The Current State of Impact Investingin Japan

2019
March 31, 2020 (December 24, 2020 Version)
Global Steering Group for Impact Investment (GSG) National Advisory BoardExecutive Summary

The Current State of Impact Investing in Japan

According to the survey of the GSG National Advisory Board in 2019, it is conﬁrmed that thebalance of impact investing in Japan reached at least JPY 317.9 billion.
The survey also shows that 5 new entrants executed impact investing this year while 9 out of
11 organizations executing impact investing which had continued to reply thequestionnaires since 2018 expanded their activities.

2019 Highlights

Two key highlights are observed in the Japanese impact investing market.

❶ New entry into the impact investing market by ﬁnancial institutions
The research found that the number of players expanded widely in the impact investing
market, including investment management companies and institutional investors, with one
third being organizations that newly executed impact investing. An increasing number ofﬁnancial institutions are expected to enter into the impact investing market in the future.
For example, Japan Impact Investment II Limited Partnership was established in Japan, in
which, unlike Japan Impact Investment I operated solely by the Shinsei Bank Group,
foundations other than the Shinsei Bank Group, ﬁnancial institutions, industrial
corporations, and educational corporations participate as joint GPs or LPs. Development
Bank of Japan agreed to invest in the Bridges Social Outcomes Fund II which is managed by
Bridges Fund Management Limited (“Bridges”) in the UK, and entered into a businesscooperation agreement to build a strategic partnership with Bridges. As these initiatives
show, it is expected that knowledge will be accumulated by the ﬁnancial institutions newly
participated in the funds, leading to further expansion of impact investing activities.

❷ Development in impact investing in the policy making side
In the leadersʼ declaration of G20 Osaka Summit in 2019, it was mentioned that “other
innovative ﬁnancing mechanisms including blended ﬁnance can play an important role in
upscaling collective eﬀorts by each country”, and Prime Minister Shinzo Abe declared in his
speech that “Japan will lead the international discussion by examining ways to employ
diversiﬁed and innovative ﬁnancing schemes including social impact investing and utilizing
dormant bank accounts for ﬁnancing necessary to address global issues.” The Regional
Revitalization SDGs Financial Research and Study Group was established by the Cabinet
Oﬃce to study and discuss how regional revitalization SDGs ﬁnance can solve regional social
issues, and the discussion is under way on promoting the regional revitalization SDGs
ﬁnancial scheme. These political developments are also expected to lead to growth in andpromotion of impact investing in the future.

The Current State of Impact Investing in Japan 2019

Introduction

04

About The Global Steering Group for Impact Investment (GSG)
and the National Advisory Board

05

About this Report

CHAPTER I Overview of Impact Investing06❶ History and Current State of Impact Investing11❷ History and Background of Impact Investing in Japan15❶ Estimating the Market Size❶-1 Research Perspective❶-2 The Definition of Impact investing16❷ Screening Process of Impact Investing Cases❷-1 Approach to screening impact investing cases❷-2 Comparing against the 2018 Research Findings

17❸ Research Scope for Market Estimation

18❹ Market Size Estimation Findings❹-1 Overview

21❹-2 Comparison of the current state of impact investing in Japan with the global market

24❹-3 Linking impact investing performance to the SDGs

26❹-4 Awareness of impact investing26❹-5 Future plans for impact investing29❹-6 Disclosure of impact investing30❺ Case Studies

46❻ Insights from the Current Impact Investing Market

48

Conclusion

49

Contributions, etc. Topics Related to Impact Investing50❶ Relationship between ESG investment and impact investing56❷ Significance and reality of impact investing60❸ The domestic trend of SDGs × Finance

Table of Contents

CHAPTER II The Japanese Impact Investing Market

03

Introduction
About The Global Steering Group for Impact Investment (GSG) and the National Advisory Board
The Global Steering Group for Impact Investment (“GSG”) was established with the objectiveof globally promoting impact investing, based on the call by the then Prime Minister of the
UK David Cameron at the G8 Summit (“Summit”) in June 2013. Formerly known as the G8Social Impact Investment Task Force, GSG was rebranded in August 2015 when ﬁve
additional member countries joined. Sir Ronald Cohen, the founder of the British dormant04

account fund called Big Society Capital, served as the chairman and had organized a seriesof meetings from 2013 to 2014, which culminated in the Task Force Report published in 2014.

Introduction

Since the rebranding in 2015, the GSG has met once a year at its annual conference whilevarious working groups have congregated to tackle speciﬁc issues.

The GSG requires its member countries to form a national advisory board. Founded in 2014,
Japanʼs National Advisory Board (the former G8 Social Impact Investment Task ForceNational Advisory Board) is comprised of experts from various sectors throughout Japan
where information is shared and discussion is underway actively on various issues regarding
impact investing.

As of the end of December 2019, the GSG Japan National Advisory Board consists of thefollowing members.

Chairman● Hiroshi Komiyama

Chairman, Mitsubishi Research Institute, Inc.

Vice Chairman● Masataka Uo

President and CEO, Japan Fundraising Association

Board members● Shuichi Ohno

President, Sasakawa Peace Foundation● Hiroshi Irie

Managing Executive Oﬃcer, Sumitomo Mitsui Banking Corporation● Ken Shibusawa

Founder and Chairman, Commons Asset Management, Inc.

● Tomoya Shiraishi

CEO, Social Investment Partners● Masataka Fukao

Chairman, Plus Social Investment● Takehiro Fujimura

General Manager, Corporate Sustainability & CSR Department,
Mitsubishi Corporation● Hiroshi Mikitani

Representative Director, Japan Association of New Economy● Hiroyuki Iijima

Managing Executive Oﬃcer, Mizuho Bank, Ltd.

● Junichi Yamada

Senior Vice President, Japan International Cooperation Agency (JICA)

The Secretariat of the GSG Japan National Advisory Board is comprised of Social Innovation
and Investment Foundation, Asian Venture Philanthropy Network, K.K., Kazetotsubasa Co.,
Ltd., K-three Inc., and Japan Fundraising Association.

About this Report
This report is a report on impact investing in Japan that dates back to July 2014 when theﬁrst edition was published by the GSG National Advisory Board, titled “Current State ofSocial Impact Investment in Japan.” Subsequent editions “Proposals for the Expansion ofSocial Impact Investment” (May 2015), “Current State of Social Impact Investment in Japan2016” (September 2016), “Current State of Impact Investing in Japan 2017” (February 2018)and 2018 (March 2019) precede this report. The term “impact investing” is used in this reportbased on discussions at the GSG National Advisory Board, which is synonymous with “social
impact investment” that was used until last year.

Chapter I, “Overview of Impact Investing” oﬀers a glimpse of impact investing in the context

Impact Investing Market” reports on the study of the impact investing market in Japan.
With regards to market size estimation in Japan, in addition to a questionnaire survey ofpractitioners in the impact investing market, interviews and in-depth research on publicly
available reports and information were conducted to calculate market size.

This report was prepared under the supervision of the GSG National Advisory Board, with thesupport of K-three Inc. in research and writing. We would like to express our appreciation to
all those who participated in the preparation of this report.

Researchers and authors of this report
K-three Inc. : Mizuki Atsuta, Chika Ochiai, Ryo Onizawa, Toshiaki Kataoka, and Masaki Kochi* For any questions or comments,
please contact the Secretariat of the GSG National Advisory Board
Japan Social Innovation and Investment Foundation＜info@siif.or.jp＞

About this Reportof global trends, with a focus on its history and deﬁnitions, and Chapter II, “The Japanese05

CHAPTER I

Overview of Impact Investing❶ History and Current State of Impact Investing
According to the Global Impact Investing Network (GIIN), 1 impact investing is deﬁned as
investment that aims to create positive and measurable social and environmental impact
while generating ﬁnancial returns at the same time. The GIIN deﬁnes four corecharacteristics of i mpact investing, that is (1) intentionally contributing to positive socialand environmental impact through investment alongside a ﬁnancial return, (2) using
evidence and impact data in investment design, (3) managing investment throughunderstanding of impact performance, and (4) contributing to the growth of impact

06

investing. 2

CHAPTER I

Various needs among investors, investees, and intermediaries accelerate the steady
expansion of the impact investing market, especially in Europe and North America.

Overview of Impact Investing ❶This chapter summarizes the history and background of impact investing as well as market
sizes in diﬀerent countries.

❶-1 History and Background of Impact Investing
The term “impact investing” was ﬁrst mentioned more than a decade ago in 2007 at aconference organized by the Rockefeller Foundation. Further back in history, in the
Netherlands in 1968, a study group, which later developed into Triodos Bank, was formed toHistory and Current State of Impact Investing

discuss the need for ﬁnancial institutions that contribute to solve environmental and social
issues. The eventual establishment of a foundation that provides funding to social
enterprises in 1971 3 marked the beginning of impact investing in Europe. Subsequently,
numerous ﬁnancial institutions and cooperatives that focused on social ﬁnance, community
ﬁnance, environmental ﬁnance, and so on emerged. In addition to Triodos Bank, someinstitutions developed from cooperatives such as the Co-operative Group in the UK and the
GLS Community Bank in Germany. In this way, the origin of impact investing is observed inEurope and North America, and the history of impact investing in each country is reviewed
as follows.
In the almost 50-year history of impact investing in Europe, a turning point was theestablishment of the Social Investment Task Force in 2000 that was headed by Sir Ronald
Cohen of the UK. As a result, new foundations, organizations and companies were formed,
contributing to the expansion of impact investing activities, mainly in the UK. In thefollowing years, several more milestones were achieved in the UK: in 2002, theestablishment of Bridges Ventures, the ﬁrst fund specialized in community investment, startof a social investment tax cut through the Community Development Financial Institutions(CDFIs), and the establishment of Charity Bank, followed by the launch of a new legal entity
in 2004 called the Community Interest Company, for limited companies that are designated to1

https://thegiin.org/
GIIN, https://thegiin.org/characteristics
3 Monitor Institute (2009) “Investing for Social & Environmental Impact”
2use their assets and proﬁts for the public good. In 2010, the ﬁrst-ever social impact bond4 (“SIB”)
was constituted by using one of the impact investment tools whereby the public and private
sectors partner to fund projects in a pay-for-success ﬁnancing model. Additionally, in 2012, Big
Society Capital was founded as a fund of funds that provides ﬁnancing to the impact investing
market, using bank ﬁnancing and funds from dormant bank accounts, and then in 2017, Barclays
Capital became the very ﬁrst major British bank to launch an impact investing fund called theMulti-Impact Growth Fund.
Around the same time, in the United States, the origin of impact investing was observed. In
1968, the Ford Foundation initiated Program-Related Investments (PRI). PRI is a scheme whereby
foundations support social businesses through investment, loans, and other means by utilizing apart of their endowments. Some examples include low-interest student loans, social businesses
that generate employment for the poor and aﬀordable housing projects for low income classes.

Community Development Financial Institutions (CDFIs) helped activate more regional
economies, and the PRI market size reached more than USD 3 billion in 2000. After the2008 underscored the need for new mechanisms which allowed investments to create healthiersocieties, which ushered in a new wave of ﬁnancial institutions and foundations from the private
sector. For example, there was an increased involvement in impact investing from the U.S. techindustry as illustrated by the Gates Foundation; and from the ﬁnancial sector, Goldman Sachsʼ
Social Impact Fund (2013) and Morgan Stanleyʼs Impact Investment Services (2012). In 2011, theRockefeller Foundation, the GIIN, and JP Morgan jointly published the ﬁrst annual report titled“Impact Investing.”5 This trend is expanding outside of the ﬁnancial sector; in recent years in the

99% of his shares in Facebook stock (USD 45 billion) and launched the Chan Zuckerberg
Initiative in 2015. 6 This was followed by the US buyout-fund TPG Growth establishing the Rise
Fund with Bono of the rock band U2 in 2018, which raised USD 2 billion for impact investing.7
As a culmination of this trend, the Group of Eight (G8) industrialized nations decided to promote
impact investing on a global scale at the UK Summit in 2013, and went on to launch the Global
Steering Group for Impact Investing (GSG) in 2015. Chaired by Sir Ronald Cohen, the GSG
currently has 21 nations 8 plus the EU as members, through which each government has
implemented policies and promoted the growth of the market. These have led to the promotionof impact investing, as in 2018, “impact investing” was included in the leadersʼ declaration of
G20 Buenos Aires Summit,9 and in the leadersʼ declaration of G20 Osaka Summit in 2019, it was
mentioned that “other innovative ﬁnancing mechanisms including blended ﬁnance can play animportant role in upscaling collective eﬀorts by each country.” Following the G20 Osaka Summit,
the G7 ministers expressed support to promote impact investing in the G7 Paris Summit.10

4

Not a typical bond, SIBs are a combination of pay-for-success contract with the public sector and fundraising from third party investors
5 J.P. Morgan, the Rockefeller Foundation and the GIIN (2010) “Impact Investments”
6 The Guardian (2015) “Mark Zuckerberg and Priscilla Chan announce baby girl ‒ and USD 45bn charity initiative”
7 World Economic Forum (2018) “The Rise Fund”
8 http://gsgii.org/
9 https://www.mofa.go.jp/mofaj/ﬁles/000424876.pdf
10 https://gsgii.org/2019/07/g7-ministers-issue-supportive-statement-on-impact-investment/

History and Current State of Impact Investing

United States, Mark Zuckerberg, the founder of Facebook, announced a lifetime donation of

Overview of Impact Investing ❶Rockefeller Foundation introduced the term “impact investing” in 2007, the ﬁnancial crisis in

CHAPTER I

In 1994, with the introduction of the Riegle Community Development and Regulatory Act,

07

Figure 1

Chronological table of impact investing 11

Overseas

The Rockefeller Foundation

used the term “impact investing” forthe first time and started to promote
impact investing

Japan

2007

2008
The Global Impact Investing
Network (GIIN), a global networkof impact investors, was established08

IRIS, a reporting standard for impact

2009

investing, began operating

CHAPTER I

The worldʼs first social impact
bond was launched in the UK

2010

The US gave legal recognition to

Overview of Impact Investing ❶Benefit Corporation,

as a category for social enterprises

2011

Big Society Capital, a social

impact investment fund funded bydormant bank accounts,
was established in the UK

2012
GSG National Advisory Board
was established

History and Current State of Impact Investing

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

2013

IBG8 Social Impact Investment Task Force

The worldʼs firstdevelopment impact bondwas launched in India

GSG National Advisory Board proposed

7 key recommendations

towards promotion of impact investing
The promotion of impact investing is
mentioned for the first time in the2014

governmentʼs growthstrategies and in basic policies
for regional revitalization
The Government Pension Investment
Fund (GPIF) signed the

2015

2016

TPG, a major private equity firm,
established a JPY 200 billion social
impact investment fund

“Impact investing” was included in theleadersʼ declaration of G20 Buenos

Aires Summit

11

http://www.siif.or.jp/wp-content/uploads/2019/07/SIIF̲annual̲report̲2018.pdf

2017

2018

UN Principles of Responsible
Investment

Social impact management
Initiative was establishedThe Dormant Deposits
Utilization Act was enacted

Japanʼs first social impact
bond (SIB) was launchedSocial impact bonds were included in
the agenda for the PPP meeting of

the Council on Investments
for the Future❶-2 Trends among Impact Investing Organizations
In addition to GSG, there are three representative organizations that aim to advocate impact
investing globally, which are the GIIN, Impact Management Project (IMP), and SDGs Impact.

