global Steering Committee (GSG) Global Summit in October 2021 commented, “If such amount of funds
has really been invested according to principles, global issues would have been solved many times overalready.”

114 https://www.oecd.org/newsroom/covid-19-crisis-threatens-sustainable-development-goals-ﬁnancing.htm
115 http://www.gsi-alliance.org

116 https://www.unpri.org/pri-blog/ceo-quarterly-update-celebrating-4000-signatories-and-supporting-the-evolution-of-ri/8033.article

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At the end of 2021, SSIR online, the online version of Stanford Social Innovation Review (SSIR),
announced the ten most popular articles of the year.１１7 Among the articles, one questioned ESG rating,and another criticized the actual sustainability activities of corporations. Both not only warn against“washing” but also show the limit of the current economic and social system that cannot accurately
evaluate the outcomes of sustainable activities. Thus, realizing “Impact transparency, integrity andharmonisation,” the theme of one of the workstream at the G7 Impact Taskforce, becomes criticallyimportant.
Move to establish new sustainability standards
Reﬂecting such trend, there is a move in the ﬁeld of sustainable disclosure to link impact measurementwith disclosure reports as the measurement gets more sophisticated. At the same time, the existence ofmultiple standards created a situation which was derided as “alphabet soup.” Although it is true that suchsituation ensued, in the fall of 2020, with the mediation of Impact Management Project (IMP), ﬁve organizations that set these standards―Carbon Disclosure Project (CDP), Climate Disclosure Standards Board(CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC), Sustainability
Accounting Standards Board (SASB)―announced a joint statement and a move to organize and integrate
standards has started.118 In 2021, IIRC and SASB integrated to establish Value Reporting Foundation(VRF). The ﬂow to incorporate these sustainable standards to the framework of international accounting
standards has also accelerated, creating a move to consolidate those standards with the International
Financial Reporting Standards (IFRS) under IFRS foundation.
This led to the establishment of International Sustainable Standards Board (ISSB) which was announced
during the 26th UN Climate Change Conference of the Parties (COP26) held in Glasgow in November
2021.119 In 2022, ISSB embarked on developing the comprehensive global baseline for sustainability
disclosure standards. The integration of VRF and CDSB is also being scheduled, which will further
promote the establishment of uniform standards. Meanwhile, national regulatory authorities will be
developing their respective domestic regulation based on the global baseline developed by ISSB.
At the same time, a move to formulate new disclosure standards is accelerating in the EU as well. European Financial Regulatory Advisory Group (EFRAG) which is in a position to comment directly on EU
sustainable standards through Corporate Sustainability Reporting Directive (CSRD) for corporations andbusinesses and Sustainable Financial Disclosure Regulation (SFDR) for ﬁnancial institutions signed
Statement of Cooperation with GRI.120 Therefore, ISSB and the collaboration of the EU and GRI haveformed two broad trends.

117 https://ssir.org/articles/entry/the̲10̲most̲popular̲ssir̲articles̲of̲2021?utm̲source=Enews&utm̲medium=Email&utm̲campaign=SSIR̲Now#

118 https://home.kpmg/jp/ja/home/insights/2020/09/sustainability-reporting-20200923.html
119 https://www.asb.or.jp/jp/ifrs/press̲release/y2021/2021-1103.html

120 https://www.efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FSiteAssets%2FEFRAG%2520GRI%2520
COOPERATION%2520PR.pdf&AspxAutoDetectCookieSupport=1

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Contributions

How disclosure requirements related to impact will be formulated in these new disclosure standards arelargely undecided as of today, however, as described above, concerns for “impact washing” are growing
and the requirements for sophisticated impact measurement are expected to be expanded. Discussions
conducted around the keyword “materiality” in ESG investments so far are being summarized already. It
has become mainstream to use the framework of double materiality to treat the positive/negative impact
corporations cause to the society and environment as said impact exist in the outer perimeter of the information directly reﬂected in the companyʼs ﬁnancial value. However, attempts to sort the concepts of therelationship between impact and company value is still ﬂuid, and some opine that being trapped into thesingle vs double materiality framework is not wise.121 The ﬁve standards-setting bodies that published thejoint statement above and IMP suggest the concept of dynamic materiality made up of three layers.122
Structural transformation of capitalism
The awareness that global economy and society need urgent structural change has led to actions that aim
to transform the current structure based on capitalism. Calls to stakeholder capitalism and corporations
have been widely raised from ﬁelds outside of ﬁnance and investment in the past few years. Today, we
have also started to hear similar requests asking for the development of such mechanism from those
involved in impact investment and related ﬁelds. For example, the Global Impact Investment Network(GIIN) is involved in New Capitalism Project 123 and Re-imagining Capitalism.124 GIIN has started a
podcast “NEXT NORMAL: RE-IMAGINING CAPITALISM FOR OUR FUTURE” hosted by GIIN founder and
CEO Amit Bouri.125
In the GSG Global Impact Summit held in October 2021, Sir Ronald Cohen moderated a townhall meeting
titled “Transition to impact capitalism,” where participants from both the public and private sectors introduced initiatives for transition from their respective viewpoints.126
GIIN explains that the new capitalism it envisions as “We envision a future when impact is integrated into
investment decisions as the ʻnormalʼ way of doing things.” 127 A discussion on new capitalism has started
also in Japan, and it will be required to join such global discussions in future.

