Current State of Social Impact Investment
in Japan 2016
September 28, 2016
The Global Social Impact Investment Steering Group (GSG)
Japan National Advisory Board

TABLE OF CONTENTS
Overview ......................................................................................................................................... 4

TABLE OF CONTENTSI

G8 Social Impact Investment Task Force and National Advisory Board ....................... 6

II

This Report .............................................................................................................. 7

Main Subject “The Current State of Social Impact Investment in Japan” ............................................. 9I

What is Social Impact Investment? ........................................................................... 9
1.

Definition of Social Impact Investment ................................................................... 92.

History and Background of Social Impact Investment ............................................ 10

3.

Need for Social Impact Investment in Japan and its Background ............................ 11

4.

Global Trends and Market Scale of Social impact investment ................................ 35

II

The Social Impact Investment Market in Japan ........................................................ 37
1.

Social Impact Investment Market Scale Measurement ........................................... 37

2.

Analysis of Social Impact Market Scale ................................................................. 41

3.

Examples of Social Impact Funding in Japan .......................................................... 44

III

Efforts to Expand Impact Investment in Japan ......................................................... 53
1.

Utilization of Dormant bank accounts ................................................................... 55

2.

Introduction of the Social Impact Bond (SIB) and Development Impact Bond (DIB) . 59

3.

Corporate Systems and Certification which Facilitate Socially Oriented Projects .... 63

2

TABLE OF CONTENTS

Introduction .................................................................................................................................... 6

Establishment of a Social Investment Tax Reduction System ................................. 66

5.

Permeation of Social Impact Measurement ........................................................... 68

6.

Clarification of Fiduciary Liability ......................................................................... 71

7.

Increasing Private Investors ................................................................................. 74
Prospects of the Social Impact Investment Market and Necessary Activities .............. 77

Appendix ........................................................................................................................................ 80

3

TABLE OF CONTENTSTABLE OF CONTENTS

Ⅳ

4.

OVERVIEW
Scale of the Social Impact Investment Market in JapanThe scale of the social impact investment market in Japan has nearly doubled, from approximately
17 billion yen in 2014 to approximately 33.7 billion yen in 2016.

Overview

Overview
Change in the social impact investment market scale in Japan

Implementation progress of the proposals for the expansion of social impact investment inJapan
Although the scale of social impact investment in Japan is on an upward trend according to the“Proposals for the expansion of social impact investment in Japan” published by Japan’s National
Advisory Board in 2015, it cannot be said that major progress has been observed at the present stage.
Further expansion in social impact investment is anticipated as these proposals are implemented.

4Overview

Overview
Proposals for the expansion of social impact investment in Japan
published by the National Advisory Board

5

INTRODUCTION

Introduction

The G8 Social Impact Investment Task Force was established with the objective of globallypromoting social impact investment, based on the appeal at the Summit Conference held in June,2013 by Prime Minister Cameron of the host country U.K. Sir Ronald Cohen, the founder of a British
dormant account fund called Big Society Capital, was appointed as the chairman of theaforementioned task force. As a rule, one government representative and one member from theprivate sector from each of the G8 countries participate in conferences which are held approximately
every two months.
From Japan, the Ministry of Foreign Affairs, representing the government, and the Nippon
Foundation, representing the private sector, became members as of the 4th Paris Conference of theG8 Social Impact Investment Task Force which was held in April, 2014.

G8 Social Impact Investment Task Force and National Advisory Board

The G8 Social Impact Investment Task Force was succeeded by the Global Social Impact
Investment Steering Group (GSG) which was newly formed in August, 2015 with five additional
member countries.
Japan’s National Advisory Board (hereafter, “National Advisory Board”) is a subsidiaryorganization established in Japan along with the launching of the G8 Social Impact Investment Task
Force, and its members are comprised of experts from various sectors throughout Japan. With theobjective of increasing the momentum of social impact investment in Japan, active information
sharing and discussions are held regarding various matters related to social impact investment.
The National Advisory Board consists of the following members:
Chairman• Hiroshi Komiyama

Chairman, Mitsubishi Research Institute, Inc.

Board members:• Takehiro Fujimura

General Manager, Mitsubishi Corporation CSR & Environmental Affairs Department• Ken Shibusawa

Founding Partner & Chairman, Commons Asset Management, Inc.