❶ -2-1The Global Impact Investing Network (GIIN) was envisioned and created by a group of

Global Impact

investors centered on the Rockefeller Foundation to activate impact investing. In terms ofInvestingactivation of impact investing, the GIIN pursues the creation of a global network for impact

Network (GIIN)

investors, and the implementation of a standardized social impact measurement index toevaluate social and environmental impact. Their initial project was the launch of aninvestment working group focused on sustainable agriculture in Sub-Saharan Africa.
The GIIN also created IRIS as catalog of metrics for impact investing, which has been

Catalog of Metrics as one component of the system, which is the generally accepted system
for impact investors to measure, manage, and utilize their impact. 12

people participated. In Japan, ﬁve organizations including the Social Innovation and
Investment Foundation (SIIF) join as full members of the GIIN.

❶ -2-2The Impact Management Project (IMP) is an initiative launched in 2016 led by Bridges FundThe Impact

Management and others, involving over 2,000 organizations. This initiative led to theManagement

establishment of the IMP network in 2018, as a platform for corporations and investors to

Project (IMP) 13

share knowledge, pursue opportunities for synergy and partnerships, and generate a

network is a collaboration of global organizations including the United Nations
Development Programme (UNDP), the International Finance Corporation (IFC), theOrganisation for Economic Co-operation and Development (OECD), Social Value
International (SVI), the Global Reporting Initiative (GRI), the GIIN, the Principles for
Responsible Investment (PRI), the World Benchmarking Alliance (WBA), and the GSG, which
compose the core members, together with partner members. In Japan, K-three Inc. and theSocial Innovation and Investment Foundation (SIIF) join as strategic partner members. 15❶ -2-3

SDGs Impact was founded in 2018 by the UNDP in cooperation with the IMP members. SDGs

SDGs Impact 16

Impact provides standards and tools, and networking opportunities to enable eﬀective
investment for the Sustainable Development Goals (SDGs) adopted by the United Nations in2016. The SDGs consist of 17 goals and 169 targets to achieve a sustainable world as set out
in the 2030 Agenda for Sustainable Development adopted at the UN Summit in 2015. The
agenda pledges “no one left behind” and the goals are unique in that they call for action by
all countries including both developed and developing. It is estimated that USD 5 to 7
trillion is needed annually to achieve these goals. 17
12 https://iris.thegiin.org/
https://impactmanagementproject.com/
14 Social Impact Measurement Initiative (2018) “Social Impact Management Guidelines Ver. 1”
15 K-three news release (2019)16 https://sdgimpact.undp.org
17 UNDP (2017) “Impact investment to close the SDG funding gap”
13

History and Current State of Impact Investing

common understanding on social impact measurement and management 1 4 . The IMP

Overview of Impact Investing ❶“GIIN Investor Forum 2019” was held in Amsterdam in October 2019 where more than 1,200

CHAPTER I

updated for several years. In May 2019, the GIIN released the IRIS+ system, including the IRIS09❶ -3 The Global Impact Investing Market Size
The GIINʼs 2019 Annual Impact Investor Survey 18 shows that survey respondents manage
USD 239 billion in investing assets globally. The GIIN estimates that the global impact
investing market size including investing assets of impact investors who did not respond to
the survey has reached USD 502 billion at the end of 2018. 19
The GIIN forecasts strong future growth in the impact investing market in 2019. As survey
respondents invested USD 33.1 billion in impact investing in 2018, those organizations are
expected to invest roughly USD 37.3 billion in 2019, reﬂecting +13% projected growth in thevolume of capital invested.
The GIIN survey shows that in 2018, the US and Canada accounted for 28% of total assets

10

under management, while Latin America and Caribbean and Sub-Saharan Africa accounted

CHAPTER I

for 14% each, and Europe accounted for 10%. Trends among ﬁve-year repeat from 2014 to2018, respondents indicated the fastest growth in Middle East and North Africa (43%, CAGR),South Asia saw CAGR of 24%, Latin America and Caribbean at 21%, and East and South East

Overview of Impact Investing ❶Asia at 20%, showing expansion of areas in which respondents invested their capital.
Respondents overall indicated signiﬁcant allocations to ﬁnancial services (13% tomicroﬁnance and 11% to other ﬁnancial services), energy (15%), and food & agriculture(10%). Trends among ﬁre-year repeat from 2014 to 2018 indicated diversiﬁed sector
allocations, as respondents grew their allocations to infrastructure at 61% per annum, water,
sanitation and hygiene and ICT at 43% per annum each.

Figure 2

Organizationsʼ headquarters location

History and Current State of Impact Investing

Western, Northern& Southern Europe
21%

Eastern Europe, Russia& Central Asia
1%

Middle East
& North Africa
East Asia
1%
2%
South Asia
3%

U.S. & Canada
58%

Southeast Asia
2%
No Single Headquarter
Location1%
Latin America& Caribbean（Including Mexico）
4%

Oceania1%
Sub-SaharanAfrica6%n=1102； exclude organizations for which headquarters location was unknown

18
19

GIIN (2019) “Annual Impact Investor Survey” https://thegiin.org/assets/GIIN̲2019%20Annual%20Impact%20Investor%20Survey̲webﬁle.pdf
GIIN (2019) “Sizing the Impact Investing Market” https://thegiin.org/research/publication/impinv-market-size❷ History and Background of Impact Investing in Japan
The impact investing market in Japan also continues its growth trajectory. The balance of
impact investing in Japan grew from JPY 71.8 billion in 2017 to JPY 317.9 billion in 2019. 20
An increase in Environmental, Social and Governance (ESG) investments, a demographic
shift caused by an aging society and decline in birthrate, and the eﬀect of natural disasters
have played a signiﬁcant role in the formation of the impact investing market in Japan. ESG
investment is the practice of investing taking into account environmental, social andgovernance factors when making investment decisions. In 2018, ESG investments reached
JPY 232 trillion, about 1.7 times greater than the previous year. Much like in the West, thisgrowth is driven by events such as the heightened long-term risks of worldwide
environmental degradation, the reorientation of the ﬁnancial market against short-termism

towards business models that solve social and environmental issues. 21 Structurally, issues
such as the increase in government spending on social security and medical insurance

mothers go beyond what the public resources that have supported the system in the pastcan cover. In relation to calamities, the Law to Promote Speciﬁed Nonproﬁt Activities (theNPO Law) was passed in 1998 following the Great Hanshin Earthquake of 1995. After theGreat East Japan Earthquake of 2011, monetary donations from within and outside of Japan
poured into the region, and in addition to direct donations and contributions, low-interest
loans for nonproﬁts and companies addressing post-disaster recovery and subsidies were
established during this time. Such activities have continued beyond emergency support,

Moreover, national and local governments are also considered to have partly contributed to
the formation of the impact investing market. The enactment of the Dormant Accounts
Utilization Bill in 2016 eﬀectively started in 2019, with the selection of Organization
Distributing Funds by Japan Network for Public Interest Activities (JANPIA) which wasappointed 23 as the Designated Utilization Organization by the Cabinet Oﬃce. The countryʼsﬁrst SIB projects backed by local governments came about in 2017 in Hachioji City and Kobe
City, and in 2018, a wider regional collaboration model was implemented in Hiroshima
Prefecture, and many more projects have been implemented, planned, or underconsideration as of 2019.

20 GSG (2020) “The Current State of Impact Investing in Japan 2019)Japan Sustainable Investment Forum (2018) “Fourth Sustainable Investment Survey in Japan”
22 GSG National Advisory Board (2016) “Current State of Social Impact Investment in Japan in 2016”23 Cabinet Oﬃce (2019) “Appointment of the Dormant Utilization Organization based on the Act on Utilization of Dormant Deposits”
21

History and Background of Impact Investing in Japan

with several impact investing originating from those activities. 22

Overview of Impact Investing ❷expenses due to aging demography, and the need for childcare services to support working

CHAPTER I

triggered by ﬁnancial crisis, a series of major corporate scandals, and the growing interests11❷-1 Trend in Demand
Two key trends are seen among service providers (the demand side of funding) aiming at
solving social issues.

First is the growth of social enterprises. While social enterprises have no legal specialized
form in Japan, the cases listed here refer to organizations that address social issues
regardless of their status as nonproﬁts or for-proﬁt companies. According to the “report on
the aggregated activity size of social enterprises in Japan” by the Cabinet Oﬃce in 2015, thesize of social enterprise activities in Japan is estimated as follows.
Social enterprise here is deﬁned as organizations that fulﬁll all of the following seven elements:

12
CHAPTER I① Working to solve or improve social issues through for-proﬁt activities② Main business objective is social mission rather than proﬁt③ Proﬁts are mainly re-invested into social project(s), not allocated to ﬁnancial

Overview of Impact Investing ❷investments or to dividend payouts (in the case of for-proﬁt organizations)④ Less than 50% of proﬁts are paid out to investors and shareholders(in the case of for-proﬁt organizations)⑤ Total revenues from social project(s) comprise more than 50% of
the organizationʼs total revenues⑥ Less than 50% of revenues are derived from public insurance(medical, nursing care and so forth)⑦ Less than 50% of the revenues (not including subsidies, membership fees andHistory and Background of Impact Investing in Japan

donations) are derived from government-commissioned projects

Figure 3

Overview of social enterprises in Japan 24
Number of social enterprises
Total added value
Number of paid employees
Revenue on social businesses

205,000
JPY 16.0 trillion (3.3% of GDP)
5,776,000
JPY 10.4 trillion

The number of nonproﬁt organizations among social enterprises has also showed someincrease compared to 2018. A recent trend shows that there has been a rise in nonproﬁts
that earn business revenue in addition to donations or subsidies, and there is an increase indemand for supplying funding to nonproﬁts operated with earned revenue.

24

Cabinet Oﬃce (2015) “A report on the aggregated activity size of social enterprises in Japan”

Figure 4

Number of nonproﬁt entities 25・26
Nonproﬁt organizations

51,428（-342）

Certiﬁed nonproﬁt organizations

1,118（+30）

Public-interest incorporated associations and foundations

9,719（+88）

Cooperatives

43,299（+375）

Social welfare organizations

21,186（-520）

Educational corporations

8,142（+15）*Values in parentheses indicate changes from 2018 27

A second emerging trend has been the increase of startups that have a mission of solvingsocial issues while also indicating promises of high economic performance. Although thosecases where institutional investors and venture capitalists are executing impact investing insuch startups with a mission of solving social issues. 28

CHAPTER I

startups may not necessarily fulﬁll the seven criteria listed above, there has been a rise in

13

Overview of Impact Investing ❷History and Background of Impact Investing in Japan

25 Cabinet Oﬃce (as of the end of October 2019) “NPO Statistics Information”
National Tax Agency (as of December 2019) “Corporate Number Publication Site”
27 GSG National Advisory Board (2019) “The Current State of Impact Investing in Japan 2018”28 Shinsei Bank Group news release (2019) “Impact Investment in Life is Tech, Inc.”26

❷-2 Trends in Supply
In terms of supply side trends of impact investing, funding suppliers can mainly be categorized ascorporations or individuals. In 2018, there was an increase in products geared toward individual
investors, such as the Social Investment Declaration by Crowd Credit Inc., 29 which provides
loan-based crowdfunding services, and listed stock investment trust launched by Nomura AssetManagement Co., Ltd. 30 From the organizational side, as their ﬁrst investment from its impact
investing fund to support women, Sasakawa Peace Foundation invested JPY 1 billion in a
microﬁnance investment fund by Blue Orchard Finance SA of Switzerland in 2018, 31 and in 2019, in
addition to Sasakawa Peace Foundation, Sumitomo Life Insurance Company which had invested in
the fund since 2016, Japan International Cooperation Agency, and Japan Bank for International

14

Cooperation made more investment in the fund upon request for a capital increase.

CHAPTER I

In 2019, Shinsei Impact Investment Limited invested by Shinsei Corporate Investment Limited of theShinsei Bank Group and Japan Social Impact Investment Foundation (SIIF) established Japan Impact
Investment II Limited Partnership, with Mizuho Bank, Ltd. In addition to the fund operating

Overview of Impact Investing ❷members, Shinsei Bank, Sumitomo Mitsui Trust Bank, Limited, The Bank of Yokohama, Ltd.,
educational corporations, and industrial corporations have invested in the Fund for its ﬁrst closing.32
In addition, parties engaged in impact investing have expanded and partnership/collaboration has
increased among them,33 as evidenced by the fact that Development Bank of Japan agreed to invest
in SIB managed by Bridges Fund Management Limited (“Bridges”) in the UK, and entered into abusiness cooperation agreement to build a strategic partnership.
The Japanese government also took action to promote impact investing. In the G20 Osaka Summit
in June, in addition to that promoting impact investing was mentioned in the leadersʼ declaration, as

History and Background of Impact Investing in Japan

mentioned above, Prime Minister Shinzo Abe clearly declared in his speech that “Japan will lead theinternational discussion by examining ways to employ diversiﬁed and innovative ﬁnancing schemes
including social impact investing and utilizing dormant bank accounts for ﬁnancing necessary toaddress global issues.” In July, the ﬁrst meeting of “Round Table Discussion of Advisory Panel to
Discuss New Ways of Financing to Meet the SDGs” was held.
Other domestic moves which can lead to the expansion of impact investing include an attempt toconnect the attainment of the SDGs to ﬁnance.
For example, the Regional Revitalization SDGs and ESG Financial Research and Study Group wasestablished by the Cabinet Oﬃce to study and discuss how regional revitalization SDGs and ESG
ﬁnance can solve regional issues. The regional governments are also taking actions in line with goals
and targets of the SDGs, which is expected to lead to the future impact investing. Kanagawa
Prefecture has implemented “SDGs Social Impact Evaluation and Demonstration Project” since 2018,
which aims to connect conducting social impact measurement and management to investments
and loans from the market including capital providers. In Shizuoka Prefecture, “SDGs x ESG Financial
Liaison Committee” was established to promote loans and businesses which place emphasis onenvironment.

29

Crowd Credit news release (2018) “Crowd Credit made a public declaration to proactively invest in social enterprises around the world”
Nomura Asset Management news release (2018) “Nomura ACI Advanced Medical Impact Fund”
31 Sasakawa Peace Foundation news release (2018) “The Asia Women Impact Fund establishedby the Sasakawa Peace Foundation contributed JPY 1 billion as its ﬁrst investment to the Blue Orchard Microﬁnance Fund SA”
32 https://www.shinseibank.com/corporate/news/pdf/pdf2019/190628̲impact2̲j.pdf, https://www.pref.kanagawa.jp/docs/bs5/documents/20191108siryou.pdf
33 https://www.dbj.jp/ja/topics/dbj̲news/2019/html/20191120̲79719.html
30

CHAPTER II

The Japanese Impact Investing Market❶ Estimating the Market Size❶-1 Research Perspective
This research seeks to estimate the market size of impact investing in Japan to compare
impact investing in Japan to the global survey, and to identify the challenges, possibilities
and potentials towards the further growth of impact investing.
In addition to market size estimation, the survey also gathered information on respondentsʼ
level of interest in impact investing, the relationship between impact investing and theSDGs, and challenges in impact investing, etc.

CHAPTER II❶-2 The Deﬁnition of Impact investing

the discussion of the GSG National Advisory Board Working Group. 34

Deﬁnition of Term of Impact InvestingTermDeﬁnition
Inclusive of both short-term and long-term, social and environmental
changes or eﬀects as a result of speciﬁc projects or activities.