121 Comment by Ms. Veronika Poole (Deloitte UK), speaker, The Future of Performance Measurement session at the Oxford Economicsof Mutuality Forum.

122 https://29kjwb3armds2g3gi4lq2sx1-wpengine.netdna-ssl.com/wp-content/uploads/Reporting-on-enterprise-value̲climate-proto
type̲Dec20.pdf

123 https://thegiin.org/new-capitalism , https://www.nationalcivicleague.org/ncr-article/aligning-action-to-reimagine-capitalism
124 https://omidyar.com/reimagining-capitalism-4
125 https://thegiin.org/nextnormalpodcast

126 From Japan, Ryohei Yanagi, CFO of Eisai Co., Ltd. gave an overview of how Eisai Co. Ltd. participated in the Impact Weighted
Accounts Initiative (IWAI).

127 https://thegiin.org/new-capitalism

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Expansion of the ﬁeld of impact investment
Impact investment has become more inﬂuential in sustainable investment and overall investment as
described above. At the same time, the ﬁeld is also continuing its eﬀorts to develop and spread relevant
rules, framework, and tools.
Further establishment of IMM
My article in the FY2020 Survey explained the history of how IMM became widely adopted. Since then,the use of IMM has become even more popular. In the article, I wrote that in a brieﬁng on SDG Impact
Standards for Japanese companies held in December 2020, it was reminded that said standards “ispractical standards, rather than performance standards and reporting standards.” This is an important
point. The objective of IMM is not just the result of impact management and reporting but to utilize impact
information to management. Fabienne Michaux, Director of SDG Impact, said in her presentation at the
GSG Global Summit, “Measurement and reporting are important, however, more essential is to integrate
the thinking of impact on managementʼs decision making.”
・ Signatories of “Operating Principles for Impact Management,” developed mainly by people with ties tothe International Finance Corporation (IFC), started from 58 institutions at the time of its announcement in April 2019 but grew to 109 by December 2020 and 150 as of the end of 2021.128 These three
Japanese institutions have become signatories.129
・ UNDP has been developing SDG Impact Standards,130 and the Japanese translation for the standards
for enterprises and organizations, SDG Compass, has been published in December 2021.131 In 2022,
activities aimed at certiﬁcation are likely to accelerate. Thus, wide acceptance of the standards as amodel of IMM implementation for both investors and enterprises/organizations are anticipated.
・ IRIS+ is a basic tool for IMM developed by GIIN in 2019. GIIN added employment, water (water andhygiene: WASH), climate change (mitigation) to the impact categories of IRIS+ to increase the themesof the impact addressed by IMM.

Impact performance
In IMM, impact measurement is one element that supports the management and their decision making.
As described earlier, especially as prevention of “washing” has become an important viewpoint, themeasurement of impact results draws high expectations.

128 https://www.impactprinciples.org , https://www.impactprinciples.org/signatories-reporting

129 Japan International Cooperation Agency (signed on August 26, 2019), MUFG Bank, Ltd. (signed on March 4, 2021), Nippon Sangyo
Suishin Kiko Ltd. (NSSK) (signed on April 12, 2021).

130 https://sdgimpact.undp.org/practice-standards.html

131 https://www.jp.undp.org/content/tokyo/ja/home/library/sdgimpact̲standard̲enterprises.html

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Contributions

GIIN has announced a new methodology to measure impact, COMPASS.132 And GIIN continues to review
the method to evaluate impact performance. In addition to clean energy, housing development, inclusive
ﬁnance, and agricultural investment, in 2021, it published “COMPASS: The Methodology for Comparing
and Assessing Impact,” a survey report on mitigating climate change and quality job using COMPASS.133
In order to satisfy the “independent veriﬁcation” required in Principle 9 of the Impact Management Principles, Tideline Advisors, LLC., a ﬁrm that oﬀers consulting on impact investment, founded its groupcompany BlueMark as an independent third-party organization to assess and verify impact practice anddeveloped a unique framework for certiﬁcation. Tideline published a report that compared and reviewed
its “independent veriﬁcation” activities.134
This is just one example, and the trend of sophistication of impact measurement and impact information
will surely accelerate even further in future. At the same time, initiatives such as the Impact Weighted
Accounts,135 aiming to convert impact information into ﬁnancial value and report in ﬁnancial reporting
framework, has started. Therefore, we canʼt take eyes oﬀ from the new activities in this theme in 2022.
In closing
Last but not least, it is necessary to conﬁrm that "Just transition," which is stressed in the G7 Impact
Taskforce Report is crucially important in aiming for a transformation of economic and social systemcentered on impact. The concept was originally stated in the Paris Agreement in 2015 for climate change(COP21). Any system change will create demand for new industry and profession, although it will cause
shrinking of existing industry such as fossil fuel industry, aﬀecting workers and local society that rely onsuch industry. Therefore, not leaving these people and communities behind becomes a large challenge fortransition. Stakeholders in impact investment and related initiatives take this point in their views in thinking about system change.
At the beginning of this article, I wrote that stakeholders promoting impact investment show clear awareness that it will jumpstart the transformation of global economic and social system. This is closely related
to the fact that people who have promoted impact investment in the last decade have considered it as amovement to transform the economic system and the wider economic and social system. Whether suchawareness of the movement may spread widely in the world of ﬁnance is still in question today, however,treating impact investment as just a small initiative in a speciﬁc investment style has become outdated
today.