• Tomoya Shiraishi

CEO, Social Investment Partners• Junichi Yamada

Senior Special Advisor, Japan International Cooperation Agency• Masataka UoCEO, Japan Fundraising Association• Shuichi Ono

Executive Director, The Nippon Foundation

6

Introduction

G8 Social Impact Investment Task Force and National Advisory
Board

G8 Social Impact Investment Task Force and National Advisory Board

IIIThis Report

This Report

In comparison to the report from July, 2014, this report places more emphasis on the careful
investigation of the market scale and analyzes how the social impact investment market has grownsince the establishment of the National Advisory Board as well as the background thereof.
More accurate figures were obtained in the market scale survey by conducting surveys andinterviews with the players who are putting social impact investment in practice in Japan.
This report was prepared under the supervision of the National Advisory Board, with the surveys
and writing of this report carried out by the following persons. We would like to express ourappreciation for all of their cooperation in the preparation of this report.

Survey and writing●

Masaki Kochi, K-Three, Inc.

●

Chika Ochiai, Keio Research Institute at SFC

Others who cooperated in the preparation of the report (in random order; affiliation at the timeof the report compilation)●

Reiji Yamanaka, KIBOW Foundation●

Takuya Okamoto, Social Venture Partners Tokyo●

Satoko Kono, ARUN LLD.

●

Tetsuya Yoshida, Relationship Capital of Japan●

Masami Komatsu, Music Securities, Inc.

●

Junichi Yamada, Japan International Cooperation Agency●

Takashi Baba, Japan International Cooperation Agency

7

This Report

Introduction

Under the main subject, in Chapter I, “What is Social Impact Investment,” the history anddefinition of social impact investment are discussed from the perspective of global trends. Chapter
II, “The Social Impact Investment Market in Japan,” summarizes the form of social impact investment
in Japan and market survey reports. In Chapter III, “Efforts to Expand Social Impact Investment inJapan,”the progress of the seven proposals reported in May, 2015 is discussed, while Chapter IV,“Prospects of the Social Impact Investment Market and Necessary Activities,” introduces proposals
for the further promotion of social impact investment.

Introduction

Following the “Current State of Social Impact Investment in Japan” (July, 2014) and “Proposals for
the Expansion of Social Impact Investment” (May, 2015), this report discusses the current state of
the social impact investment market in Japan.

This Report●

Jun Sano, Mitsubishi Corporation Disaster Relief Foundation●

Nao Sudo, Japan Exchange Group, Inc.

●

Daigo Minoshima, Japan Exchange Group, Inc.

●

Yasuhisa Yamada, Japan Center for NPO Evaluation●

Yumiko Shimizu, Japan Center for NPO Evaluation●

Makiko Tsuda, Ministry of Economy, Trade and Industry●

Yoichi Nara, Ministry of Economy, Trade and Industry●

Ken Shibusawa, Commons Asset Management, Inc.

●

Yuko Umagoe, Commons Asset Management, Inc.

●

Takashi Kobuki, Oiko Credit Japan●

Koichiro Fujii, Makaira KK●

Yoko Kaneko, Makaira KK●

Masaki Kimura, Aichi Community Foundation, Community Youth Bank momo●

Katsuji Imata, CSO Network Japan●

Kazuhiro Arai, Kamakura Investment Management Co., Ltd.

●

Tatsuaki Kobayashi, Social Finance Study Group●

Japan Finance Corporation●

Masataka Uo, Japan Fundraising Association●

Yoshihiro Kamozaki, Japan Fundraising Association●

Kentaro Ogiue, The Nippon Foundation●

Daisuke Yamashita, The Nippon Foundation●

Taejun Shin, Gojo & Company, Inc.

●

Hiroshi Amemiya, DWM Asset Management, Ltd.

●※ Please forward any inquiries or feedback to the National Advisory Board Office.
Social Finance Unit, The Nippon Foundation cc@ps.nippon-foundation.or.jp

8

Introduction

Takeyuki Nakagawa, Mitsubishi Corporation Disaster Relief Foundation

This Report

Introduction●

What is Social Impact Investment?

1. DEFINITION OF SOCIAL IMPACT INVESTMENT
In this section our objective is to clarify the definition of “social impact investment” as used in thisreport by considering its background and other types of social investments.

What is Social Impact Investment?