Social impact
measurement

To understand impact through quantitative and qualitative approaches andmake a value judgment of speciﬁc projects or activities.

Social impact
management

Management which aims to enhance impact by incorporating social impact
measurement into project management processes and making project
improvements or decisions based on information obtained.

Impact investing

Investing behaviors which attempt to solve social and environmental issues
while seeking ﬁnancial returns. Measurements on impact including social
impact measurement should be conducted before and after the investments.
In this research, all forms of ﬁnancial transactions that seek ﬁnancial returns
including equity and bond investment, loans, lease are consideredinvestments. Donations, subsidies and grants are excluded.
Sources : Cabinet Oﬃce and the GSG National Advisory Board materials

34 Prior to the 2018 research, the term “social impact investment” was used;however, from this yearʼs research, the term has been changed to “impact investing”.

Estimating the Market Size

ImpactThe Japanese Impact Investing Market ❶The deﬁnition of impact investment in the 2019 survey is determined as follows, based on

Figure 515❷ Screening Process of Impact Investing Cases❷-1 Approach to screening impact investing cases
In this report the criterion was deﬁned for selecting impact investing cases as “investment
behavior attempting to solve social and environmental issues while seeking economic
returns, and social impact measurement is conducted before and after the investments.”
Although emphasis was placed on how the investment behavior contributed to solvingsocial and environmental issues, mere measurements or assessments for risk avoidance
purposes did not qualify. Furthermore, if social impact was measured only either at the time
investment decisions were made or after the investments were executed, such cases were

16

excluded because they were not considered investments made with the intention of

CHAPTER II

creating social impact and leading to subsequent improvements.

❷-2 Comparing against the 2018 Research Findings

The Japanese Impact Investing Market ❷In the 2018 research report, a criterion was set to objectively assess intention of impact investing:whether performance indicators were set which contribute to solving social and environmental
issues in the investment decision making process and outcomes were evaluated. The major change
from this year is that social impact measurement is required to be conducted not only before but
also after the investments. Until the 2018 research, the condition for impact investing was that social
impact measurement was conducted only before investments, in order for more investors toparticipate in the domestic impact investing market which was in the early days of impact investing.
From this yearʼs research; however, new criteria for impact investing are set as follows, based on thediscussion at the GSG National Advisory Board Working Group, that is, social impact measurement

Screening Process of Impact Investing Cases

must be conducted even after the investment. However, institutions conducting measurement afterinvestments and measurement contents will not be questioned.
The reason for this change is that as it was becoming more common to conduct social impact
measurement when executing impact investing with the expansion of impact investing, it wasconsidered necessary to improve the quality of social impact measurement and social impact
management in the future. For example, the GIIN has released the “State of Impact Measurement
and Management" since 2017, in which the GIIN captures data from impact investors collected via
questionnaire survey about how they measure, manage, and report their impact.35 As improvementin the quality of social impact measurement and social impact management has been questioned
overseas, in Japan, too, a change in criteria was made, taking into account the needs for requiring
improvement in the quality as well as the quantitative expansion of impact investing.
Regarding measurement target (whether requiring the measurement of business outcome or
accepting measurement of business output alone), no speciﬁc criteria were set in this yearʼs
research, unchanged from the previous year.36 As there has been lack of concerted action among
countries, these criteria will be reviewed continuously according to the maturity of the domestic

35
36

https://thegiin.org/assets/GIIN̲State%20of%20Impact%20Measurement%20and%20Management%20Practice̲Second%20Edition.pdf
Output: direct results including products and services produced by businesses or organizational activities.
(Examples) number of activities, term of activities, number of participants, etc. Outcome: changes or beneﬁts brought about by output of businesses or initiatives.
(Examples) acquisition of business skills, changes in mental state (think positively), getting a job, etc.

market. Regarding negative impact veriﬁcation, 37 although the need for negative impact
veriﬁcation is acknowledged, it was not required in this yearʼs research. The case studies
show cases in which negative impact veriﬁcation was conducted.

Figure 6

Requirements of impact investing in this researchNo.

Requirement

Mandatory / optional / not required

1Social impact is measured at
the time investment decisions are madeMandatory

2(Not only output but also)
outcome is measured

Optional(It is desirable to conduct measurement)

3(Not only positive impact but also)
negative impact is measured

Optional(It is desirable to conduct measurement)

17

4Social impact is measured
after investments

Mandatory

5

Whether an institution conducting measurement
is limited to either an investor or investee.

Not limited

CHAPTER IIThis research initially compiled a list of research samples which included all institutions
potentially related to impact investing in order to screen out impact investing cases of domestic
ﬁnancial institutions according to the assessment described in 2.1. Speciﬁcally, the list honed in
on Japanese domestic investors that have made public statements such as signatories ofPrinciples for Responsible Investment, Principles for Financial Action for the 21st Century, andothers, and looked at a wide research sample as it did in 2018. The list is as follows.

Research sample

Selection criteria (some overlapping)●

Signatory of Principles for
Responsible Investment

Type of organization

NumberBanks, credit unions and credit associations

164

Insurance

25
20

●

Signatory of Principles for

Securities

Financial Action for the 21st Century

Asset management ﬁrms (mainly listed companies)

44●

Japan Sustainable Investment Forum

Private equity and venture capital

136●

Social Impact Measurement

Lease and non-bank institutions

58

Other organizations

39
7

survey participant
Initiative member●

Venture capital

Pension funds●

Securities

Listed companies

19●

Other relevant organization

Local governments

2

Governmental ﬁnancial institutions
Total

37

9
523

Negative impact: negative social and environmental changes or eﬀects as a result of businesses or activities.
(Examples) working environment is proper or not, new environmental loads occur or not,whether or not there is an increase in equalities, standards for fair trade and procurement exists or not,whether or not there is conﬂict of interest in regional economies, etc.

Research Scope for Market Estimation

Figure 7

The Japanese Impact Investing Market ❸❸ Research Scope for Market Estimation

❹ Market Size Estimation Findings❹-1 Overview
To estimate the market size of impact investing, questionnaires were sent to selectedorganizations, and the responses were reviewed against the criteria outlined above todetermine whether the case qualiﬁed as impact investing.
The questionnaires were mailed out on October 2, 2019, with a deadline to remit by
December 23, 2019. Of the 523 organizations sampled, 52 organizations 38 (9.9%) responded.
Of those 52, a total of 16 were acknowledged as impact investing cases.
Based on the survey using the questionnaire, an estimated investment balance of JPY 317.9

18billion was allocated to impact investing in Japan. 3 9 Of those who responded to the

CHAPTER II

questionnaire, 9 out of 11 organizations which had continued to reply the questionnaires
since 2018 expanded their activities. The total cumulative investment balance oforganizations which had continued to reply the questionnaires since 2018 increased to JPY

The Japanese Impact Investing Market ❹306.5 billion in 2019 from JPY 224.1 billion in 2018 (JPY 82.3 billion (37%) increase). The total
cumulative investment balance calculated based on the same criteria as those of last year
was JPY 407 billion. It should be noted that the amount is not exhaustive due to limitation
on research methods of tabulating responses to questionnaire, and does not represent themarket size in the strict sense.

The following table summarizes the impact investors who contributed to the estimatedinvestment balance. 5 new entrants to the market were conﬁrmed in 2019, and of thosecontinuing from the 2018 survey, there were several organizations that increased theirinvestment balances, including The Dai-ichi Life Insurance Company Limited and Shinsei

Market Size Estimation Findings

Corporate Investment Limited.

38
39

Includes responses submitted past the deadline
Includes the balance of investments owned by companies and the balance of investment managed on behalf of clients and salesFigure 8

Impact investors conﬁrmed through the survey 40

Type

Name of organization

Governmental
ﬁnancial
institutions

Management
ﬁrms

Examples of impact investing

Japan Equity Impact Investing

Sumitomo Mitsui Trust
Asset Management Co., Ltd.

Japanese equity SRI fundKamakura Investment
Management Co., Ltd.

Publicly Oﬀered Investment Trust “Yui 2101” whichinvests in listed or unlisted companies

Nomura AssetManagement Co., Ltd.

Nomura ACI Advance Medical Impact Fund

Mizuho Bank, Ltd.

Social Impact Bond for the promotion of colon cancer
screening in Hiroshima Prefecture, and Japan Impact
Investment II Limited Partnership

Sumitomo Mitsui
Banking Corporation

Social Impact Bond in Kobe City for prevention ofsevere diabetic nephropathy (“Kobe City SIB”)

The Dai-ichi Life Insurance
Company, Limited

Investment in renewable energy, microﬁnance businessin developing countries, extension of healthy life
expectancy, employment creation, and startups which
aim to solve social issues in the ﬁeld of promoting asociety with womenʼs empowerment, etc., and impact
investment in listed companies, PE Fund, and SIB

Shinsei Corporate
Investment Limited

Japan Impact Investment I Limited Partnership andJapan Impact Investment II Limited Partnership

Digisearch andAdvertising, Inc.

Investment in Social Impact Bond for the promotion ofcolon cancer screening in Hachioji City, Angel Investment,
and Share FundThe Social Innovation and
Investment Foundation

Investment in SIBs (Kobe City, Hachioji City, Hiroshima
Prefecture, etc.), healthcare tech startup with a social
impact measurement system, impact investment
intermediaries, direct investment in ADDress Co., Ltd.,and investment in Japan Impact Investment II Limited
Partnership

Sasakawa Peace
Foundation

Investment in Blue Orchard Micro Finance Fund andJapan ASEAN Women Empowerment FundKIBOW Foundation

Investment in enterprises operating social businesses
through the KIBOW Shakai Toshi Fund

Plus Social Investment

SIBs (Saijo City, Higashiomi City, and Toyonaka City)

Hitachi Capital Corporation

Green Bond

Nanto Lease Co., Ltd.

Nanto Regional Vitality Creation Support Investment
Limited Partnership

Major banks

Insurancecompanies

Venturecapital ﬁrms

Foundations

Organizations
specializing in
impactinvestingOtherorganizations

40

In principle, the amount to be totaled is the amount purchased by investors, not amount issued by issuing entities.
Investments by investors who responded to questionnaire are totaled as impact investing activities only
when those investors are determined to meet criteria for impact investing including conducting social impact measurement before and after investments.
When investments are made with the intention of executing impact investing and with social impact measurement by investors,
the amount purchased is included in the impact investing activities, even though capital provision to the government is included in such amount.
Regarding impact investing products for individual investors, as it is impossible to research on those investorsʼ intentions,those products are totaled as impact investments which meet the criteria for impact investing
when it is conﬁrmed that intermediary ﬁnancial institutions including management companies
and securities companies have intended to create social impact or conducted impact measurement at the design stage
and after the formation of the products (that is, before and after investments are made by investors).
Normally, it is desirable that suﬃcient disclosure of the result of social impact measurement be made to individual investors.
However, to date, standards for impact reporting to individual investors have not been established and they have been under development,
disclosure to individual investors is not required.

19

Market Size Estimation Findings

Asset Management One
Co., Ltd.

The Japanese Impact Investing Market ❹Investments and loans to overseas microﬁnance businessand other projects including JAPAN ASEAN Women
Empowerment Fund

CHAPTER II

Japan International
Cooperation Agency(JICA)

When asked about number of impact investing, 60% reported they had executed 4-10
investments in the latest ﬁscal term, and half of them replied that they had executed morethan 11 investments since establishment. This indicates that the impact investing market are
steadily expanding in Japan. Impact investing are considered to be executed continuously
as 25% of investors have cumulatively executed more than 31 impact investments since
establishment.

Figure 9

Number of impact investing cases - latest ﬁscal term - (FA 41, n=10)
0 Cases
10%

20

30%

1~3 Cases

60%

4〜10 Cases
0

CHAPTER II

Figure 10

20

40

60

80

100％

Number of impact investing cases - since establishment 42 - (FA, n=12)

The Japanese Impact Investing Market ❹1~3 Cases
33%

8%

33%

20

40

60

4〜10 Cases

25%

11〜30 Cases
31 Cases 〜

0Market Size Estimation Findings
41
42

FA stands for free answer where respondents can freely enter texts, words, and numbers.
The percentages are rounded oﬀ the 1st decimal place, so the total may not become 100%.

80

100％

❹-2 Comparison of the current state of impact investing in Japan with the global market
To better understand the state of impact investing in Japan, the survey compared theﬁndings to those of the 2019 GIIN survey, 43 based on the following four criteria.

（1）Industry of targeted investment
Respondents in the Japanese survey allocated the most capital to education (75% of
respondents), while food security & sustainable agriculture gathered the most capital in the
global GIIN survey (58% of respondents). It can be surmised that expectations for advanced
technologies as a means of solving social issues and education that develops the younger
generation lead to the popularity of those sectors. Many respondents in both the Japaneseand the global GIIN surveys allocated their capital in sectors such as medical/healthcare,as an investment target.
Two areas identiﬁed by the 2018 and 2019 Japanese survey, womenʼs empowerment andhowever, those areas are considered to increase their attractiveness as one of the leading
investment targets in Japan.

Figure 11

Sector allocations (Number of respondents, MA 44, n=12)

Quality education
Medical / healthcare
IT & advanced technologies
Womenʼs empowerment

Market Size Estimation Findings

Financial services (excluding microﬁnance)
Renewable energy
Adaptation to and mitigation of climate change
SME support
Food security & sustainable agriculture
Other
Infrastructure & urban development
Conservation
Microﬁnance
Secure water resource & hygiene
Housing

Japan
GIN

Arts & culture
0

10

20

30

40

50

60

70

80％

* The GIIN survey allowed for multiple answers, n=266

44

The Japanese Impact Investing Market ❹climate action, have not been selected as investment sectors in the global GIIN survey;

CHAPTER II

ﬁnancial services, and renewable energy, showing the worldwide popularity of those sectors

21

43 GIIN (2019) “ANNUAL IMPACT INVESTORSURVEY 2019”
MA stands for Multiple Answer. Respondents can choose one answer or more answers from multiple choices.

（2）Instrument of investment
In Japan, most investors chose public equity, private debt and private equity as the
instrument of investment. The majority of investors in the global GIIN survey also chose
private debt and private equity as the instrument of investment, indicating those two
investment methods are widely used regardless of country or territory.

Figure 12

Instrument of investment (Number of respondents, MA, n=13)

Private equity
Private debt
Public equity

22

Other

CHAPTER II

Equity-like-debt (including Beneﬁciary right)
Public debt

Japan

The Japanese Impact Investing Market ❹Real assets

GIN
0

10

20

30

40

50

60

70

80％

* The GIIN survey allowed for multiple answers, n=261（3）Allocations by stage of business
When reviewing allocations by stage of business, the greatest share of funds in Japan wasinvested in venture, growth, and mature (publicly-traded companies) stage investees, andthere is a tendency for more funds to be invested in mature (publicly-traded companies)
stage investees compared to the global survey. On the other hand, the global GIIN survey
shows that more share of funds was invested in seed/start-up and growth stage investees.

Market Size Estimation Findings

Figure 13

Allocation by stage of business (Number of respondents, MA, n=10)

Venture stage
Growth stage
Mature stage (publicly-traded companies)
Seed/start-up stage

Japan

Mature stage (private companies)

GIN
0

10

20

30

40

50

60

70

80％

* The GIIN survey allowed for multiple answers, n=198

（4）Returns
In a comparison of the Japanese survey and global survey in returns, the majority of
respondents in both the Japanese and the global GIIN surveys indicated that theirinvestments met both their ﬁnancial and social performance expectations.