132 https://thegiin.org/research/publication/compass-the-methodology-for-comparing-and-assessing-impact

In September 2021, Global Impact Investing Network (GIIN), GSG-NAB Japan, Social Innovation, and Investment Foundation(SIIF) and Social Impact Management Initiative (SIMI) co-sponsored an explanatory session of COMPASS for stakeholders inJapan.

133 https://thegiin.org/research/publication/understanding-impact-performance-climate-change-mitigation-investments-andquality-jobs-investments

134 https://bluemarktideline.com/making-the-mark-2021

135 https://www.hbs.edu/impact-weighted-accounts/Pages/default.aspx

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Figure 71. Examples of 2021 online international conferences and meetings that discussed changes
and impact of socio-economic systems and the role of impact investing

Date

Name of Conference and Meetings
ImpactAlpha - Capitalisim Reimagined Call No. 30: Universal owners aim to turn

9/17

10/6 - 8

10/18 - 20

11/18

11/30 - 12/2

shareholder power into real-world impact

https://impactalpha.com/the-call-no-30-universal-owners-aim-to-turn-shareholder-power-into-real-world-impact/

GSG Global Impact Summit
https://web.cvent.com/event/1a85b365-bdﬀ-4753-bb64-93e1dc9b97b1/summary

SOCAP21https://socapglobal.com/events/socap21-virtual/

GRI Summit
https://ecovadis.com/events-webinars/gri-summit-2021/

Oxford Economics of Mutuality Forumhttps://www.eomforum.org

ImpactAlpha - Capitalisim Reimagined Call No. 35: Building a multi-movement
12/3

engine to hold corporations accountable and reimagine capitalism

https://impactalpha.com/call-no-35-building-a-multi-movement-engine-to-hold-corporati
ons-accountable-and-reimagine-capitalism-video/

G7 Impact Taskforce Reporting Event
12/13

https://gsgii.org/2021/08/g7-impact-taskforce-announces-membership/(A website announcing the establishment of taskforce)*Note: The above include websites and meetings those that require paid registration or do not allow viewing
subsequent to the event, therefore, not all of them can be viewed directly from the links.

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Contributions

Contribution No.2

Practicing Impact Investing in Public Equity
Chief Fund Manager, Equity Investment Division
Resona Asset Management Co., Ltd.

Yuichiro Hanyu

1. Introduction
In March 2021, Resona Asset Management began to manage an impact investing fund which invests inpublic equity in Japan. In this article, I would like to illustrate issues and important points unique to impact
investing in public equity that Resona faced, including the companyʼs opinion. In the latter half, I would
introduce the fundʼs investments as an example.

2. Signiﬁcance of impact investing in public equity
In considering impact investing in public equity, what is considered most important is to clarify the reason
why public equity have been chosen as the subject of impact investment. The starting point of impact
investment with intention is to answer to questions such as what kind of additionality is there by investingin public equity for the investors and the asset management company or what is the unique beneﬁt ofpublic equity, in other words, to respond to “Why.”
Investment in public equity is subject to various conditions and limitations speciﬁc to the publicly tradedstocks in an exchange. That is why the framework for impact investment developed for private equity orbonds/loans often cannot be directly applied. To implement impact investment in public equity, a new
product design is needed that incorporates the characteristics of public equity and maximize theirstrengths.

Expanding impact investing
Public equity has superiority in transparency in the information disclosure and liquidity in trading stocks,
therefore, they are considered an asset class suited to a wide range of investors. When structured as aninvestment product, it may be designed as an open-ended fund where investors can start from a small
amount and can always purchase or redeem their shares. Impact investing has developed among limited
institutional investors and charity organizations; however, such characteristic of publicly traded stocks is
considered beneﬁcial for impact investment to spread to a wider range of institutional investors andindividual investors.
At the same time, approximately 3,900 listed companies exist in Japan, and investors can trade thestocks of these companies in the stock market. The existence of such an expansive investment