According to Global Impact Investing Network (hereafter, “GIIN”), “Impact investments areinvestments made in companies, organizations, and funds with the intention to generate social andenvironmental impact alongside a financial return.” 1 When selecting where to invest funds, bymaking a decision based not only on the single bottom line of “financial return,” but on a double
bottom line which includes “social impact,”2 a “failure” in the financial market is corrected, and abalance in investment between social and economic factors is struck. Both developing and advanced
country markets are investment targets, and depending on the circumstances, the financial return
margin may be equivalent to or lower than that of a normal market.
The growth of the social impact investment market stimulates capital investment in initiatives
which address urgent social issues. The field is diverse, and it includes a sustainable food supply,
clean technology, microfinance, medicine and education.
As the market for social impact investment is in a nascent stage, when it comes to the definitionof social impact investment, there are some areas which are vague or inconsistent in international
reporting. In Chapter II of this report, the social impact investment market scale in Japan wasmeasured; however, the method of calculating the market size and the scope thereof vary in thereporting conducted in various countries.
In addition, ESG (Environmental, Social and Governance) investment closely resembles social
impact investment in terms of the type of investment. However, there is a differentiation between
them based on the GIIN impact investment concept of the “Investor’s intention to have a positivesocial or environmental impact through investments.” If investment with the sole pursuit of financial
return is described as “general investment” and investment with the sole pursuit of social return is
described as a “donation” (form of funding), the classification of the intermediate investment
methods is as shown in Figure I-13. The boundary between “intention to make a social impact” and“active interest in social impact” referred to here is vague, but if the aforementioned concept is
applicable, both can be classed as social impact investment. Although there are no restrictions in
the investment method, it can be said that while there is a greater risk in stock investment than inbond investment, at the same time, it can achieve higher leverage through management. Amongsocial impact investments as well, there are more stock investments than bond investments ininvestments with a greater degree of active orientation toward social impact.
1

GIIN website

2

The bottom line mentioned here refers to the bottom of the profit and loss statement, the final line of the financial statement.
In other words, it is the final performance of a company or organization, which states the ordinary profit or net income.
3“2014 Impact Investing Report” (Finance in Motion)

9

Main Subject “The Current State of Social Impact Investment in Japan”

I

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

MAIN SUBJECT“THE CURRENT STATE OF SOCIAL IMPACT INVESTMENT IN JAPAN”

What is Social Impact Investment?

Figure I -1 Classification of investment methods

2. HISTORY AND BACKGROUND OF SOCIAL IMPACT INVESTMENT
Social impact investment is a type of investment intended to solve environmental and social issues
with a medium-to long-term perspective, and is often implemented in fields that are difficult forcommercial enterprises prioritizing financial returns to take part in. Funder and recipients as well asintermediaries all have various needs, and the market is gradually expanding. In this section, we will
discuss the history and background of social impact investment in various countries, in particular, in
the U.K. and the U.S., which exercise a strong presence in the social impact investment market.
As the need for a market which funds initiatives for social issues gradually grew over the last 20
years, especially among those concerned with the financial market and the solution of social issues
in Western countries, the social impact investment market took form. The border between activities
focusing on social needs and economic needs became indistinct, and particularly since the global
financial crisis in 2008, it became evident that there was a need for a new investment approach toconstruct a sound society.
“Social impact investment” came into use as a specific term in 2007, when the Rockefeller
Foundation coined the phrase at a conference held that year4.
The oldest case of social impact investment in the history of Europe goes back to theestablishment of a study group at the Triodos Bank in Netherlands in 1968, which concluded that
there was a need for financial institutions which benefit both the environment and society, resulting
in the establishment of a foundation which funded social enterprises in 1971.5
A major turning point was when Sir Ronald Cohen took the lead in establishing a social investment
task force in UK. Based on this task force, various new foundations, organizations and enterprises
directed at the social impact investment market primarily in the U.K. were established, and activities
increased. Thereafter, the first fund specializing in community investment in the U.K., Bridges
4

The Rockefeller Foundation website

5

Jan.2009 “Investing for Social & Environmental Impact” (Monitor Institute)

10

Main Subject “The Current State of Social Impact Investment in Japan”

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Details of the social impact investment market in Japan shall be discussed in Chapter II. Thissection will consider the definition of social impact investment, with the above-mentioned concept
as a reference and individual cases carefully examined one by one.

What is Social Impact Investment?