Figure 14

Financial performance (SA 45, n=6)
2%

GIIN

16%

82%

Outperforming
In-line

Japan

17%

0

Underperforming

83%

20

40

60

80

23

100％

CHAPTER II* GIIN survey: n=253, “not sure” responses excluded* Japanese survey, “other” responses excluded

Impact performance 46 (SA, n=7)

GIIN

14%

77%

9%

Outperforming
In-line

Japan

14%

0

Underperforming

86%

20

40

60

80

100％

* GIIN survey: n=254, “not sure” responses excluded* Japanese survey, “other” responses excluded

The Japanese Impact Investing Market ❹Figure 15

Market Size Estimation Findings

45

SA stands for single answer where respondents can choose one answer from multiple choices.
The percentages are rounded oﬀ the 1st decimal place, so the total may not become 100%.

46❹-3 Linking impact investing performance to the SDGs
When asked whether impact investing was linked to the Sustainable Development Goals(SDGs), 42% replied yes, an increase from 31% last year. This trend of working on social
impact measurement with linking it to the SDGs is expected to increase in the future.

Figure 16

Linking social impact measurement to the SDGs 47 (SA, 2019: n=12, 2018: n=13)

2018

23%

8%

46%

23%

0%

24

2019

42%

CHAPTER II

0

20

42%

40

60

17%

80

100％

Linking all of our social impact measurement to the SDGs
Linking some of our social impact measurement to the SDGs

The Japanese Impact Investing Market ❹Currently not linking, though we plan to do so in the near future
No, and we do not have any foreseeable plans to do so

Those who replied yes were then asked the reasons for linking their performance to the
SDGs. The most common answer was “they are a useful way to communicate our social
impact externally since it is a widely recognized framework” (80%), followed by “as an
impact investor, it is important for us to integrate into the global development paradigm”(60%). This trend well conformed to the GIINʼs survey result, indicating that the term SDGs is
widely used as a tool for external communication or globally shared language. On the otherMarket Size Estimation Findings

hand, fewer respondents indicated that the SDGs help identify co-investors or attract
investees, which explains that many regarded the SDGs as one relationship between
investments and society rather than a means to directly create investment opportunities.

47

The percentages are rounded oﬀ the 1st decimal place, so the total may not become 100%.

Figure 17

Reasons for linking social impact measurement to the SDGs (MA, n=5)

They are a useful way to communicate our social impact
externally since it is a widely recognized framework
It is important for us, as an impact investor,
to integrate into the global development paradigm
They enable us to attract investors
They enable us to conceive of new investment strategies
and opportunities
They help us reﬁne our theory of change
and set appropriate impact objectives and impact targets
They help us identify co-investors
or co-investment opportunities

Japan

0

10

20

30

40

50

60

70

80

90

100％

* GIIN survey : n=163

impact investing practice. Many respondents have incorporated the SDG-alignment as aﬁlter in investment selection or made SDG-targeting a core element of their investment
strategy, which explained that they link the SDGs to their investment behaviors. On theother hand, the GIIN survey showed that the greatest share of respondents have mapped
their existing portfolios to the SDGs or incorporated the SDGs into their management
systems, indicating that the SDGs have been incorporated to see the whole picture of theirinvestments.

Ways to link SDGs to impact investing practice (MA, n=5)

Market Size Estimation Findings

Figure 18

Incorporated SDG-alignment as a ﬁlter
in investment selection
Made SDG-targeting a core element of
our investment strategy
Mapped our existing portfolio to the SDGs
Incorporated the SDGs into our impact measurement
and management system
Japan
Raised new funds speciﬁcally targeting the SDGS

GIN
0

10

20

30

40

50

The Japanese Impact Investing Market ❹Respondents were also asked to share how they have incorporated the SDGs into their

25
CHAPTER II

GIN

They enable us to attract investees

60

70

80％

* GIIN survey : n=163

❹-4 Awareness of impact investing
The survey also asked about the awareness of impact investing. When asked aboutfamiliarity with the term “impact investing”, 63% responded that they knew the deﬁnition oft he t er m . C o m b i n e d w i t h t h o s e w h o w e r e fam i l i ar w i t h t h e t e rm , aw are n e ss a mon g
respondents reached 83%. Although it is possible that only respondents with awareness of
impact investing participated in the survey, it can be surmised that most respondents wereat least familiar with the term “impact investing” within the scope of this survey. In thesurvey conducted by the Social Innovation and Investment Foundation regarding awarenessof impact investing, targeting general consumers, awareness among them was 6.8%. 48

26

Figure 19

Awareness of the term “impact investing” (SA, n=41)

CHAPTER II

63%

The Japanese Impact Investing Market ❹

0

20

20%

40

60

17%

80

100％

A respondent knows the deﬁnition of “impact investing”
A respondent is familiar with a term of “impact investing”
A respondent is not fam

iliar with a term of “impact investing”❹-5 Future plans for impact investing
The survey also asked about changes within the organizations that execute impact
investing, future plans for impact investing, and conditions under which respondents would

Market Size Estimation Findings

increase their impact investing.
When asked about internal changes, 82% responded that “there is greater buy-in frominternal stakeholders to have an impact investing arm” and “ the organization ismaking/planning more impact investing”, and only 8% responded that “the organizationʼs
key decision-makers are more reluctant to make impact investing.” It appears that within theorganizations that execute impact investing, support for impact investing is increasing
regardless of decision-makers or executors.

48

https://prtimes.jp/main/html/rd/p/000000001.000049509.html

Figure 20

Changes in the organization from the year before (MA, n=11)

My organization is making
more impact investing
There is greater buy-in frominternal stakeholders to havean impact investing arm
It is easier to persuade others
in my organization
to make impact investing
The conversations with internal stakeholders
have moved more fromthe “why” to the “how” of impact investing27

My organization has
a greater commitment

0

10

20

30

40

50

60

70

80

90％

selected “IT & advanced technologies” and “medical/healthcare.” “IT & advanced
technologies” and “medical/healthcare” are the most popular sectors of impact investing inJapan, showing strong interest in those sectors.

Figure 21

Future plan for increased allocation by sector (MA, n=34)

Medical / healthcare
IT & advanced technologies

The Japanese Impact Investing Market ❹Regarding sectors where respondents planned to increase allocations in the future, 31%

CHAPTER II

Key decision-makers are more reluctant
to make impact investing

Market Size Estimation Findings

Quality education
SME support
Womenʼs empowerment
Renewable energy
Conservation
Microﬁnance
Financial services (excluding microﬁnance)
Food security & sustainable agriculture
Infrastructure & urban development
Housing
Adaptation to and mitigation of climate change
Arts & culture
Secure water resource & hygiene
Other
0

5

10

15

20

25

30

35％

When asks what conditions would make increasing impact investing easier, the mostpopular reply was “the increase of the number of investment cases in a social/environmentalﬁeld” and “an interest in or understanding of creating social impact by top management”(34%). The reply “the increase of the number of investment cases in a social/environmentalﬁeld” increased signiﬁcantly compared to the last yearʼs survey, indicating an increasing
interest in not only social impact itself but also social and environmental changes caused by
the investments in connection with the SDGs, etc.
“Regulatory approach to promote impact investing by the government” and “sharing
information on successful impact investing cases” were also considered to help to growimpact investing (32%), same level as the last yearʼs survey.
In addition, as in last year, there were responses such as “changing internal structure to28

facilitate impact investing.” If more impact investing cases are continued to be created and

CHAPTER II

shared, and public awareness of impact investing instruments grows widely, impact
investing can accelerate and expand.

The Japanese Impact Investing Market ❹Figure 22

Conditions to engage in more impact investing - 2019 vs 2018 survey ﬁndings 49 (MA, n=41 (2019 survey), n=41 (2018 survey))

An interest in or understanding ofcreating social impact by top management
The increase of the number of investment cases ina social / environmental ﬁeld
Regulatory approach to promote impact investingby the national and local governments
Sharing information on successful
impact investing cases

Market Size Estimation Findings

Building internal structure tofacilitate impact investing
An interest or engagement frommy companyʼs stakeholders
Validation and evaluation of
an investee by a third party entity / rating system
Call to action by principles for responsible investment,
united nations global compact, and ﬁnancial action for the 21st century
Eﬀective use of external resources
for impact investing
Recognizing correlation of ﬁnancial creditworthinessand social impact

Japan（2019）Japan（2018）

Other
0

49

GSG National Advisory Board (2019) “The Current State of Impact Investing in Japan 2018”

5

10

15

20

25

30

35％

❹-6 Disclosure of impact investing
The survey also inquired on organizationsʼ disclosure of their impact investing, to which 69%
replied “disclosure as part of information disclosure to introduce our business andactivities.” In most cases, the media channels used for disclosure were companiesʼ websites.
Some organizations had dedicated pages for social impact investing set aside on theirwebsites, while others disclosed their impact investing in their investment reports or annual
reports.

Figure 23

Information disclosure (MA, n=13)29Disclosure as part of information disclosure to
introduce our business and activities

CHAPTER II

Limited disclosure to a part of investors,
etc. (not open to public)
Disclosure as part of information disclosure ofcorporate social responsibility (CSR)

Disclosure as a part of environmental accounting
Other
0

10

20

30

40

50

60

70

In addition, of the comments received, there were occasional comments on demand growth,such as “there is an increase in the exposure of terms like SDGs, PRI, and ESG investments,
and the ground is fertile for impact investing,” and “there is high demand from investors (forimpact investing such as “ﬁnding and selecting portfolio companies is our bottleneck,” “theneed for more cases,” and “the need for an established global method of social impact
measurement.”

Market Size Estimation Findings

impact investing).” On the other hand, there were also comments as to the challenges in

The Japanese Impact Investing Market ❹No disclosure❺ Case Studies
Three case studies in the table below have been selected from the aforementioned players
in the impact investing market to represent recent shifts in the market.

Figure 24

Case studies and reason for selection

No.

Case study

Sector❺-1

Investment in AsMama,
Inc. by Japan Venturephilanthropy Fund(JVPF)

Support forchild-care
and womenʼsempowerment❺-2

Investment in Gojo
and Company, Inc.
by Japan International
Cooperation Agency(JICA)

Financialbusiness
focusing on
Micro ﬁnance❺-3

Establishment of Japan
Impact Investment
II Limited Partnershipby Shinsei Corporate
Investment Limited

Childcare,nursing care,and new work
style-related
business

30

Reason for selection● Selected as a case in which the recovery ofinvested fund has been completed with theend of the support period● Selected as a case in which an investee was

CHAPTER II

assessed to have taken measures to minimize
negative impact when discussing investment

The Japanese Impact Investing Market ❺● The newest impact investing case in Japan● Selected as a case which gives an insight

into broadening investor base, as limited
partners participated in the fund comparedto Japan Impact Investment I Limited
Partnership funded solely by the Shinsei
Bank Groupʼs capital❺-1 Investment in AsMama, Inc. by Japan Venture Philanthropy Fund (JVPF) 50
This case study takes a closer look at investment in AsMama, Inc. by Japan Venture Philanthropy
Fund (JVPF), a case in which JVPF had executed impact investing with ﬁnancing method that

Case Studies

ﬁnds few cases in Japan and completed the recovery of invested fund.

❺-1-1
Investment
overview

50

Figure 25

Investment Overview

Fund name

Investment in AsMama, Inc. by Japan Venture philanthropy Fund (“JVPF”)

Period of fundAugust 2015 to August 2019 (4 years)

Fund size

Totaling JPY 30 million

Investor

Japan Venture Philanthropy Fund (“JVPF”)

Fund managementcompany

Social Investment Partners (“SIP”)
The Nippon Foundation

Investee

AsMama, Inc.

Additional
stakeholders<Pro bono partners>
Bain & Company, Inc. Cliﬀord Chance Law Oﬃce

Expectedsocial impact

Creating a society where local residents can support each other in a safe
and comfortable network of peers by providing “Kosodate Share”

Highlights

Utilizing a price ﬂuctuating convertible bonds structure to realize both scaleand returns of impact investing

http://jvpf.jp/wp-content/uploads/2019/12/
JVPF%E5%8D%94%E5%83%8D%E6%88%90%E6%9E%9C%E3%83%AC%E3%83%9B%E3%82%9A%E3%83%BC%E3%83%88AsMama%E7%B7%A8.pdf

❺-1-2Fund details（1）Investor (Fund manager)【 Japan Venture Philanthropy Fund 】① Established (year) | 2013
② Total amount of fund | JPY 840 million (as of March 2019)③ Mission |●To foster and support social enterprises by providing mid- and long-term

ﬁnancial

support and management support which utilizes business skills to bring solutions toJapanʼs social issues through the sustainable growth of those enterprises.
●

To promote and establish the culture of venture philanthropy 5 1 in Japan throughactivities of the Fund.

④ Main activities |Japanʼs ﬁrst full-scale venture philanthropy initiative jointly established and managed byand management support in the form of subsidies, and investments and loans toorganizations and enterprises operating social businesses in the 3 ﬁelds of education &womenʼs social participation to expand social impact.

（2）Investee【 AsMama, Inc. 】① Established | November 4, 2009
② Capital | JPY 7 million③ Mission |Solving social issues related to childcare and maximize social impact by providing social
platform which matches and assists regional social needs.

With the objective of creating a society where people can rely on and support each otherby connecting people to people and people to community, AsMama establishes a social
platform to provide people of child-caring age with opportunities to meet and support
each other, and provides the “Kosodate Share” apps in which people can assist each otherin a timely manner, in a safe, secure, and unconstrained environment. AsMama-certiﬁed“Mama Supporters” across Japan oﬀer child-care support in their local communities, andhelp build local community through exchange events and public relation activities tocreate a “real” relationship where people of child-caring age can support each other.
AsMama has strengthened collaboration with local governments and corporations torevitalize local communities, and operates the child-care sharing services for as little as
JPY 500 per hour backed by revenues derived from outsourcing services to local
governments and consulting services to corporations.

51

Venture philanthropy : A model which aims to promote business growth and accelerate solutions to social issues by cultivating high-potential NPOs
and social enterprises with mid- and long-term ﬁnancial and management support

Case Studies④ Main activities |The Japanese Impact Investing Market ❺young career support, regional revitalization & community building, and childcare &CHAPTER II

Social Investment Partners (“SIP”) and the Nippon Foundation. The JVPF provides ﬁnancial

31

（3）Fund scheme① Background |AsMama, which marked its 5th anniversary, had expanded its regional exchange business andcompleted the development of the “Kosodate Share” apps. The company had an intention tostrengthen its business foundation and raise more funds for future business expansion, andwas selected as a support recipient by the JVPF in August 2015. The JVPF spent about 4
months for examination of support: the mid-term business plan was formulated with thesupport of SIP, a roadmap was created to achieve the plan, and management issues wereidentiﬁed. Then after discussions in the JVPF selection committee, the conditions were
formulated for both ﬁnancial and management support, and the support was ﬁnally decided.
Supporting period was 4 years. During the period, a director was sent out from SIP to provide

32

management consultation with a high frequency while management support was provided

CHAPTER II

by Bain & Company, Inc. and Cliﬀord Chance Law Oﬃce, pro bono partners of SIP, based onpriority of management issues. During the support period, AsMama was able to develop theorganizational base while creating a proﬁt model which is balanced with social impact. In

The Japanese Impact Investing Market ❺August 2019, the company redeemed all of the grant, and the support was completed.