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universe is beneﬁcial because of aspects such as scalability of the social issues that investors can engage
through investment and diversiﬁcation of the impact that may be generated from the investment.
By extending impact investment to public equity, it is expected that both the investors and investee
companies engaging in solving social issues can increase their bases, thereby promoting the mainstreaming of impact-driven investments. Asset management companies act as an intermediary to playa role of creating the ﬂow of funds and information with a solid intention and create additionality.
2) The raison d'etre of shareholders as long-term supporter
Many social issues that we struggle to ﬁnd solution for today are not easily soluble with short-term results
achieved by investments. Rather, they are deep and complex structural issues. In order to contribute tosolving these issues through impact investment, both the investors and the investee companies need to
be engaged continuously over a long period.
For impact-oriented companies that work on solving the issues with strong resolve, it becomes important
to ﬁnd understanding investors who provide capital seamlessly. Speciﬁcally, companies that list theirstocks in the stock exchange cannot select stockholders. They must face many and unspeciﬁed stockholders through the market. For these companies to contribute to social issues, the management is
expected to hold on to the original strong intention and overcome the pressure from investors who prioritize relatively short-term results and continue to manage the company without losing focus.
At the same time, impact investors need to look for long-term return. By focusing on long-term return,these investors may appear as intentionally giving up some of the beneﬁt of investing in public equity, thatis, high degree of liquidity. However, by being recognized from the companies as having a diﬀerent investment attitude from general stockholders, their commitment to long-term investment enables them tobuild good and trusting relationship and meaningful dialogue. Product design based on such long-term
position becomes the basis of the investor and the management company to show additionality in impact
investment in public equity. Through the development of impact investment in public equity, if the base of
impact-oriented stockholders as long-term supporters expand, this will be a strong tailwind for the activities of impact-oriented companies.
3) Additionality of the investors (the fund manager) and engagement
When investing in public equity, an opportunity to provide funds directly to the investee is limited. In mostcases, investing means a transaction with a third party to buy/sell the companyʼs stocks in the market.
Given such nature, considering the additionality to an investor by impact investment in public equity,
engagement activities naturally become more important.
Engagement activities become the foundation of impact measurement and management (IMM) for
impact investment in public equity. In listed companies, there are not many cases where analysis andinformation disclosure necessary for IMM are suﬃciently provided to stockholders. In such case, impact
investors can explain the investee companies the concept of impact monitoring and methods as well as
its signiﬁcance to gain understanding and encourage increasing information disclosure of speciﬁc details,

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Contributions

or in some cases, improve the companyʼs business strategy.
From the viewpoint of a listed company, an investor is just one of the many and unspeciﬁc. Investors needto avoid being one of the many and unspeciﬁc investors in order to enhance eﬀective engagement and berecognized by the company as someone worth having a dialogue with. In realizing such relationship, theframework of IMM which creates impact strategically and aim for business development will be an eﬀective approach.

3. Case Study: Resona Local Impact Investment
Resona structured its ﬁrst impact investment fund of listed Japanese equity, “Resona Local Impact
Investment,” targeting the solution of social issues in Japan and started investing in March 2021. Hereafter, I would like to introduce some of the accomplishments of the fund as a real-life example, while referring to the points raised earlier. (The speciﬁcs of selecting the issues and impact assessment are scheduled to be published in Resonaʼs impact report to be regularly published after the spring of 2022.)

1) Impact investment with “purpose” as the starting point
The starting point of Resonaʼs impact investment is the companyʼs purpose introduced in its stewardshipreport, “An asset manager that can provide abundance and happiness to future generations as well as ourown.” From the operation side, this purpose means that Resona aims to contribute to the customersʼasset building as well as cause positive eﬀect on the sustainability of the society and the environment
through the businesses of the investee companies, and the double goals will allow the company topromote to abundance and happiness of future generations. Impact investment means realizing both
impact and investment, thus it is an endeavor that concentrates Resonaʼs ideal described in the purpose.

Figure 72. Resona Local Impact Investment
Provide abundance and happinessto the future generation as wellResonaʼs
PurposeRealize “A society in Japan that is sustainable and good to live in”