In the U.S, the next largest market of social impact investment, the Ford Foundation took the leadin introducing Program-Related Investment (PRI) and Mission-Related Investment (MRI) in 1968, and
it is thought that this played a contributing role in expanding the scope of the market. PRI refers toa mechanism in which foundations use a portion of their basic funds to support socially-oriented
enterprises through methods such as investment and loans. Per U.S. tax codes, 5% of total assets
must be used on "business expenditures" every year, but because the amount of investment andlending related to programs which meet the fixed requirements is treated as "expenditures,"foundations which meet the 5% rule while investing assets provide funding to business linked to the
management of such programs, low-income housing projects, and so on. 9 Unlike PRI, MRI is not
specified by the IRS, so investments cannot be calculated as expenditures, but its merit is that there
is no need to set a rate lower than the market rate. Therefore, foundations which would like topursue both the realization of their individual mission and a financial return on par with the market
rate are able to choose MRI.10
From the 1980s, Socially Responsible Investment (SRI) became popular, and through the passingof the Riegle Community Development and Regulatory Improvement Act in 1994, promoting therevitalization of the regional economy through CDFIs. By 2000, the PRI market had already exceeded
30 billion dollars.
By around 2012, the SRI market had grown to a scale of 3.7 trillion dollars, and the first SIB wasestablished in the United States.
From a global standpoint, the social impact investment market is still in its early stages, and it isthought that it will continue to grow according to the needs and trends of the funders, recipients,
intermediaries and governments in the future. As mentioned in the U.K. report, the organization ofa central government-led system is thought to play a vital role in dynamically moving the market.

3. NEED FOR SOCIAL IMPACT INVESTMENT IN JAPAN AND ITS BACKGROUND
In this section, we will first discuss why social impact investment is necessary in Japan, and thenrefer to its social context. As indicated in Figure1-2, we will consider the trends of the funders,
6

CDFI: Community Development Financial Institutions

7

Social Impact Bond: Details will be discussed in III-2 “Introduction of SIB and DIB”

8

Sep. 2014 “Building a Social Impact Investment Market, The UK Experience” (UK’s Presidency of the G8)92015 “The Frontline of Social Impact Investing in Japan” (The Nippon Foundation)

10

May 2015 “JFC Views No. 80” (Japan Foundation Center)11

Main Subject “The Current State of Social Impact Investment in Japan”

In particular, it can be said that the social impact investment market in the U.K. which has beenleading the global market, has gradually been expanding with the establishment of various
intermediaries as the core. In addition, it is noteworthy that through the support of socialorganizations involved in public service provision led by the central government, social investment
projects have increased. This reflects how governmental cooperation plays a vital role in thedevelopment of the social impact investment market.8

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Ventures, was established in 2002, social investment tax reduction through CDFIs commenced,6 andCharity Bank was founded. In 2004, the operation of a new type of corporation called a Community
Interest Company (CIC) commenced. Furthermore, in 2010, the first social impact bond 7 (hereafter,“SIB”) in the world was set up.

It can be said that due to the social context involving issues attributed to the rapidly decreasing
birthrate and aging population in Japan and Japan being a nation which is prone to natural disasters,
the needs of each player have increased. Despite this, there has not been any movement to promotesocial impact investment led by the central government. Therefore, efforts which lobby the central
government continue to be essential.

What is Social Impact Investment?

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

recipients, intermediaries, and so on with regard to the ecosystem supporting social impact
investments (related parties and the legal system).

Figure I-2 Social impact investment ecosystema) Social context
Increase in social welfare expenditures due to decreasing birthrate and aging population
As with other developed nations, Japan’s social issues include a decreasing birthrate and an aging
population, caring for persons with disabilities, a decline in educational standards, shrinking nuclear
families, a rigid criminal justice system, increasing unemployment, and lifestyle-related diseases.
Among these, the most pressing issue confronting Japan is that of the decreasing birthrate and aging
population, and the pace at which the aforementioned is progressing is the most rapid in the world,with 1 in 3 being 65 years or older by 2050. The population of Japan, which was approximately
128,060,000 in 2010, is estimated to decrease to approximately 116,610,000 by 2030, andapproximately 97,080,000 by 2050. The growth rate of the actual GDP continues to be low after theend of the “Bubble Era” in 1991 that led to a 20-year “lost period.” The real GDP was 1.8% in 201212

What is Social Impact Investment?