② Investment overview and support conditions |Financial support provided to AsMama, Inc. by the JVPF was as follows.

Figure 26

Overview and conditions of ﬁnancial support

Total funding amountJPY 30 million

Method of investment

Unsecured convertible bond-type bonds with stock acquisition rights52

Corporate debentureʼs coupon rate

None

Collateral security

None

Case Studies

Repayment terms

August 31, 2018 (later changed to the end of August 2019)

Exercise conditions

Either of the following conditions is met● Equity financing of more than JPY 30 million is made(reference transaction53)● No reference transaction occurs before the expiration date54● When there is a reference transaction, the amount calculated bymultiplying reference transaction price by conversion rate (70-90%)
Conversion price● When there is no reference transaction, the amount agreed by bothparties. If no agreement is reached, the amount that refers to net
asset value● When a bond holder reasonably determines that sociality has beenlost
Key reason for acceleration● Repayment of debt is not made on time
● Default or violation of representations and warranties occurs● When there is a change in control● Obligation to report important matters (business plans, financial

statements)● Restrictions on important matters

Support conditions● Obligation to report on business activities monthly and makefinancial reports● Development of the board system, dispatch of a director from SIP,

and participation of an observer● Continuation of business with social mission

Sources : Japan Venture Philanthropy Fund “Report on collaboration outcome, December 2019”52

A type of corporate debentures issued by a company that can be converted to stock at conversion price.
Transaction referenced to determine price per share when the conversion from the bond to stock is made.
54 The expiration date of the period during which stock acquisition rights can be exercised.
53

③ Stakeholders |The implementation mechanism and role of each stakeholder are as follows.
Normally, SIP, which manages the JVPF, plans and leads management support and provides
support in collaboration with pro bono partners as necessary. In this project, SIP took aleading role in providing management support while Cliﬀord Chance Law Oﬃce and Bain &Company, Inc. participated as pro bono partners.

Figure 27

Stakeholders and their roles
Name

Roles in the projectJapan Venture
Philanthropy Fund

Providing financial support

Social Investment Partners

Management of the JVPF, comprehensive management support,
and monitoring

Clifford Chance Law Office

Management support (organizing internal rules,
allocating operational duties, and organizing authorities)

Bain & Company, Inc.

Management support(identifying business areas and providing planning support)④ Approach to social impact |The JVPF sets social impact of business it supports by utilizing a logic model in collaboration
with top management of potential investee at the business planning stage. Since social
impact is considered to be mid- and long-term results, the JVPF separately sets KPIs for
output linked to the speciﬁed social impact, on which monitoring is performed monthly,quarterly and annually, and resets the KPIs whenever necessary based on the review of theinvestment. The KPIs in this project include the number of registered users of “Kosodate
Share”, the number of certiﬁed “Mama Supporters”, the number of actual childcare sharing
services, usersʼ satisfaction level, and the number of staﬀ as an organizational base.
In this project, support for (1) reviewing core value of business, (2) planning strategies, and(3) strengthening organizational base was provided through the KPIs linked to the social
impact and social impact management, as eﬀorts necessary for AsMama, Inc. to continuously
create social impact.
Additional support provided to AsMama, Inc. at the same time to create social impact
included meetings with a director sent out from SIP on a regular basis and weekly meeting toredesign business plans and establish organizational structure.

Case Studies

business plan. The setting of social impact and the KPIs linked to that impact are tailored per

33

The Japanese Impact Investing Market ❺EntityCHAPTER II

AsMama, Inc.

（4）Key takeaways① Possibility of balancing ﬁnancial returns with social returns by ﬁnancing that utilizes
unsecured convertible bond-type bonds with stock acquisition rights |The most striking feature of this project in the context of impact investing is that it was
funded utilizing investment techniques used in venture capital or private equity
investments as a means of ﬁnancing to achieve ﬁnancial exit while creating social impact.
The investment scheme of this project is characterized by (1) utilization of convertible
bonds, (2) convertible bonds whose conversion price will be determined based on future
market price, (3) that in case convertible bonds are not converted into stocks in the
period during which stock acquisition rights can be exercised, the principal can be34

recovered by redemption of bonds, and (4) that the mission lock clause is added to theredemption clause for the purpose of emphasizing sociality of corporations or businesses.

CHAPTER II

In this project, considering that the investee is a venture-stage company, convertible
bonds with ﬂuctuating conversion price are used, that is, the stock price of the investee is
not evaluated at the time of providing support, but conversion price will be determined

The Japanese Impact Investing Market ❺based on the future market value when the market value becomes available. The
advantage of using this type of convertible bonds is that since the stock price is notevaluated at the time of providing support, there will be no eﬀect on the stock price evenwhen the investee attempts to raise funds by means of equity ﬁnancing after receiving
support, as such the degree of freedom of management of the investee can be ensured.
In addition, ﬁnancing in the form of convertible bonds ensures ﬁnancial returns. In thecase where the convertible bonds are not converted into stocks, the principal can berecovered by redeeming bonds in so far as the company is able to build a proﬁt model.
On the other hand, by adding the mission lock clause to the redemption clause, pursuit ofsociality of continuing social mission will be guaranteed against the situation where theCase Studies

companyʼs management does not attach importance to sociality due to an increase in thenumber of stakeholders as a result of equity ﬁnancing after receiving support.
As the JVPF is a fund funded by donation, ﬁnancial returns generated by this project are
not returned to donors who supply the capital but utilized to ﬁnance new support
recipients. AsMama agreed with the concept of the JVPFʼs ﬂow of funds, and uponcompletion of receiving support, the company became a supporter of the JVPF, making ad o na t io n t o t h e J V P F i n ad d i t i o n t o fu n d s fo r re d e m p t i o n . Th i s p ro j e c t w ill be a nimportant example of executing impact investing utilizing investment techniques forstartup or venture-stage companies in venture capital investments.

② Development and expansion of social businesses by accompanying support |The JVPF puts emphasis on accompanying support in order for social businesses withvarious management challenges to achieve healthy growth. The JVPFʼs support went
beyond simply providing capital. It provided comprehensive management support
including (1) review of core value of business, (2) strengthening organizational base, and(3) redesign of business strategies after sharing management objectives of maximizing
speciﬁc social impact with the support recipient. Those eﬀorts resulted in increases in thenumber of registered users of “Kosodate Share”, certiﬁed “Mama Supporters” andchildcare sharing services, and improved level of user satisfaction. The background factor
which enabled the provision of such accompanying support is that the JVPF is jointly
managed by the Nippon Foundation, an organization that has in-depth knowledge ofsocial business support, and SIP, an expert in the ﬁeld of venture capital investment and

CHAPTER II

corporate management.

35

The Japanese Impact Investing Market ❺Case Studies❺-2 Investment in Gojo and Company, Inc. by Japan International Cooperation Agency (JICA)
This case study analyzes Japan International Cooperation Agency (JICA)ʼs investment in Gojo
and Company, Inc.

❺-2-1
Investment
overview

36
CHAPTER II
The Japanese Impact Investing Market ❺❺-2-2
Fund details

Figure 28

Investment Overview

Fund name

Investment in Gojo and Company, Inc.

Period of fundAugust 22, 2019

Fund size

JPY 1 billion

Investors

Japan International Cooperation Agency (“JICA”)

Investee

Gojo and Company, Inc.

Expectedsocial impact

Improving access to ﬁnance and standard of living for low income classes,
and helping womenʼs empowerment in developing regions

Highlights

When discussing investment, JICA assessed that Gojo and Company, an investee,
had taken measures to minimize negative social impact（1）Investors【 Japan International Cooperation Agency 】① Established (year) | 2003
② Capital | JPY 8,145.9 billion (as of the end of March 2019)③ Main activities |JICA is an incorporated administrative agency in charge of administering Japanʼs Oﬃcial
Development Assistance (ODA), whose objectives are promoting international
cooperation and contributing to healthy socioeconomic development in Japan and other

Case Studies

countries through supporting socioeconomic development, reconstruction, andeconomic stabilization in developing regions, etc. JICA also provides support throughvarious types of assistance methods including technical cooperation, ODA loans (yenloans, foreign loans and investments) grants to developing countries while dispatching
Japan Overseas Cooperation Volunteers, Senior Japan Overseas Cooperation Volunteers,and Japan Disaster Relief Teams, etc.

（2）Investee【 Gojo and Company, Inc. 】① Established (year) | 2014
② Capital | JPY 7.09 billion (as of August 2019)③ Main activities |With a mission of providing ﬁnancial access to everyone in the world as the private sector
World Bank, Gojo and Company, Inc. delivers microﬁnance in developing countries.

（3）Fund scheme① Background |Established in July 2014 with a mission of providing ﬁnancial access throughout the world
as the private sector World Bank, Gojo and Company has delivered ﬁnancial services, witha particular emphasis on microﬁnance, targeting people who are not provided withﬁnancial services in developing regions. To date, the company has provided multiple
ﬁnancial products with over 400,000 clients in India, Cambodia, Sri Lanka, and Myanmar(more than JPY 20 billion), and aims to provide 100 million people in 50 countries withquality and aﬀordable ﬁnancial services by 2030.
There are 1.7 billion adults in the world who do not have accounts in ﬁnancial institutions 55,
thus improving ﬁnancial access is an urgent issue in developing regions. More than half of
those adults who do not have accounts in ﬁnancial institutions are women, indicating that aﬁnancial services, including microﬁnance” (Goal 1) and “improve access to ﬁnancial services”(Goal 8). Under those circumstances, JICA decided to invest in Gojo and Company, Inc., which

regions, and help expand Gojoʼs business, to help improve access to ﬁnance among
low-income classes, raise the standard of living, and promote womenʼs empowerment.

② Stakeholders |Japan International Cooperation Agency invested in Gojo and Company that delivers
microﬁnance through its local subsidiaries and aﬃliates in developing countries, byutilizing the framework of overseas investments and loans.

Figure 29

Stakeholders

Sejaya Micro Credit（Sri Lanka）

Japan
International
Cooperation
AgencyInvestment

Privateenterprises

Gojo andCompany, Inc.

Microﬁnance Delta Intʼl（Myanmar）

Ananya Finance（India）

Satya MicroCapital（India）

AVIOM India Housing Finance（India）

55

The Global Findex database 2017

Case Studies

Maxima Microﬁnance（Cambodia）

The Japanese Impact Investing Market ❺is delivering ﬁnancial services with a particular emphasis on microﬁnance in developing

CHAPTER II

gender gap is expanding in developing regions. The SDGs also aim to “ensure access to37

（4）Process of investment discussion
In this project, JICA utilized an overseas investments and loans scheme to invest in Gojo andCompany, Inc. Procedures required for the examination, etc. of overseas investments andloans projects are roughly divided into three stages - pre-examination stage, examination
stage, and post-examination stage.

In the pre-examination stage, an initial discussion is conducted on quantitative andqualitative development eﬀects, ﬁnancial risks, and signiﬁcance of eﬀorts before
examination policies are determined, then investments and loans are examined inaccordance with those policies.

38

JICA identiﬁes items requiring quantitative and qualitative checks in the examination stage,
and set up those items in consultation with Gojo and Company. In this project, quantitative

CHAPTER II

development eﬀects were set such as proportion of women in borrowers (the extent towhich loans were directed to female clients, and the extent to which the proportion of
female clients is expected to be maintained in the future), and the number of people whose

The Japanese Impact Investing Market ❺access to ﬁnancial services is improved. In addition, JICA valued the fact that Gojo andCompany had worked on minimizing negative social impact created by its business with thethoroughgoing customer ﬁrst principles, and decided on the investment.
Speciﬁcally, in the examination stage, it was highly valued that Gojo and Company hadtaken measures not to run into multiple debts and worked on improving the ﬁnancial
literacy of borrowers. JICA also valued that Gojo and Company had an in-house social
performance manager, had formulated a group governance policy, and had advised allgroup companies to obtain Client Protection Principles certiﬁcation as soon as possible.

（5）Key takeaways

Case Studies① When discussing investment, the investee companyʼs eﬀorts to minimize negative social
impact are evaluated |This project is characterized by that the investee companyʼs eﬀorts to minimize negativesocial impact created by its business are evaluated in the examination stage. Social
impact created by impact investing includes positive as well as negative impact. In
measuring social impact of impact investing, it is desirable to make sure that negativesocial impact is not created while conﬁrming positive impact by the investments andloans executed. However, some negative social impact measurement may ﬁnd it diﬃcult
to locate or measure a causal relationship between negative social impact andinvestments and loans. In such cases, this project may provide one solution in that
qualitative measurement is conducted regarding whether investeesʼ policies, systems,
and structures have been developed and discussed in order not to create any negativesocial impact.

❺-3 Establishment of Japan Impact Investment II Limited Partnershipby Shinsei Impact Investment Limited invested by Shinsei Corporate Investment Limited,with Social Innovation and Investment Foundation and Mizuho Bank, Ltd
This case study analyzes the establishment of Japan Impact investment II Limited Partnership by
Shinsei Impact Investment Limited. It should be noted that the GSG National Advisory Board has
no intention to recommend that anyone invest in the Fund, and shall not be liable for its
investment process and/or outcome.

❺-3-1
Overview

Figure 30

Summary of the Fund

Establishment dateJune 28, 2019

Fund size

JPY 2.6 billion (as of December 2019)

Investors

GP (General Partner) : Japan Impact Investment II Limited Partnership
LP (Limited Partner) : Shinsei Bank, Limited, Mizuho Bank, Ltd.,Social Innovation and Investment Foundation (SIIF),
Sumitomo Mitsui Trust Bank, Limited, and others

Fund managers

Shinsei Impact Investment Limited
Social Innovation and Investment Foundation (SIIF)(Mizuho Bank, Ltd. as adviser)

Terms

Investment period: 5 years; Fund term: 10 years

Investment target

Venture-to-mature-stage companies operating childcare/nursing care/
new work style-related businesses

Expected social
ImpactDevelopment and expansion of companies and businesses contributing tobuilding an environment where people in diﬀerent situation can continue
working, and establishment of an ecosystem of impact investing in Japanby increasing the number of impact investors and sharing knowhow.
● Participation by external sectors in management● Participation by limited partners● Selecting investees and evaluating businesses

by utilizing social impact measurement❺-3-2（1）Fund

Details【 Japan Impact Investment II Limited Partnership (“2nd Fund”) 】① Established | June 28, 2019
② Fund size | JPY 2.6 billion (as of December 2019)③ Main activities |The Fund is the successor fund of Japan Impact Investment I Limited Partnership (“Child-care
Support Fund”) which was established jointly by Shinsei Bank, Limited and Shinsei Corporate
Inves t m ent L im it ed in 2 0 1 7 . Th e F u n d i n v e s t s i n an d p ro v i d e s g r o w t h s u p p o r t t oworker-oriented companies operating in the ﬁeld of life events of working people such as
child and nursing care, by utilizing social impact measurement methodology. The Fundmanagement and social impact measurement are carried out jointly by Shinsei Impact
Investment Limited and Social Innovation and Investment Foundation.