Sustainable and resilient living environment

A society that is good to live in for everyone

Next-generation town building

Reduce the burden of household chores and raising children

Maintenance and improvement of lifeline functions

Diversiﬁcation and enrichment of education

Prevent and reduce disasters

Sustainable medical and elderly care

Industrialization of agriculture and improvement of product reliability

Help with the management issues of medium- and small-scale enterprises

Sustainable energy use

Empowering individuals

Selection of stock names and engagement
Resona Local Impact Investment

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Resona Local Impact Investment Fund states its speciﬁc goal as “Realizing a Japanese society that issustainable and good to live in.” It outlined ten items as compelling issues/areas that are detrimental tosustainability (Figure 72). The fund will ﬁnd companies that contribute to the solution of issues in each of
the ten areas and make a long-term and continuous investment, as well as encourage their activities
through engagement. This is the whole picture of the fundʼs “Theory of change.”2) Social issues in Japan
Behind the reason why the fund decided to address the social issues in Japan as its target is the awareness of crisis about the social issues inherent to Japan that cannot be solved only by a global framework
such as SDGs. For Japan to meet the SDGs, it is considered necessary to seek eﬀective solutions that are
based on the actual situation in Japanʼs society. These reasonings became the basis of the intention of
the fund or the fund manager.
In addition, in impact investing, Resona considers it desirable that the company shares the same goals
with the customers who invest their asset and the investee companies who actually work on solving theissues, and the fund should be managed based on mutual understanding. Based on this background,Resona aims to provide opportunities for all people living in Japan to engage and participate in solving theissues in everyday life that anyone could face.
Another feature of the fund is the selection of ten items, which shows the extensive scope of the social
issues it addresses. Social issues in Japan are complicated with many issues tangled up, mutuallyconnected by a chain of causality. Worsening of a certain issue will drive the deterioration in another issue
due to a structure that creates a negative spiral eﬀect. To change such structure for the better, it is naturally important to focus on solving such certain issue, but it is also required to stop the negative chain
reaction caused by the structure by simultaneously resolving multiple issues and areas.
Investing in public equity has advantages described earlier such as the expanse of investment universe,
the ease of access and the scale of the companiesʼ activities that enable an approach working on multiple
issues and areas simultaneously.
3) Engagement and IMM
The fund states engagement activities as a source of its value additionality together with the selection ofstock names. It is because, as explained earlier, Resona believes that promoting a creation of impact by
the investee companies through engagement is a major part of impact investorsʼ additionality.
As the basic stance of engagement, the fund works on realizing the three following points (Figure 73) andclaims it will be “ʼa long-term partnerʼ for companies that have intentions to solve social issues and implement actions to that goal.” Based on such stance, the fund works on making its customers understandthat impact investors are not those who confront companies but are partners running the same race withthe same goal and it aims to develop a constructive dialogue between them.

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Contributions

Figure 73. Engagement activities❶ Sharing intentions
・ Explain the Resona Local Impact Investmentʼs issue awareness and its futuregoals, and obtain understanding・ Specify social issues that companies could contribute to the solution and discuss
the awareness of current situation

Companies
with intention
to challenge issues

LONG-TERMPARTNERSHIP・ Build consensus on the vision of the future and the future goals to be realized
through the companiesʼ business activities❷ Continuous and long-term holding・ In support of the managementʼs stance to have an intention to act on solvingsocial issues, continuously hold the companiesʼ stocks
・ Clarify an investment stance not to be swayed by short-term results and focus on
long-term corporate value creation❸ Constructive and speciﬁc dialogue
・ To “visualize” the roadmap for solving social issues, and regularly check the
progress of achievements
・ Share managerial issues to realize the companiesʼ goals and hold inquiry-basedlearning sessions that promote continuous improvement and sophistication❶ Sharing intensions
The starting point to grow out of being just one of many and unspeciﬁed investors and to eﬀectively
engage with the investee companies is sharing intentions. To be recognized by the investee companies as
an investor worth holding a dialogue with, Resona not only works to gain a deep understanding of theinvestee, but it also provides thorough explanation on the concept and the issue recognition of the fundin order to gain understanding from the companyʼs side as well. In addition, Resona holds discussion on
the current state of the social issue the company is targeting as well as the future vision it is seeking inorder to share awareness. If mutual understanding cannot be formulated at the starting point, it is expected to be diﬃcult to cooperate on IMM over the long run, thus Resona views sharing intentions as highpriority for its investment decision as well.
❷ Continuous and long-term holding
By clearly stating the fundʼs investment stance not to be swayed by short-term results and continuously
hold stocks over the long-term, it aims to implement IMM focused on long-term value creation. In case ofa change in the managementʼs direction during the investment or a loss of capacity to keep creating
impact and achieve growth, the possibility to sell stocks of the company is not totally denied. However, as
long as the shared goals exist, the fundʼs principle is to ﬁrst engage with the investee company and work
together on improvement.

143❸ Constructive and speciﬁc dialogue
In holding a dialogue with the investee, Resona sends the logic model as the discussion model which isthe framework for impact measurement prior to the meeting. By visualizing the pathway to impact
creation and using the model as the material for discussion, Resona aims to prevent the dialogue to“share intention” turning into an exchange of abstract opinions and induce discussion of speciﬁc points
so as to achieve meaningful results.

4. Final words
For impact investment to be spread even further, it is said that development of industry-standard framework and measurement method are crucial. In order to build a consensus in the investment industry,
accumulating speciﬁc undertakings and fact-based opinions are considered necessary. Although Resonaʼs initiative has just started, I wrote this article hoping it would help further development of impact
investment. I appreciate receiving feedback from the readers as they would be helpful for Resona toenhance its contribution and increase additionality.