Figure I-3

Japan’s governmental expenditures

Widening social structure gap
As types of employment continue to diversify, disparity in income levels among the productive
age group (15 to 64 years old) is growing. Although Japan was once labeled a country of “all middleclass people,” the disparity in the income levels of its citizens is becoming a cause for concern. Basedon these changes in the social structure, the construction of a more sustainable social structure
which increases efficiency in the social welfare system and stimulates the regional economy is anurgent issue now and will continue to be into the future.
The rapid increase in social welfare expenditures creates a need for the introduction of social
impact investment. The government being required to provide the necessary services in order toaddress the increasing social service demands is difficult both from a financial and a capability
perspective. Amid such a situation, a cost-effective business proposal including service provision by
non-profit organizations and social enterprises would be a beneficial solution both for the non-profit
organizations providing the services and for the beneficiaries. This would serve as an excellent

11”Japan’s Fiscal Condition 2015” （Ministry of Finance）

13

Main Subject “The Current State of Social Impact Investment in Japan”

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

and 1.6% in 2013. Government spending reflects this harsh reality.11 As Figure I-3 shows, the ratioof social welfare-related expenditures including elderly care, medical care and unemployment
insurance has a large impact both in the amount and its percentage of overall spending.
Furthermore, the disparity in income levels which is becoming more widespread in recent years has
the potential of imposing a further burden on social welfare expenditures, such as in the expansionof an economic safety net provided for low-income earners and the unemployed.

The relatively frequent occurrence of natural disasters is a unique aspect of Japan’s social andeconomic background. For example, 1995, the year in which the Great Hanshin-Awaji Earthquake
struck, has been called the “beginning year of volunteerism” in Japan, and this trend was nottransient in nature. Many residents took part in disaster volunteer work, mostly through volunteer
organizations. As a result of increasing calls to strengthen the status of existing volunteer
organizations, these organizations were granted a legal status, and the “Act on Promotion ofSpecified Non-profit Activities (NPO Law)” was adopted in 1998. The number of specified non-profit
corporations (hereafter “NPOs”) has been steadily increasing, and as of the end of July, 2016, 51,100
NPOs have been authorized12, and among the authorized NPOs, 946 of them enable a certain amountof tax breaks for donors.

What is Social Impact Investment?

Then, on March 11, 2011, the Great East Japan Earthquake with the subsequent tsunami disasterstruck, resulting in the loss of more than 15,000 lives. It also caused the Fukushima No. 1 Nuclear
Power Plant Disaster, which is still being dealt with to the present. 2011 become another turning
point for non-profit organizations in Japan and for social impact investment.
Since 2011, not only has the number of NPOs increased, mainly in the three disaster-stricken
prefectures, but the flow of funds has also changed significantly13. Immediately after the disaster, alarge sum of donations to disaster victims and organizations were sent both from within Japan andoverseas. Assistance from overseas came not only from governmental and international institutions
but also from private companies and NGOs, and it is said that a total of 164 billion yen of monetary
support was received just in the first year. Donations for the support of earthquake victims andreconstruction is estimated to be 600 billion yen. This corresponded to more than half of the total
donations in 2010.
Furthermore, there were not only direct donations, but also the establishment of low-interest
rate loan structures and various subsidies directed at NPOs and companies engaged in the disasterreconstruction efforts. There were multiple cases in which such activities were not limited toemergency aid, but took off from that point to become a form of social impact investment. Suchcases will be referred to in Chapter II.

b) Recipient trends
Growth of Japan’s non-profit organizations
The legal status of non-profit organizations in Japan has been strengthened in the last 15 years.
As mentioned above, the track that non-profit organizations had been on changed after the Great
Hanshin-Awaji Earthquake in 1995 and the Great East Japan Earthquake in 2011. The number ofcertified NPOs has gone from approximately 200 as of March, 2011 to approximately 950 as of 2016.

12

Cabinet Office Website

13“NPO Capacity Development Project-Project Evaluation Report” 2014 (Japan NPO Center)14

Main Subject “The Current State of Social Impact Investment in Japan”

Context as a nation prone to natural disasters

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

solution to cope with the unprecedented difficulties Japan is presently facing, and there is great
anticipation for more effective, highly efficient services utilizing social impact investment.

What is Social Impact Investment?

Figure I-4

Change in the number of certified NPOs (including provisionally-certified corporations)

Development of a system for Japan’s non-profit organizations
Although the increase in the number of organizations has constituted a great change, a particularmajor turning point was when non-profit organizations began to function as public service providers.
The legal status of an NPO began to be granted with the adoption of the Act of Promotion ofSpecified Non-profit Activities in 1998, with the objective of promoting the sound development of
citizens’ voluntary participation in community service programs, including volunteer activities. In
April, 2012, a major legal amendment was made that focused on measures linked to thereinforcement of NPO foundations’ financial underpinnings.