Case Studies

Highlights

39

The Japanese Impact Investing Market ❺Japan Impact Investment II Limited Partnership

CHAPTER II

Fund name（2）Investors
Unlike the “Child-care Support Fund” funded solely by the Shinsei Bank Group, many limited
partners participate in the Fund including Mizuho Bank, Ltd. and Sumitomo Mitsui Trust
Bank, Limited.

（3）Fund scheme① Background of establishment of the 2nd Fund |Shinsei Bank, Limited and Shinsei Corporate Investment Limited have decided to launch an
impact investment fund in 2016, based on the recognition that it was meaningful to utilize
private funds to solve social issues. From the outset, the composition of the impact

40

investment fund was envisioned in two phases. In the 1st phase, a relatively small-scale
impact investment fund is launched and a demonstration of the fund is conducted with the

CHAPTER II

groupʼs own capital, and in the 2nd phase, the investment and management structure isreinforced by adding partners outside the Shinsei Bank Group. In 2017, the “Child-care
Support Fund” was established as planned and investment specializing in companies

The Japanese Impact Investing Market ❺operating child-care related business began. As investment business by the Child-care
Support Fund has made successful progress, Shinsei Bank, Limited and Shinsei Corporate
Investment Limited believed that it had been demonstrated that impact investing could beexecuted from the perspective of domestic institutional investors, then in 2019, they decided
to move on to the 2nd phase to establish the 2nd Fund. In the 2nd Fund, after Shinsei Impact
Investment Limited funded by Shinsei Corporate Investment Limited was established, Social
Innovation and Investment Foundation was jointly involved in the establishment andmanagement of the Fund to reinforce the investment and management structure as apartner that had rich global knowledge of public beneﬁt and sociality and could leverageeach otherʼs strength. In addition, with Mizuho Bankʼs participation in the Fund as aCase Studies

management adviser, it is expected that the Bankʼs solid network and innovation support
function including “Mʼs Salon” will be utilized to expand the business growth and social
impact of the investee companies.

② Stakeholders |The implementation mechanism and the roles of each stakeholder for the Fund are as
follows. The 2nd Fund invests in companies operating child and nursing care related social
businesses using funds provided by the limited partners such as Shinsei Bank, Limited andMizuho Bank, Ltd., and returns ﬁnancial returns to investors while issuing impact reports onsocial impact created by the businesses. While investment management, social impact
measurement, and investees support are conducted by Shinsei Impact Investment Limited
and Social Innovation and Investment Foundation, co-founder of the Fund, Mizuho Bank, Ltd.
jointly support investee companies.

Figure 31

Investment scheme

Shinsei Bank, Mizuho Bank, SIIF,
Sumitomo Mitsui Trust Bank, and others

Limited Partners

Impact Report

Fund Management/
Impact Measurement

Investment / Return

Japan Impact Investment II Limited Partnership

Grow

Impact Investment / Support

th Su

ppor

t

Investee Companies（Social Startups）

Impact Measurement

Sources: Shinsei Bank Group 56

Name

Roles in the project
Function as a fund(ﬁnancing, investment, business support, and business assessment)

Shinsei Impact Investment
LimitedFund management, social impact measurement on
invested businesses, and growth support of investee businesses

The Social Innovation
and Investment Foundation

Fund management and social impact measurement on
invested businesses

Mizuho Bank, Ltd.

Investment and growth support of investee companiesʼ businesses

Other limited partners

Investment

Investee companies

Implementation and growth of social business,
resolution of social challenges

56

Shinsei Bank Group News Release (June 28, 2019)

Case Studies

Japan Impact Investment
II Limited Partnership

The Japanese Impact Investing Market ❺Stakeholders and their roles

CHAPTER II

Solving Social Challenges（Creating Social Impact）

Figure 32

41

Business

（4）Comparison between the Child-care Support Fund and the 2nd FundThe diﬀerence between the Child-care Support Fund and the 2nd Fund is as follows. The 2nd
Fund has not only expanded the investment scale and business as a fund, but also involved
a wider variety of players than the Child-care Support Fund, including the participation oforganizations outside the Shinsei Bank Group in the management and the investment by LP
investors, thereby expanding social impact while building an ecosystem of impact investing.

Figure 33

Comparison between the Child-care Support Fund and the 2nd FundChild-care Support Fund42

2nd Fund

CHAPTER II
The Japanese Impact Investing Market ❺Fund size

JPY 500 million

JPY 2.6 billion (as of December 2019)

Investment target

ChildcareChildcare, nursing care,and new work style-related businesses

Management (GP)

Shinsei Corporate
Investment Limited

SIIF participates outside the Shinsei Bank
Group, and Mizuho Bank, Ltd. joined as
an adviser

Shinsei Bank

Shinsei Bank, Limited, Mizuho Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited, The
Bank of Yokohama, Ltd., educational
corporations, industrial corporations, andothersLimited Partners

Utilization ofSocial Impact
Measurement

Coordinate the implementationof social impact measurement on
a project-by-project basis. A logic
model is utilized only for businessassessment after investment

A logic model is utilized for both investment
decision and business assessment in all
projects. Organizational assessment afterinvestment will be conducted, and an impact
report will be issued to limited partners in
the future

Case Studies

Both the Child-care Support Fund and the 2nd Fund make working people the centerpieceof projects, aiming at realization of society where they can continue to work by overcoming
events which prevent them from continuing to work including childcare, nursing care, andtheir own illness. While childcare was the only theme of the Child-care Support Fund, thescope of investment covered by the theme of the 2nd Fund has been broadened to the areaof investment that was originally envisioned. Narrowing down the theme in the Child-care
Support Fund enabled the accumulation of more knowledge and network about theindustry. Those knowledge and network can be used in the 2nd Fund since some issues arecommon to childcare and nursing care.
In the Child-care Support Fund, social impact and performance indicators are measured afterinvestments but no logic model was created before investments. In the 2nd Fund, progresshas been made in viewing social impact: a logic model is created and performance

theory of change is set up at the fund level in the 2nd Fund to discuss what challenges
should be solved through the Fund and what kind of portfolio should be constructed totaken into account as external investors also participate in the 2nd Fund. Speciﬁcally, social
impact measurement is conducted as follows. The 2nd Fund intends to expand social impact
by selecting investee companies that contribute to the social impact creation, evaluating
their progress of investment from both quantitative and qualitative aspects, and working onsocial impact management utilized in decision-making in the investee companies.

Figure 34

Social impact measurement process
Formulate a hypothesis (theory of change) regarding social impact
creation aimed at by the Fund

Preliminary
review

Select investment targets which contribute to the Fundʼs theory of change

Review

Make aninvestment
decision● Create a provisional logic model for potential investee companies● Verify expected social impact, negative social risks, etc.

Investment committee makes an investment decision,
taking into account economic risks and returns, and social impact● Decide on a logic model for investee companies● Formulate measurement index and method

Duringinvestment

Collect and analyze data

● Make an impact report● Utilize the measurement results in the decision-making in the investee companies

Investment
recovery● Seek exit that has high aﬃnity with social

IPO or investee companies● Comparison, etc. of social impact before and after investment

Case Studies

Fund design

The Japanese Impact Investing Market ❺solve them. One factor behind that point is that issuing an impact report to investors is also

CHAPTER II

indicators are discussed in the project examination stage before investments. In addition, a43

（5）Key takeaways① Possibilities of expanding an ecosystem of social impact investing by participation of
external sector into management and limited partnersʼ participation |The most striking feature of the 2nd Fund is, as mentioned above, participation byorganizations outside the Shinsei Bank Group. Social Innovation and Investment
Foundation participates in the Fund management and Mizuho Bank, Ltd. also provides
assistance while many limited partners are investing in the Fund.
As an example of external sector participation in management of the Fund, Social
Innovation and Investment Foundation participates, and takes charge of thedevelopment and implementation of social impact measurement and social impact

44

management through the investment process. This type of joint management system
which eﬀectively uses the respective strength of participants can be one model of impact

CHAPTER II

investing in Japan.
One of the primary motives for a wide variety of limited partners to get involved in theFund is to obtain examples and knowledge of impact investing. In recent years, actions to

The Japanese Impact Investing Market ❺achieve the SDGs and impact investing have been encouraged in Japan. While impact
investing appears to attract a growing interest among investors in Japan as shown by thefact that many investors have invested in the Fund, in reality, examples and know-how ofimpact investing are not suﬃcient enough. In response to such a situation, the Fund aims
to contribute to formulating an ecosystem of impact investing in Japan by not only
directly providing opportunities for impact investing but also sharing know-how in theexecution of impact investing through conducting of and reporting on social impact
measurement. With industrial corporations also participating, the Fund serves as aninterface that connects industrial corporations which need open innovation in theirbusiness development with startups and technology companies contributing to solving

Case Studies

social issues with which the Fund has a relationship. As the fund has collected
information of various companies regardless of whether or not actual investment is made,for those industrial corporations which seek to make contact with startups andtechnology companies to achieve the SDGs or solve social issues but have no idea whereto start, participating in the funds that execute impact investing like the Fund can be abreakthrough.

② Balancing ﬁnancial returns and social impact by utilizing social impact measurement |The point of argument in executing impact investing is how to explore businesses inwhich ﬁnancial returns and social impact are balanced out. In that regard, the Fund
selects and provides support to investee companies by focusing attention on theirbusiness models and utilizing social impact measurement. Regarding the businessmodels, it is checked whether an increase in the number of clients or users will lead to theeconomic beneﬁts. The clients or users refer to, in many cases, beneﬁciaries or creators ofsocial values generated by businesses. Regarding utilization of social impact
measurement, a logic model is created at the pre-investment stage and a hypothesis isformulated as to what logic and process the business will utilize to create social impact,
before deciding on whether to invest. By utilizing such approach and methodology, theFund enables investment where ﬁnancial returns and social impact balance out evento some extent.
Furthermore, social impact management in accordance with the globally accepted

impact measurement index after investment to collect and analyze data and reﬂect themeasurement results in the investee companiesʼ business improvement anddecision-making. In this way, the Fund intends to expand social impact by not only simply
measuring and evaluating social impact, but also utilizing the measurement results in theinvestee companiesʼ decision-making process.

The Japanese Impact Investing Market ❺standards of practice such as IMP is implemented, including ﬁnalizing a logic model and

CHAPTER II

though potential businesses in which impact investing is executable are narrowed down

45

Case Studies❻ Insights from the Current Impact Investing Market
As explained in this chapter, the balance of impact investing in Japan was at least JPY 317.9
billion in size in 2019. The survey shows that the Japanese impact investing market
continues to expand: 5 new entrants executed impact investing this year while 9 out of 11
organizations which had continued to reply the questionnaires since 2018 expanded theiractivities.
The ﬁndings include cases of business partnership agreement with ﬁnancial institutions that
led overseas impact investing activities and investment in the funds related thereto, and inJapan, too, participation in the impact investing funds by several ﬁnancial institutions and46

business entities (these cases are not included in the market size). From those cases, it isexpected that knowledge will be accumulated regarding project management, etc. towards

CHAPTER II

project formation, social impact measurement, and achievement of performance indicators,
which will lead to further expansion of impact investing activities in the next year andbeyond.

The Japanese Impact Investing Market ❻The survey pointed to the following measures and expectations that could help impact
investing take root and further expand in Japan.

Figure 35

Measures and expectations moving forward① Leadership by top management② The increase of the number of investment cases in a social/environmental ﬁeld
③ Institutionalization for impact investing promotion④ Development of skilled experts to measure social impact

Insights from the Current Impact Investing Market① Leadership by top management |The fact that social and environmental impact creation tends to manifest in the mid-longterm and only top management can make the decision to wait for impact to manifest may
be why there is a sense that awareness and understanding from the head of anorganization is necessary.

② The increase of the number of investment cases in a social/environmental ﬁeld |Considering that capital providers including ﬁnancial institutions act in response to
demand for supplying funding, it is necessary to increase investment cases to which
capital providers can actually supply funding.

③ Institutionalization for impact investing promotion |In terms of national and regional government regulations, some possible measures
include requiring the allocation of a set portion of investment lending to impact investingor promoting aggressive implementation of impact investing in public investment.
The enactment of the Dormant Accounts Utilization Bill in 2016 eﬀectively started in
2019, with the selection of Organizations Distributing Funds by Japan Network for Public
Interest Activities (JANPIA) which was appointed as the Designated Utilization
Organization by the Cabinet Oﬃce. Social impact measurement is planned to be used in
the utilization of dormant accounts, and this movement is expected to lead to promotionof social impact measurement and impact investing activities in the future.

④ Development of skilled experts to measure social impact |lead to dissemination and furthering awareness are needed. Once there are more capable
individuals who can deliver concrete and hands-on investigations and measurements,

The Japanese Impact Investing Market ❻this will likely lead to a more investor-friendly foundation for impact investing.

CHAPTER II

As knowledge regarding social impact measurement is not yet widespread, eﬀorts which

47

Insights from the Current Impact Investing Market

Conclusion
According to the survey, Japan's impact investing balance has expanded from JPY 17 billion
in 2014, to at least JPY 317.9 billion in 2019, though the 2019 survey revealed a JPY 344.0
billion market in 2018. The 2019 survey did alter impact investing's deﬁnition, which shouldhave inﬂuenced the result. More speciﬁcally, pre-2018 surveys regarded impact
measurement before investment as a prerequisite for impact investing but from 2019,
impact measurement before and after investment became the prerequisite.
The impact investing market is expected to expand further in 2020, supported by national48

and regional governmental attempts to connect SDGs to ﬁnancal ﬁrms and dormant bankaccount activation. As the overall market continues to grow, ensuring impact investment

Conclusion

quality grows with quantity should be a primary stakeholder concern.

Contributions, etc. Topics Related to Impact Investing
While impact investing activities are spreading and expanding, there exist various views
regarding diﬀerence and deﬁnition between impact investing and ESG investment. With the
spread and expansion of impact investing, more attention is focused on the size andmethodology of impact investing while there are moves to simply use impact investing as amarketing tool such as impact washing (giving a semblance that there is social impact which
does not actually exist), thus some people question whether impact investing really createssocial impact. With the spread and expansion of the idea of impact investing in Japan, there
are moves to combine the SDGs and ﬁnance, a move which can lead to future expansion of
impact investing.

impact investing in Japan are attached in the form of contributions and interviews.
Attached articles are contribution by Mr. Eiichiro Adachi, counselor of The Japan ResearchInstitute, Limited, regarding the relationship between ESG investment and impact investing
as a topic associated with the spread and expansion of impact investing in Japan, and aninterview column with Mr. Reiji Yamanaka, director of KIBOW Impact Investment Team,regarding signiﬁcance of impact investing viewed from the scene of impact investing. The
domestic trend of SDGs x Finance is also attached as a topic which can lead to further
expansion of impact investing.
It should be noted that opinions in these articles are personal views of a contributor or aninterviewee and do not represent the oﬃcial views of organizations to which they belong or
the GSG National Advisory Board.

List of contributions, etc.
No.