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Contributions

Contribution No.3

Taking up the Challenge of Impact Investing at the Ritsumeikan Trust
Deputy Director, Division of Financial Aﬀairs, Division of General Planning and Development
The Ritsumeikan Trust

Katsuya Sakai

1. Purpose and History of Asset Management in Private Universities
The role of universities has been expanding and diversifying while the population of 18-year-old isdecreasing and government subsidies and research funding are being reduced. When considering future
university management from a long-term perspective, universities are required to obtain more diverse
external funding in the future, shifting their current income structure in which student fees account for
approximately 80% of their income. Asset management is one of the ways to obtain funds.
According to “Results of asset management by the incorporated educational institutions for FY2020(FY2019 results)” by the Promotion and Mutual Aid Corporation for Private Schools of Japan, the amountof assets of private universities to be invested in FY2019 reached 8.8998 trillion yen, increasing every year
since FY2016 when the survey was initiated. The reason why private universities have a large amount ofassets to be invested is largely attributable to the fact that they need to retain funds in the long term forthe replacement and renewal of their large campuses and many facilities, and to their characteristics
such as scholarship funds (No. 3 basic funds) in which interest and dividends are used for scholarshipprojects.
Currently, many private universities have established regulations on asset management and manage theirassets in accordance with investment policies, etc. decided by the board of directors after deliberations
by internal committees, and other bodies. Their assets are invested mainly in stable assets of deposits
and savings, and bonds, with deposits and savings accounting for 44.8% of total assets to be invested,bonds for 43.5%, stocks for 2.2%, and investment trust for 5.4%. This is presumably due to the fact thatseveral universities suﬀered signiﬁcant losses from derivatives trading as a result of the global ﬁnancial
crisis in 2008, and to the issuance of “Notice on Asset Management by Incorporated Educational Institutions” (Notice) by the Ministry of Education, Culture, Sports, Science and Technology on January 6, 2009.
The Ritsumeikan Academy began asset management in FY2005 as so-called measures for payoﬀs(assets available for investment were 154.3 billion yen as at the end of FY2020). Initially, assets were
invested only in Japanese government bonds and deposits and savings. Its asset management has been
expanded to include investing in foreign bonds and alternative investments to this day. 17 years havepassed since the start of asset management, and the Academy has taken into account the economic
situation and other conditions from time to time; however, our basic stance on asset management hasremained unchanged and we have always managed our portfolio with two principles of “preserving asset
values” and “diversify risks” in mind.

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2. Background of The Ritsumeikan Trustʼs Social Impact Fund
2.1 BackgroundWe have managed our assets as described earlier. While the primary mission of private universities is tosend graduates who will contribute to society, supporting these graduates will also further enhance thevalue of the universities. As such, we have also considered possibility of investing in or providing ﬁnancing to entrepreneurial and business activities related to alumni, faculty and staﬀ, students, etc. withincertain limits, separately from regular asset management that aims at preserving assets over the short or
medium term, with the expectation that they would provide feedback to the Academy over the very longterm. Our model is based on the fact that advanced universities in Europe and the U.S. have formed scholarship funds and other assets through donations from alumni who have started their own businesses andthrough gain on the sale of stocks in initial public oﬀering, etc.
Traditionally, these initiatives have been conducted as activities in the ﬁeld of university research within
the framework of joint research, with the keyword “industry-academia collaboration.” Recently, in
addition to the traditional industry-academia collaboration such as joint research and funded research,commercialization of research seeds and collaboration with start-ups, etc. have also been actively
conducted. Against the backdrop of national policies, funds have been established, mainly at the University of Tokyo and other national universities, to invest in university-launched ventures, etc. Many of themseek only economic returns on exit, and funds that have an impact investing perspective in addition toeconomic returns have yet to emerge.

2.2 Ritsumeikan Impact-Makers Inter X (Cross) Platform (RIMIX)
Against the backdrop described above, we had interviewed alumni, ﬁnancial institutions and others to ﬁnd
out what value Ritsumeikan can oﬀer to society in this area by demonstrating our strengths in comparison
to other universities. As a result, we decided to focus our attention on the characteristics that there aremany graduates who have started their own businesses to solve social issues and are working as so-called“social entrepreneurs.” We had fostered understanding and interest in social issues and had provided agreat deal of assistance to students for solving social issues through establishment of the EDGE-NEXT
Program by the Ministry of Education, Culture, Sports, Science and Technology and APU Startup Program,scholarships that support studentsʼ independent activities, at universities, and inquiry-based classes at
aﬃliated junior high and high schools of the Academy. Based on these initiatives of the Academy andsuccess of alumni, we established Ritsumeikan Impact-Makers Inter X (Cross) Platform (RIMIX) in 2019to support Impact Makers, people and social entrepreneurs who make an impact on society.
RIMIX visualizes and supports the Ritsumeikan Academyʼs programs for students from elementary school
to graduate school, from mindset training to providing entrepreneurial support, as a single platform. We
oﬀer the “Presidentʼs PITCH CHALLENGE” as an acceleration program, to support students from skill set
to actually starting up a business. As part of our support, we have established Ritsumeikan Social Impact
Fund (RSIF), as a scheme to support alumni, students, and faculty and staﬀ who solve social issues
through business.