15

Main Subject “The Current State of Social Impact Investment in Japan”

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

There are various types of legal entities in Japan’s non-profit sector, and no single definition for a
non-profit organization exists. The point common to all non-profit organizations is that a low
corporate tax rate is applied to them and that they are subject to donation deduction.

What is Social Impact Investment?

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

From the beginning of the long-term care insurance system in 2000, non-profit organizations havebeen providing public services along with private companies. Since 2001, amid the promotion ofadministrative and decentralization reforms, NPOs began to receive many commissioned projects
from the government. For example, in 2003, legal amendments regarding the designatedadministrator system were enacted, and contracting the operation of public facilities such ascommunity centers, libraries, sports facilities and parks to NPOs and private organizations such as
corporations became widespread. Along with this movement, financial institutions funding NPOs
also began to emerge, and the foundations of NPO business development began to take shape, forexample with the establishment of funding systems in local governments. There have been reports
indicating that approximately 20% of NPO income is derived from government-commissioned
projects, indicating that the government is a source of revenue for business operations run by nonprofit organizations 14 . Figure I-5 shows the revenue breakdown of non-profit organizations.
Donations are thought to constitute a large part of the revenue breakdown of both authorized andprovisionally authorized corporations, which is attributed in part to the fact that donation exemption
or tax exemption is applied to authorized non-profit corporations. In addition, the breakdown ofoperating revenue is indicated in Figure I-6. Operating revenue constitutes the greater part, and outof that, long-term care insurance takes up approximately 50%.

Figure I-5 Total business income breakdown of NPOs15

14 “

Field Survey Report on Specified Non-profit Organizations 2013” (Cabinet Office)

15

Ibid.

16

What is Social Impact Investment?

On another front, there is a trend in which commissioning public services to the public sector isconsidered to be a method of administrative cost reduction, and there are cases in which non-profit
organizations are considered low-cost service providers. The primary deciding factor on the part of
the government administration with regard to the service provider is often the bidding price. The
majority of government contracts are by fixed-price in nature, and with the exception of a few
projects, performance-based payment is not incorporated and fixed payment is made based on theservice provided. Therefore, we are at the stage where there is virtually no assessment of the qualityof administration-based projects and the social impact or implementation thereof. Moreover,
government payment for contracted services is made primarily for the project implementation
expenses and often does not include the overhead, thus preventing the contracted organizationfrom strengthening its operational capabilities. This issue needs to be addressed in the future.
In October, 2015, the credit-guarantee system for NPOs was launched. The credit-guarantee
system allows small and medium-sized enterprises to have their local credit guarantee corporation
be their guarantor when procuring funds from financial institutions, facilitating the obtaining of loans.
This system has improved the financing environment of NPOs which formerly had difficulties in
obtaining large loans. According to the Small and Medium Enterprise Agency, 166 NPOs utilized thecredit guarantee system in the 3 months to the end of December, 2015, for a total of 1.35 billion
yen17. There are NPOs which have already received loans in units of tens of million yen, enabling aproactive development of their operations. NPO Sodateage-Net, which supports young people
entering the work force, received a 10 million-yen loan from the Tama Shinkin Bank which wasallocated to funding for recruitment. Meanwhile, an NPO called Tasukeai-Izumi, which is involved
with initiatives such as temporary care for the elderly, was granted a 10-million yen loan after
16 “

Field Survey Report on Specified Non-profit Organizations 2013” (Cabinet Office)17

February 18, 2016 “Small and Medium Enterprises/Regional Economy 1: NPO Corporation Credit Guarantee Amount becomes
1.3 billion” (Nikkan Kogyo Shimbun)

17

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure I-6 Operation revenue breakdown of NPOs16

Growth of Japan’s social enterprises

What is Social Impact Investment?

While growth is seen in the non-profit sector, there is gradual growth in organizations which are
limited corporations in terms of legal structure but have a mission to solve social issues. According
to the “Report on the Aggregated Activity Size of Social Enterprises in Japan,” which was issued by
the Cabinet Office in 2015, there are 205,000 social enterprises and their gross added value isestimated to be 16.0 trillion yen (to GDP ratio 3.3%) 19. This figure is somewhat smaller than that of
the non-profit sector. There are 5,776,000 paid employees and revenue from social enterprises
totals 10.4 trillion yen. According to the definition of social enterprise in this context, the following
7 requirements must be met:

18

1

It addresses the “solution/improvement of social issues through business”

2

The main objective of the business is not the pursuit of profit but the resolution of social
issues3