Topic

Summary

Author1

Relationshipbetween ESG
investment andimpact investing

Discussion of the relationship between
ESG investment and impact investing
based on history to provide future
prospect (contribution)【 Contribution 】
The Japan Research Institute,
LimitedMr. Eiichiro Adachi

2

Signiﬁcance of
impact investing
viewed fromthe scene of
impact investing

Interview column regarding what ishappening at the scene of impact
investing and the signiﬁcance of impact
investing viewed from the relationshipbetween investors and entrepreneurs【 Interviewee 】
KIBOW Foundation
Impact Investment Team
Director
Mr. Reiji Yamanaka

3

The domestic
trend of
SDGs × FinanceDiscussion of how the SDGs, as a “sharedlanguage” between investors andentrepreneurs, can aﬀect impact
investing (contribution)【 Writer 】
K-three Inc.
Mr. Toshiaki Kataoka

Contributions, etc. Topics Related to Impact Investing

Topics which relate to the spread and expansion or which lead to further expansion of49❶ Relationship between ESG investment and impact investing
Contributor : Mr. Eiichiro Adachi, The Japan Research Institute, Limited

Think and act in accordance with the concept of “ﬁduciary responsibilities”
About 50 years ago, when I was a child, I was repeatedly told by the adults around me that I
had to manage my money strictly. You have to split the bill to the last yen when paying foryour own account, repay all of the amount you borrowed, and calculate and report inwriting balance of a shared-cost event, and so on. I did not understand why they especially50emphasized “itʼs about money”; however, now I know it is because there has been
never-ceasing ﬁnancial troubles in our society. Although I am not sure whether children

Contributions, etc. Topics Related to Impact Investing ❶nowadays are raised in the similar manner, the situation surrounding money seems
unchanged even now, at 50 years later. Various incidents provoked by ﬁnancial troubles
have been repeatedly reported.

It is needless to say that an attitude of strict money management must be pursued inproviding basic ﬁnancial functions including store of value such as safe deposit boxes,
settlement such as payment agency (transfer), and fund intermediation such as deposits andloans. Economic activities cannot be carried out soundly if assets disappear or payment is
not made due to acts or errors of the ﬁnancial institutions. Therefore, ﬁnancial institutions
are put under certain control of the supervisory authorities. It is for this reason that ﬁnancial
business makes it a principle to ensure trust.
However, when we focus our attention on the function of the ﬁnancial intermediation in
ﬁnancial business, there are some issues that are diﬃcult to handle. In the case where alender (capital provider) and a user (fund-raiser) of capital make a direct deal with no third

Relationship between ESG investment and impact investing

party involved, the only way to handle the diﬃculty in recovery of the capital (fund-raiserʼsdefault) is to leave it to an after-the-fact process between the parties.

In the case where a ﬁnancial institution performs the function of intermediation, thatﬁnancial institution is questioned whether it has made an eﬀort to the greatest possible
extent to avoid the situation where recovery of fund becomes diﬃcult. If the ﬁnancial
institution is a bank, the bank is questioned whether proper credit control has been
performed on borrowers, necessary allowance for bad debts has been reserved, and so on. In
the world of indirect ﬁnancing where commercial banks have been traditionally major
players, total amount of recovery is predictable as recovery of fund for capital providers
consists of principal and promised interest payment. In addition to that, it is possible tocontrol the occurrence of events which make it diﬃcult to recover fund by diversifying therisk of fund-raiserʼs default.

When it comes to securities investment such as stocks and bonds, the situation becomeseven more complicated. A capital provider tries to recover (or maintain potential
opportunity to recover) funds as much as possible while allowing for the possibility of thedamage to the capital invested (principal) in the future recovery of the funds. The amount offunds recovered of marketable securities consists of the market value of the securities,
dividends, coupons, etc., which are constantly ﬂuctuating. Thus, it is impossible to foresee
the amount to be recovered though it is possible to predict it even at the time of investing
and afterwards. The situation is the same for both capital providers and ﬁnancial institutions
which perform the function of intermediation.

As such, capital providers always act with the suspicion that they could have recovered alarger amount of funds if they had made another decision. The ﬁnancial institutions (mostly

products) are questioned more severely whether they had made eﬀorts to ensure that
capital providers can recover the capital they had invested as much as possible; however, inthe case of securities investment which always involves uncertainty, it is not easy for the
ﬁnancial institutions to prove that. The concept of “ﬁduciary responsibilities” has beencultivated through years of experience in the tension between capital providers andﬁnancial institutions which perform the function of intermediation in the world of direct
ﬁnancing. The major components of this concept include “prohibition of considering othermatters in investing, exercising voting rights, and so on.”From social responsible investment (SRI) to ESG investment
The term “ESG investment” has become widely accepted globally with the launch of theasset owners and asset managers, and others who approved and signed on to the principles.
Environmental (E), social (S), and governance (G) factors were speciﬁed in the 3 out of 6
principles such as “We will incorporate ESG issues into investment analysis anddecision-making processes.” As a result, the term “ESG investment” has become commonly
used.

However, the movements of performing an investment analysis and decision-making taking
into account environmental (E), social (S), and governance (G) factors did not suddenly
begin in 2006. Before that, there had been investment behaviors called Socially Responsible
Investment (SRI), which aimed at correcting social issues, for decades. SRI had also been
exposed to harsh criticism for violating “ﬁduciary responsibilities.”

Relationship between ESG investment and impact investing“Principles for Responsible Investment” in 2006, and subsequent increase in the number ofContributions, etc. Topics Related to Impact Investing ❶trust banks, asset management ﬁrms, and securities companies which sell investment

51

Under the circumstances where SRI was performed by individuals, educational corporations,and religious groups that had strong interest in social issues, SRI was considered as aninvestment which noticeably reﬂected investorsʼ tastes and gave up maximizing the amountof investment recovery itself. When pension funds emerged and started to provide ﬁnancial
support including housing development for low-income individuals, they were criticized forviolating “ﬁduciary responsibilities” by some pension holders. The criticism was mostpronounced in the US, and in some states courts decisions were given that investment
analysis and decision-making performed by those pension funds were illegal.

In reality, many traditional ﬁnancial institutions have maintained a distance from SRI for a52

long time. The situation changed drastically with the launch of the “Principles for
Responsible Investment.” The group which led the “Principles for Responsible Investment”

Contributions, etc. Topics Related to Impact Investing ❶thoroughly committed to building a consensus that performing investment analysis anddecision-making taking into account environmental (E), social (S), and governance (G)factors would not violate “ﬁduciary responsibilities.” The group stressed that some cases
showed performing investment analysis and decision-making considering environmental (E),social (S), and governance (G) factors contributed to maximizing the amount of investment
recovery, based on the analysis of cases where a global law ﬁrm had cooperated with theconsensus-building, a company which had caused marine environmental pollution suﬀered
enormous damages, and a company found with child labor on its supply chains faced withsales decline due to a boycott caused by consumers. It even expressed concerns that if
climate change problems and other issues became more serious in the future, not executing
ESG investments would be violating ﬁduciary responsibilities.

The assertion of the group which had led the “Principles for Responsible Investment” gained
support among capital providers and ﬁnancial institutions, together with the understanding

Relationship between ESG investment and impact investingthat the source of corporate value was shifting to the assets that cannot be visualized(intangible assets), and that negative externality (decline in productivity of the entire
economy) could lead to a decrease in the amount of investment recovery in the longer term.
The advent and spread of the term “ESG investment” paved the way for investment analysis
and decision-making which take into account environmental (E), social (S), and governance(G) factors to be released from the spell of violating “ﬁduciary responsibilities.”

Over impact investing
It should be noted; however, that “ESG investment” does not have implications ofconsidering all of the environmental (E), social (S), and governance (G) factors. Thus, thepremise is that focus should be limited to considering factors which contribute tomaximizing the amount of investment recovery.

As the concept becomes clearer, there are some people who are not always satisﬁed withsuch investment behavior. Then the term “impact investing” has emerged. Global Impact
Investing Network (GIIN) deﬁnes impact investing as investment in the enterprises,organizations, and funds, which generates social and environmental impact as well as
ﬁnancial returns, and states that, as its characteristics, the most important factor of impact

investment. The GIIN does not mention that “generating ﬁnancial returns” is to “aim at
maximizing the amount of investment recovery.”

The deﬁnitions or interpretations of impact investing among the Organization for Economic
Co-operation and Development (OECD), the G8 Social Impact Investment Task Force, theWorld Economic Forum, and the European Commission, in addition to the GIIN, have threeelements in common: (1) achieving speciﬁc social goals or pursuing social (andenvironmental) impact is clearly intended, (2) ﬁnancial returns including recovery of
principal at a minimum are expected, and (3) measurement and reporting of impact are
intended to be institutionalized.

Given the above, it can be surmised that currently there are 3 positions with diﬀerent
characters standing side by side. The 1st position requires both (1) and (3) while, regarding

market average.” “The Case for Simplifying Sustainable Investment Terminology” released by
the Institute of International Finance (IIF) in June 2019 is a typical example. There, the term
impact investing is not used, instead, a “methodology aiming at securing returns on
investment equal to or above the market average while pursuing direct, positive, andmeasurable impact on society and environment” is named as “impactful investment”, and a“methodology which pursues direct, positive, and measurable impact on society andenvironment without seeking returns on investment equal to the market rates” as“philanthropic investment.” The IIF explains that philanthropic investment is not within thescope of sustainable investments, and appears to be in the position to see investments
which satisfy the conditions of impactful investment as a form of ESG investments eventhough it does not explicitly state that.

Relationship between ESG investment and impact investing(2), requiring factor of “aiming at securing returns on investment equal to or above theContributions, etc. Topics Related to Impact Investing ❶investing is the investorsʼ intention of creating social and environmental impact through53

The 2nd position requires both (1) and (3) while, regarding (2), requiring factor of “having an
expected rate of return equal to or above zero, without pursuing a rate of return equal to or
above the market average (even if the rate of return ends up being higher than that).” This is
the position that the OECD takes, and the GIINʼs view is close to that of the OECD. In “Social
Impact Investment: The Impact Imperative for Sustainable Development” released in January
2019, the OECD proposed that “although many of the current impact investing is targeted atareas which generate returns relatively easily including ﬁnancial services, energy, andhousing, social impact investing should be deﬁned as investments in the development
targeting people and countries in need in the developing regions and in the core area ofsocial and environmental needs. Considering the above, impact investing is diﬀerent from54

ESG investment.

Contributions, etc. Topics Related to Impact Investing ❶The 3rd position places special emphasis on (3), and thinks that any investment can becalled “impact investing” as long as comparable and consistent impact reporting is done
and veriﬁcation conducted by an independent institution. International Finance Corporation(IFC) appears to take this position. The Operating Principles for Impact Management,
released by the IFC in April 2019 in partnership with Partners Group, Commonwealth
Development Corporation (CDC), Nuveen, an investment management ﬁrm, and otherorganizations articulates the requirements for institutionalization of impact measurement
and reporting. The number of signatories to the operating principles has grown to over 80.
From the perspective of the 3rd position, impact investing and ESG investment are notmutually exclusive, and there is no great signiﬁcance in discussing the relationship.

Relationship between ESG investment and impact investingLooking forward
In my personal opinion, I expect that the aforementioned 3 diﬀerent deﬁnitions orinterpretations will continue to coexist for the next 5 years or so. As many have pointed out,
there is no denying that confusion caused by diﬀerent deﬁnitions or interpretations of thet er m s will hind er t he m a r k e t g ro w t h . Ho w e v e r , i t i s d i ﬃc u l t fo r t rad i t i o n al ﬁ n an c i al
institutions to easily overcome the barrier of “ﬁduciary responsibilities.” On the other hand,those who engage in development which have been supported by public funds or donors in
the private sectors know by intuition that it is not easy to draw up projects which cangenerate ﬁnancial returns above the market average while creating meaningful social
impact, and that as long as you stick to ﬁnancial returns above the market average, you
cannot aﬀord to work on social issues that really need to be solved.

projects or enterprises that can generate ﬁnancial returns above the market average while
creating meaningful social impact. And if institutionalization of impact measurement andreporting entails enormous costs, investors will be hindered from maximizing the amount ofinvestment recovery. For example, it still takes some time for investors and investees toreach an agreement on how to make a compromise between simplicity and reliability of
impact reporting. This is why I expect that the deﬁnitions and interpretations will notconverge for the next 5 years or so.

I would like to add one more point. It should be noted that there has been always someﬁnancial intermediaries which intentionally caused a lot of damage to or misappropriatedthe assets of the capital providers while soliciting investment by emphasizing social andenvironmental impact. The overseas saying goes, “The road to hell is paved with good

crowdfunding. Great attention should be given to impact investing so that it will not suﬀer
from reputation of being a representative of suspicious investment method. Those who are
involved have to think over the teaching “you have to manage your money strictly” again
and again before taking action.

Relationship between ESG investment and impact investing

intentions.” Recently, there has been a succession of similar scandals in the area ofContributions, etc. Topics Related to Impact Investing ❶We can only verify in the certain time span as to the extent to which we can develop55❷ Signiﬁcance and reality of impact investing
Interviewee : KIBOW Foundation, Impact Investment Team

Director Mr. Reiji Yamanaka

Summary of KIBOW Shakai Toshi Fund II 57● To invest in entrepreneurs who can contribute to solving social issues,

Objective of
the Fundsupport their growth, and accelerate social change● To create a new scheme of ﬂow of funds for private funds to be used forthe above objective● The Fund has been launched as a private association under

General Incorporated Foundation KIBOW
Organization● Total commitment of the Fund: JPY 500 million● General partner (GP) of the Fund: KIBOW Foundation● Operational management: Reiji Yamanaka, Takeshi Igarashi, Suzuka Kobayakawa,

56

Yasuji Takahara, and Takanori Matsui

Contributions, etc. Topics Related to Impact Investing ❷Management
periodApril 2018 - March 2038 (20 years)

What is social impact generated by investment?
KIBOW Shakai Toshi Fund aims at generating social impact, targeting enterprises which try
to solve serious social issues that fall into the following 3 categories.
Firstly, enterprises which try to solve issues of “some people suﬀering from negative social
eﬀects including great hardship, sadness, and infringement of rights that should not be left
unattended.” For example, the Fund invests in enterprises which intend to break throughthe situation where people are discriminated against at work on the basis of disabilities orgender. Secondly, enterprises which seek solutions to “the communityʼs sustainability crisis.”
Although there are various levels for communities, for example, a community which

Signiﬁcance and reality of impact investing

addresses the sustainability of social security in Japan. Thirdly, enterprises which are taking
action against “the sustainability crisis of all mankind.” Speciﬁcally, issues such as climatechange are targets of those enterprisesʼ businesses.
KIBOW Shakai Toshi Fund expects that by investing in enterprises which try to solve serious
social issues like those will change direct beneﬁciaries, and that the ripple eﬀect caused by
the investments will lead to a change in the system of entire society. To aim at such a systemchange, it formulates a hypothesis 58 regarding the system change from the perspective ofinvestors before investing. This hypothesis of a system change will provide enterprises andinvestors with an opportunity to discuss on it, which will lead to a deeper mutual
understanding of their visions and businesses. In addition to the hypothesis of a systemchange, KIBOW always seeks ways to achieve the intended social impact including the use ofquantitative objectives of the targeted social impact for each project in the investment
decisions.

57
58

Refer to the website of KIBOW Foundation. http://kibowproject.jp/investment/fund.html
Also called Theory of Change. Theory of Change is generally used for the same purpose as logic models.

After investment, the Fund performs impact measurement on a regular basis to encourage
enterprises to improve their businesses. It places emphasis on qualitative information as
well as quantitative values. Realizing social impact being generated leads to an incentive forthe enterprises to incorporate an impact management cycle 5 9 into their management
process. The Fund also provides management support to grow business, which is regarded
as necessary support to increase social impact generated, since the pre-investment
hypothesis conﬁrms that social impact expands as the business grows.