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Contributions

Figure 74. 2021 RIMIX program structure

https://r-rimix.com/about/

2.3 Ritsumeikan Social Impact Fund (RSIF)
Based on the purpose of RIMIX, we inevitably considered a scheme that aims to achieve both economic
returns and social impact as a social impact fund for Ritsumeikan Social Impact Fund (RSIF). We considered various forms of fund, and decided to utilize a limited partnership scheme to support startups thatgenerate social impact over the long term, with Plus Social Investment Co., Ltd., which endorsed our
purpose, acting as GP and a sole investor, thereby avoiding being required by LP investors to generate
returns in a short period of time.
As it is assumed that companies working to solve social issues include so-called NPOs and othernon-proﬁt corporations, the fund has been set up as a scheme that can not only make investments but
also support various types of fundraising activities such as bond underwriting.
RSIF had invested approximately 500 million yen in 9 companies managed by alumni from 2020 throughthe end of December 2021. In October 2021, it prepared a report “Social Impact Report 2020-2021,” jointlywith ADDress Inc. and The Social Innovation and Investment Foundation, which visualized how“ADDress,” a subscription-based multi-location service for living and housing provided by ADDress Inc.,
had been involved in social issues and how much it had contributed to improving and solving such issues.
Going forward, it aims to realize investments in startups launched by students who have been supported
by RIMIX.

< Outline of the Fund > https://r-rimix.com/fund
Name of the Fund

Ritsumeikan Social Impact Fund Limited Partnership

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OutlineRSIF pursues both ﬁnancial returns and social returns (social impact) by making

investments and loans to companies for which students, alumni, and others of the
Ritsumeikan Academy have management responsibility.

Investment targets

all corporations, including non-proﬁt corporations

Fund size

1.0 billion yen

Fund operator

Plus Social Investment Co., Ltd.

3. Expectation and Prospect for Impact Investing by Incorporated Educational Institutions
3.1 Aﬃnity between Impact Investing and Education and Research Project in Incorporated Educational Institutions

As the areas of investment have become more diverse in the course of making investments through RSIF,
we have increasingly felt that both the Academy and portfolio companies will beneﬁt from the value
creation to society through collaboration with various educational and research institutions, etc. in the
Academy, which will ultimately contribute to generating social impact for the portfolio companies. Creating opportunities for managers of the portfolio companies, who are alumni of the Academy, to share theirknowledge with students will oﬀer students an experience they would not normally have. Students canhave such an experience as an extension of their schoolwork. We have conﬁrmed some cases in which
this has led to opportunities for students to inﬂuence their career choices, and for managers of the portfolio companies to acquire human resources, including internships. RIMIX originally aims to form a community of social entrepreneurs that will be useful after graduation through collaboration with external institutions and alumni professionals who share our philosophy, and setting up interactions that transcend
schools and generations by taking advantage of our strengths as an Academy with educational institutions from elementary schools to graduate schools. RSIF, as part of RIMIX, is also increasingly taking on
not only the investment function, but also the function of creating an ecosystem among alumni, partnercompanies, and students. This will lead to the achievement of “creation of social symbiosis value” inR2030, mid-term plan of the Academy, and we will actively proceed with such collaboration in the future.
With the spread of online classes and educational contents on the Internet amid the COVID-19 pandemic,
the need for community functions provided by schools will continue to increase. In this respect, RSIF is
considered to possess value as a community function as well that connects people who share similar values.
RSIF is a mechanism, in the form of a fund, to watch how graduates and current students of the Academy
go out into society, how they succeed, and what kind of value they create. As an incorporated educational
institution responsible for the development of people, we see great value in this. Due to the unique ﬁnancial characteristics of the incorporated educational institutions, we are allowed to take an investment
stance of looking at long-term growth of the portfolio companies while ensuring a minimum ﬁnancial
returns as an investor but not placing the highest priority thereon. We believe that we need to make fulluse of this privileged environment for the beneﬁt of society.

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Contributions

Our educational and research activities as an incorporated educational institution to nurture people andcreate innovation are themselves activities to generate social impact, and we are constantly reviewing ourown activities through impact investing. In this sense, impact investing may oﬀer various possible development besides economic returns in incorporated educational institutions.

3.2 How we communicate social impact
As described earlier, social impact is of great signiﬁcance in incorporated educational institutions; however, how to measure social impact is a very diﬃcult theme even though various attempts have been madeby organizations including The Social Innovation and Investment Foundation (SIIF). In the education
sector as well, we have similar challenges in the measurement of educational eﬀects. How to measure“social symbiosis value,” the theme of the Ritsumeikan Academyʼs mid-term plan, mentioned earlier, isalso a major challenge.
On the other hand, since the capital for activities of the incorporated educational institutions is people
who gather there, how to make these people feel empathy and attraction for the education and research
environment, philosophy, and contents of such institutions is important for them to become an attractive
community. The impact indicators as a result of their activities are an important factor when reﬂecting on
their own activities as evidence; however, when looking at impact from the perspective of communicating
to others, a diﬀerent approach may also be eﬀective. We are examining what means would be eﬀective
for RSIF in terms of qualitatively “communicate” its social impact.