The profits are largely to be reinvested into the business and not paid out as investment
or dividends to shareholders (condition for for-profit corporations only)4

Of the profits, the ratio paid out as dividends to investors and shareholders is to be 50%
or less (condition for for-profit corporations only)

5

The income from business is 50% or more of the total income

6

Of the business income, the revenue from public insurance (medical/nursing care) is to be
50% or less7

Of the business income (revenue from sources other than subsidies, membership fees anddonations), the revenue from projects commissioned by the government is to be 50% or
less“Field Survey Report on Specified Non-profit Organizations 2013” (Cabinet Office)19

May, 2015 “Survey on the Aggregated Activity Size of Actors in Society of Mutual Assistance” (Mitsubishi UFJ Research &Consulting)18

Main Subject “The Current State of Social Impact Investment in Japan”

According to a 2013 report from the Cabinet Office, out of a total of 13,130 non-profit
organizations who responded to the survey, 3,301 (approximately 25%) of the organizations
borrowed funds, with the approximate average amount of the loan being 5.6 million yen and theoverwhelming majority of the lenders being individuals. By comparison, in the 2015 report, out of
1,767 who responded, 581 non-profit organizations (approximately 33%) borrowed funds, with anapproximate average amount of 7.5 million yen. As for the lenders, the percentage of individual
lenders had decreased in comparison with the 2013 numbers, while the percentage of financial
institutions increased.18 The 2015 report was aggregated from August to October, so it cannot be
said that the start of the credit-guarantee system had any direct influence, but little by little, raisingfunds for non-profit organizations via financial institutions is becoming easier.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

receiving approval for a guarantee from Shinpo Yokohama, a credit guarantee corporation in
Yokohama City. The system reform is thought to be advantageous for financial institutions as well,as it is connected to the cultivation of new borrowers while minimizing the risk of irrecoverable debt.

In 2016, two companies received certification as a “B Corporation” from B Lab, an American nonprofit organization, for the first time in Japan: Silk Wave Industries in March, 2016 and Ishii Zoen in
May, 2016. There are many small and medium enterprises based in local regions. Therefore, there
is a need for a social certification system which to a certain degree addresses prospects such as therevitalization of local industries and the securing of personnel.

c)

Funder trends

Flow of funds to Japan’s non-profit organizations - the donation market

What is Social Impact Investment?

In comparison to other developed countries such as the United States and the United Kingdom,
the donation market in Japan is relatively small. However, it is growing at a rapid pace, and the
donation market which had been 700 billion yen in 2008 became 1.2 trillion yen in 2012, increasing
twofold in just 5 years. In 2013, individual donations totaled 740.9 billion yen and corporate
donations totaled 698.6 billion yen, with a total of 1.4395 trillion yen, manifesting further growth.
What piqued public awareness of social contribution, which had been on an upward trend sincethe 1990s, was the Great East Japan Earthquake of 2011.Until then, the total of individual donations
hovered around 500 billion yen; however, in 2011, an additional 500 billion yen was gathered fordisaster relief in addition to the approximately 520 billion yen in ordinary donations. In 2012, thetotal of individual donations declined to approximately 700 billion yen; however, in 2013, the figure
increased again to 741.9 billion yen. Excluding the amount collected for disaster reconstruction,
steady growth can be observed since 2009. This growth is attributed to the widespread use of theInternet, social network services which are used for the promotion of non-profit activities, andcrowdfunding, which makes donations via the Internet possible. 21
Japan’s wealthy class has overcome the sudden drop in share prices which hit a peak in 2007 prior
to 2008-2009 and are rising in numbers. It is said that as of 2013, households with net financial
assets of 100 million yen numbered around 1 million (of this number, households of the high-networth with net financial asset holdings of 100 million yen or more numbered 953,000, andhouseholds of the ultra-high-net-worth class with net financial assets of 500 million or morenumbered 54,000) 22. Comparing this figure to that of 2011, the number of affluent households
increased by 24.3%, and the significant increase in the wealthy class is considered to be largely
attributed to the high percentage of shares and investment trust in their financial assets.

20

March, 2015 “Final Research Report on the State of Social Enterprises in Japan“ (Mitsubishi UFJ Research & Consulting)21

205 “Donation White Paper 2015” (Japan Fundraising Association)

22

November 18, 2014 News Release (Nomura Research Institute)

19

Main Subject “The Current State of Social Impact Investment in Japan”

20What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

According to the “Investigative Research Report on the State of Social Enterprises” issued by the
Cabinet Office in 2015, among small and medium-sized enterprises, social enterprises have a higher
level of stability in both revenue and employment and are of a larger average scale. There are many
companies that do not merely function as receptacles for employment, but also recruit and train avariety of personnel and are regarded as contributing to the creation of new forms of employment.