Such investment attitudes can be seen in the actual investment projects. For example, in thecase of Aisansan Takushoku Co., Ltd., the ﬁrst investee company, the originally targetedsocial impact were meal assistance for elderly people at home and employment of thesocially vulnerable including persons with disabilities. KIBOW Shakai Toshi Fund consulted

the annual income of persons with disabilities before and after they join the company. After
that, Aisansan Takushoku has grown to the company that provides multiple services
including a variety of services to elderly people, as a result of pursuing support beyond
self-satisfaction of simply delivering meal boxes. It has adopted various methods inaccepting persons with disabilities including support for continuous employment (type A
and B) and employment transition support to provide individuals with support to be aprofessional care workers. As a result, the company stopped measuring social impact with asingle indicator, and tries to develop impact measurement into the measurement that
conﬁrms whether both users and workers (including persons with disabilities) can feel thatthey are truly happy that they were born. At the same time, each business division in
Aisansan Takushoku, together with the staﬀ and users, shares the Most Signiﬁcant Change, astory of the most life changing experience they had, and report the summary of the stories
to the Board of Directors for the subsequent management decisions. The progress of impact

investors, not by the investorsʼ one-sided guidance.

59 A management cycle which consists of 4 stages of plan, do, assess, report & utilize.
It is important to take it as a cycle to address targeted social issues in improving social impact,
rather than a cycle for one business. Sources: Social impact management Initiative
http://www.impactmeasurement.jp/wp/wp-content/uploads/2018/12/impact-management-cycle-outline.pdf

Signiﬁcance and reality of impact investing

management like this has been brought about by the dialogue between management andContributions, etc. Topics Related to Impact Investing ❷with the management of the company to quantitatively measure the amount of increase in57

Relationship between ﬁnancial returns and social impact
The relationship between ﬁnancial returns and social impact has been constantly argued in
impact investing. When investing in enterprises which tackle social issues, there are cases
where management decisions are made without regard to economical eﬃciency to pursue
social impact, and conversely, there are cases where the company grows diﬀerently fromwhat has been envisioned by the management as a result of strong pursuit of ﬁnancial
returns due to the investorsʼ lack of understanding of social impact. As those cases show,communication between investors and management is one of the challenges of impact
investing. The KIBOW Shakai Toshi Fund agrees with the management to aim at generating

58

both ﬁnancial returns and social impact prior to investment, and the investee companyʼs
mission is speciﬁed in the investment contract (mission lock). As an investment policy, theContributions, etc. Topics Related to Impact Investing ❷Fund invests in enterprises where there is no trade-oﬀ between proﬁtability and sociality
but they are mutually reinforcing. In each strategic decision, an outside director designatedby the KIBOW Shakai Toshi Fund and the management have a discussion from theperspective of growth in both social impact and proﬁts, then ﬁnal decision is made at theBoard of Directors. Sometimes a decision is made with emphasis on the short-term ﬁnancial
stability even though the Fund and enterprise aim at generating big social impact. Since thebasic values have been agreed by both parties prior to investment, there is little deviation invalues and a decision is made under constructive discussion.

Recent changes and trends in impact investingThis section describes the trends of impact investing in general with a focus on changes in the
KIBOW Shakai Toshi Fund. KIBOW Foundation established the 2nd Fund in 2018. There has beendevelopments, both internally and externally, in response to changes in the environment

Signiﬁcance and reality of impact investingsurrounding impact investing since the establishment of the 1st fund in 2015. Mr. Yamanaka
pointed out the following 3 developments.
The ﬁrst is the internal development of an increase in the amount of investment per project. The
amount of investment was limited to between JPY 10 million and 20 million in the 1st Fund. In
the 2nd Fund, it became possible to ﬂexibly execute an investment of up to JPY 50 million,
thereby providing investee companies with higher growth and bigger social impact.
The second development is changes in the external environment, that is, investment inenterprises tackling social issues has increased in the venture capital industry as well. With thesechanges, KIBOW will have to work on collaboration with venture capital while promoting
product diﬀerentiation.
The third development is that performing social impact measurement and impact management
after investment have been strengthened in its own funds. The need for the third development
is pointed out from the perspective of diﬀerentiating the company from venture capital
mentioned in the second development, and the perspective of the global advancement of
impact management that includes measurement after investment. The background to theformer is that approaches to social issues are also emphasized in equity stories including growthscenarios. There is no particular concerns 6 0 that introducing venture capitalsʼ fund into
investment may weaken social impact of investee companies, and the KIBOW Shakai Toshi Fundcan also aim at collecting funds from other venture capitals to invest in the future while taking
on the task of lead investing. Regarding the latter point that impact management has been
advanced, in addition to that impact measurement is a clear prerequisite for impact investing,an increasing number of investors take impact management into account in selecting investee
companies, formulating impact strategies, and improvement cycle after investment, as
described in the GIINʼs report61. This means that impact investors in Japan are also required to
evolve.

Signiﬁcance of impact investing fromthe perspective of both entrepreneurs and investors

both impact investors and enterprises that receive investments, based on practices of impact
investing to date.
The eﬀect on public relations is pointed out from the point of view of the enterprises receiving
investments. By receiving investment from impact investors, an enterprise is perceived favorably
by society as a company that stands up and faces social issues. Thus the way people see theenterprise may change. This may bring positive eﬀects on the enterpriseʼs recruitment. In fact,
there are more than 10 cases in which competent people related to Globis have joined theenterprises invested by the KIBOW Shakai Toshi Fund. It can be pointed out as consistency inthose cases that a trend has been formed in Japan to assess enterprises that tackle social issues.
More and more people have become interested in not only making money but also changing
society, where they ﬁnd incentives to work. It appears that psychological barriers to accepting
investments are lower for enterprises tackling social issues, since discussion based on not only
ﬁnancial returns but also targeted social impact is possible with impact investors compared to

From the point of view of the investors, it is pointed out that the eﬀect on the speed in solvingsocial issues can be improved, with more funds ﬂowing into the area of solving social issues. In
the longer term, by creating and disseminating globally an impact investing model unique to an
aging society that Japan is experiencing ahead of any country in the world, we can contribute tosolving global social issues.

With the rapid increase in attention to solving social issues by means of business not only inJapan but also around the world, impact investing is meaningful to both top management andinvestors in that it provides the means to develop discussions on the scene based on social
impact. An investment attitude like the KIBOW Shakai Toshi Fund that incorporates quantitative
objectives of targeted social impact into investment decisions and pursues changes in systems
by building on discussions with top management after investment will serve as a model for
impact investing that intends to create social impact.

60

Also called mission drift. The KIBOW Shakai Toshi Fund embeds a mission lock clause within the investment contract to address the concern.
61 Rachel Bass, Hannah Dithrich, Sophia Sunderji, Noshin Nova.
“The State of Impact Measurement and Management Practice, Second Edition”, GIIN, 2020.
https://thegiin.org/research/publication/imm-survey-second-edition

Signiﬁcance and reality of impact investing

general investors who may require decision-making based solely on ﬁnancial returns.

Contributions, etc. Topics Related to Impact Investing ❷In closing, this section describes the signiﬁcance of impact investing from the perspective of59❸ The domestic trend of SDGs × Finance
Written by Mr. Toshiaki Kataoka, K-three Inc.

The Sustainable Development Goals (SDGs) are collection of 17 clearly deﬁned goals and 169
targets, set unanimously in September 2015 by the United Nations General Assembly. Theseg lo ba l g o a ls a r e t o b e ac h i e v e d b y 2 0 3 0 t h r o u g h w o rl d w i d e c o o p e r at i o n , a imin g a t
promoting voluntary commitments and activities by not only governments but also all
stakeholders including citizens, companies, and academia around the world.

60
Contributions, etc. Topics Related to Impact Investing ❸It has been over 4 years since the formulation of the SDGs, and the SDGs have gradually
gained recognition and permeated among entrepreneurs. The SDGs have steadily begun totake root among companies and organizations, as witnessed in the SDGs awareness survey

The domestic trend of SDGs × Financeresults in the chart below. 62 The number of respondents who replied that the SDGs are“resonating with top management” has grown annually from 20% in 2015, to 28% in 2016,
36% in 2017, and 59% in 2018, and is expected to continue its upward trajectory. Regarding
how far companies are incorporating the SDGs, the rate of those who selected Step 1“Understanding the SDGs” declined (from 54% in 2016 to 43% in 2017, and to 31% in 2018),
and in turn, the rates of those who selected Step 2 “Deﬁning priorities of social issues” (22%in 2016 to 28% in 2017 and 2018), Step 3 “Setting goals” (11% in 2016 to 13% in 2017, and to
17% in 2018), Step 4 “Integrating into management” (9% in 2016 to 8% in 2017, and to 12%
in 2018) and Step 5 “Reporting and communicating” (4% in 2016 to 8% in 2017, and to 12%
in 2018) rose, respectively. It can be surmised that many companies and organizations have
moved forward to the implementation stage of the SDGs.

62

Institute for Global Environmental Strategies (IGES) and the Global Compact Network Japan (GCNJ) (2019)“Mainstreaming the SDGs in Business : Actions by Companies and Organizations in Japan)

The SDGs awareness survey

State of progress on the SDG Compass（ ％）（ n=99［ 2016］, 163［ 2017］, 180［ 2018］）【 Step1 】
Understanding the SDGs

【 Step2 】
Deﬁning priorities of social issues【 Step3 】
Setting goals

61
2016
2017

【 Step5 】
Reporting and Communicating

2018

0

10

20

30

40

50

60％

Rate of companies that responded the SDGs are “well known by top management”
2015

2016

2017

0

10

20

30

40

50

60％

Created by K-three, based on reports by IGES / GCNJ

The domestic trend of SDGs × Finance2018

Contributions, etc. Topics Related to Impact Investing ❸【 Step4 】
Integrating into management

In addition, investors and ﬁnancial institutions including securities industry, banking
industry, and insurance industry that provide funds to entrepreneurs have expanded theireﬀorts to achieve and promote the SDGs. Thus the SDGs have become a “shared language”
among entrepreneurs, investors, and ﬁnancial institutions.
Some national and local governments are working on connecting the SDGs to entrepreneurs
and ﬁnance, represented by the Regional Revitalization SDGs and ESG Financial Researchand Study Group established by the Cabinet Oﬃce. The study group discusses promoting
SDGs ﬁnance for regional revitalization toward the achievement of the SDGs by local
governments. Speciﬁcally, it examines assessment methods for achievement of the regional
revitalization SDGs including registration and certiﬁcation system and ﬁnancial

62

commendation system.
The registration and certiﬁcation system visualizes the eﬀorts to achieve the regional

Contributions, etc. Topics Related to Impact Investing ❸revitalization SDGs by local entrepreneurs. The local and national governments (third party
institutions, etc.) conﬁrm and examine applications from local entrepreneurs in accordancewith the guidelines speciﬁed by the national government to register and certify them. The
ﬁnancial commendation system is to assess regional ﬁnancial institutions that actively
support local entrepreneurs who tackle the regional revitalization SDGs through ﬁnancing
including investments and loans. Those systems can lead to future expansion of impact
investing, as follows.
Since local entrepreneurs who are registered and certiﬁed are recognized as companies
working on the regional revitalization SDGs, they can be potential investees of impact
investing. The questionnaire survey of this report points to the need for “the increase of thenumber of investment cases in a social/environmental ﬁeld” to expand impact investing in
the future, and the registration and certiﬁcation system can lead to “the increase of thenumber of investment cases in a social/environmental ﬁeld.” The ﬁnancial commendation
system can contribute to the growth in the number of impact investing players throughThe domestic trend of SDGs × Financeawards for regional ﬁnancial institutions that execute impact investing. Considering theabove, those systems can support eﬀorts of both regional ﬁnancial institutions which
provide funds and local entrepreneurs who receive funds, toward the expansion of impact
investing.
In order to steadily link those systems to the expansion of impact investing, it is considerednecessary to set proper assessment criteria in the process of system design in the future. For
example, if registration and certiﬁcation criteria and requirements are eased in order to seek
applications or participation from a wider range of local entrepreneurs, the registration andcertiﬁcation system simply assigns goals of the SDGs to existing businesses or eﬀorts of local
entrepreneurs. As a result, those entrepreneurs may be registered and certiﬁed ascompanies working on the regional revitalization SDGs without being properly assessed
whether they are really creating social impact to achieve the SDGs. Registering andcertifying the regional revitalization SDGs without conducting proper assessment may
a d ver s ely a ﬀ ec t t h e e x p an s i o n o f i m p ac t i n v e s t i n g . A w ard i n g t h e r e g i o n al ﬁn a n c ia linstitutions that support such entrepreneurs will not lead to the expansion of social impact

or impact investing. If registration and certiﬁcation are to be given to local entrepreneurs ascompanies working on the regional revitalization SDGs, it is necessary to establish criteria
and conditions to assess their business outcome to see whether they are generating social
impact and whether they are not generating negative social impact, and to quantitatively
and qualitatively assess their contribution to the achievement of the SDGs.
The state of social issues and environment surrounding businesses are changing constantly.
Businesses that were once certiﬁed as generating social impact and contributing to theachievement of the regional revitalization SDGs in the past may no longer generate social
impact due to the passage of time or changes in the environment, etc. They may evengenerate negative social impact toward the achievement of the SDGS. It is necessary to
conﬁrm and assess the eﬀorts made by the local entrepreneurs and update the status of
their registration and certiﬁcation on a regular basis even after they are registered andthrough social impact management and other means to achieve the SDGs.

On the other hand, given knowledge and managerial resources, it may not be easy for local
entrepreneurs to quantitatively and qualitatively measure and understand social impact createdby their own businesses. The questionnaire survey in the latter chapter also points to the needfor “development of skilled experts to measure social impact” to expand impact investing in the
future.
The initiative undertaken by the local governments to link entrepreneurs to ﬁnance through the“shared language” of SDGs is expected to oﬀer one solution to the above concern.
Kanagawa Prefecture is working toward achieving the SDGs. It has implemented the “SDGs
Social Impact Evaluation and Demonstration Project” since 2018, which aims to connect
conducting social impact measurement and management to investments and loans from themarket including capital providers. This project “visualizes” social values to improve values andsustainable values toward the achievement of the SDGs by communication and activities among
diverse stakeholders” through communication with investors and ﬁnancial institutions which arefund providers. As one of the project, a training program is implemented to develop humanresources for social impact measurement. Business supporters and capital providers in addition
to entrepreneurs participate in the training program to understand social impact throughquantitative and qualitative approaches. Based on that, they learn techniques for social impact
management for business improvement and decision-making to improve social values.
It is expected that the expansion of those initiatives will lead to an increase in understanding
and knowledge of social impact measurement, an increase in the number of players, and an
improvement in the quality of the value creation process through communication among
diverse players. This will link to the initiatives by the national government on the regional
revitalization SDGs, contributing to the growth in businesses or projects which create social
impact toward the achievement of the SDGs and consequently to the expansion of impact
investing.

The domestic trend of SDGs × Financesocial sustainability while aiming at “creating an ecosystem which continuously generates

Contributions, etc. Topics Related to Impact Investing ❸certiﬁed. It is also necessary to require them to constantly try to improve their businesses

63March 31, 2020 (December 24, 2020 Version)
The Global Steering Group for Impact Investment (GSG) National Advisory Board