3.3 Establishment of the Division of Startup and Business Development Promotion
With the initiatives described above as a foundation, the Academy established the Entrepreneurship andCommercialization Promotion Oﬃce in June 2021. This is an organization to promote both integrated
entrepreneurial education, implemented through RIMIX and RSIF, and the creation of researchseeds-style university-launched ventures. The theme of generating “social symbiosis value” hasremained unchanged.
We intend to continue to develop entrepreneurship and commercialization by creating a place that
embodies “Challenge your mind, Change our future” with our emphasis on social impact while making thefull use of the power of “stories” to generate human empathy that impact investing possesses.

References“Results of asset management by the incorporated educational institutions for FY2020,” the Promotion and
Mutual Aid Corporation for Private Schools of Japan (2020), Private School Information Oﬃce, Private School
Management Information Center
Reference: https://www.shigaku.go.jp/ﬁles/sisanunyoujoukyou-r2.pdf
Ritsumeikan University Public Relations Oﬃce (November 29, 2021). Ritsumeikan University Shiruto.
Reference: https://shiruto.jp/sp/3297/

Editor's note

Afterword: Editorsʼ Postscript
Secretariat, GSG-NAB Japan / Japan Social Innovation and Investment Foundation (SIIF)

Report Production Team for “The Current State and Challenges of Impact Investing in Japan ‒ FY2021 Survey ‒”Michiru Toda Project Leader, SIIF Impact Oﬃcer
Continuing from last year, as the writing and research team leader, my primary responsibilities were managing production for the overall project, organizing concepts, developing estimation methods, designing the questionnaire form,
conducting ﬁeldwork, compiling and analyzing, and writing the text (mainly the summary and Chapter 2). First, I would
like to once again express my appreciation to the organizations and people responsible for supporting our Questionnaire Survey. From here on, impact investing in Japan is expected to move on to the “how” phase which looks at developing methods and human resources. I hope this report will be used to once again reﬂect on the “why” and serve as thebasis for discussions and implementation to advance the quality of impact investing.

Kyoji Sasaki Project Sub-Leader, SIIF
I became involved with this project from this year. I was mainly involved with conducting ﬁeldwork, compiling andanalyzing, and writing the text for “Column 1: Introduction of the Impact Investment Forum.” I would like to take thisopportunity to thank everyone for their cooperation with the Questionnaire Survey. This year again, I feel we were able
to gather leads for some useful insights. I hope this report will be of some use towards the spread and development of
impact investing.

Satoshi Oda Advisor, SIIF Knowledge Development Oﬃcer
Continuing on from the previous ﬁscal year, I participated in the overall project as advisor and also wrote the text for“Column 2: Introduction of Consumer Surveys related to Impact Investing.” The essence of impact investing is to solve
social challenges through capital markets, and therefore, funds are not philanthropic money but rather risk money. 2021
saw great progress towards mainstreaming impact investments in the public administration and the ﬁnancial industry,
and in order for this not merely to be a fad from its novelty but to be sustainable, it is necessary to demonstrate its
appeal to continue attracting risk money. Together with IMM and being purpose-driven, to what extent can straightforward proﬁt management, i.e., how much one can secure earnings, be rooted in the companies that are receiving theinvestments? This management perspective and action is what I believe will become increasingly important for thesustainable growth of impact investing in the future.

Takatsugu Konno partial commission of work, CEO of Token Express Co., Ltd.
I was responsible for the ﬁrst chapter “What is Impact Investing,” “Case Studies of Impact Investments/Impact Companies,” and “Contribution: Topics regarding Impact Investing.” I would like to express my profound appreciation to theorganizations and people who supported the case studies section and the contribution section. The prosperity of
impact investing is remarkable. I feel that the era where ﬁnancial services and corporations become the bearer of social
impact is near.

Misa Kanegae partial commission of work, Business Development, Token Express Co., Ltd.
I was responsible for interviewing and writing the case studies, and managing the contribution section of this report. I
would like to extend my sincere appreciation to everyone who helped in the interview process and the contributionsection. Through conversations directly with those who are involved with impact investing from various positions, I wasable to feel their passion, ingenuity, and eﬀorts made through trial and error. I wish sincerely that this passion isconveyed to the readers and the information serves as support for future eﬀorts and discussions.

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The Current State and Challenges of Impact Investing in Japan‒ FY2021 Survey −PUBLICATION DATEMarch 31, 2022
PUBLISHER
Japan Social Innovation and Investment Foundation (SIIF)AUTHORS
Secretariat, GSG-NAB Japan / Japan Social Innovation and Investment Foundation (SIIF)
Michiru Toda, Kyoji Sasaki, Satoshi Oda
Token Express Co., Ltd. (partial commission of work)
Takatsugu Konno, Misa Kanegae

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＞

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