What is Social Impact Investment?

The individual donation market in Japan23

In recent years, corporate donations have increased markedly, from 478.5 billion yen in 2007 to
716.8 billion yen in 2011. The growth rate thereof exceeds the annual average of 10%.
Corporate donations in 2014 were 710.3 billion yen, growing steadily with an increase of about
700 billion yen from 2010. When estimating the scale of corporate donations by field, the areas ofeducation and research are the highest at 237.8 billion yen, while culture and recreation follow at
131.3 billion yen and social services, including disaster relief, are at 991 billion yen. 24
Companies have not only contributed in a vital way to non-profit activities but have also taken thelead in the social impact investment sector in Japan. Many companies have provided support tosocial projects through their own CSR programs and have developed core businesses by investing
their own funds with a strong sense of social mission. Recently, some companies have begun
investing in social enterprises with the goal of obtaining both financial and social returns. These
examples shall be discussed in detail in Chapter II.
Additionally, social impact investment with donations as capital are also becoming widespread.
In April, 2016, ARUN, a social impact investment company targeting developing countries, begansocial impact investment services aimed at such countries with donations received from companies
as capital, called “crowd social investment.” 25 With conventional donations, only short-term
support is possible. However, sustainable solutions for social issues are aimed for by providing
support via an "investment" arrangement based on funds collected through donations. Althoughmethods and funding recipients vary somewhat, other similar efforts using donations as capital are
23

Prepared by author based on 2015 “Donation White Paper 2015” (Japan Fundraising Association)

242015 “Donation White Paper 2015” (Japan Fundraising Association)

25

ARUN Seed “Crowd Social Investment” Website

20

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure I-7

What is Social Impact Investment?

Figure I-8

Annual change in corporate donations26

Furusato Tax (Hometown Tax) System
The Furusato Tax (Hometown tax) System is an individual resident tax system which has been
designed as a “donation system” for prefectures and municipalities. Citizen donations exceeding
2,000 yen qualify for a residential tax exemption. Deliberations began in 2007 and the system waslaunched in 2008. As of January 1, 2015, the residential tax refund which was formerly around 10%
increased to 20%, and due to the “one-stop exception system” which began on April 1 of the same
year, the final income tax returns which were required became unnecessary, resulting in aconsiderable increase in donations. As Figure I-9 indicates, the Furusato Tax System performancein 2015 was 165.3 billion yen, with 7.26 million Furusato tax payments. In the same year, of themunicipalities which received large amounts, the receipt for 1 municipality exceeded 4 billion yen.
The reason why the donation amount differs according to the municipality is due to differences in
the return gifts for the donation. Of the 1,796 municipalities, 1,618 municipalities sent gifts in return,26

Prepared by author based on 2015 “Donation White Paper 2015” (Japan Fundraising Association) and National Tax Agency
website data

21

Main Subject “The Current State of Social Impact Investment in Japan”

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

carried out by Japan Venture Philanthropy Fund and Relationship Capital of Japan, which will be
discussed in detail later.

On the other hand, with the Furusato Tax System, the higher the annual income, the larger theamount used to reduce taxes. Due to the entire donation, excluding 2,000 yen for the service charge,
being deductible, the tax reduction effect is greater for the wealthy class. Competition among
municipalities to gather donations from the wealthy is intensifying, since the amount of donations
differ significantly depending on their donations. It has been suggested that there is room for
improvement regarding this tax scheme, including the extreme tax reduction benefits for thewealthy.28

What is Social Impact Investment?

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

constituting 90.5%. Many municipalities send items like local agricultural produce or traditional
crafts, with the aim of promoting the local area.27

Figure I-9

Furusato Tax System - amount and number received (national total)29

27

June 14, 2016 “Current State Survey Results on the Furusato Tax Scheme” (Municipality Tax Policy Division, Local Tax Bureau)

28

July 29, 2015 “Donations Too Good to be True ; Wealthy Class ‘free food budget’” (Nikkei Shimbun)

29

June 14, 2016 Prepared by author based on “Current State Survey Results on the Furusato Tax Scheme” (Municipality Tax Policy
Division, Local Tax Bureau)

22Annual income (in units of
10,000 yen)
300
500
700
900
1,000
1,500
3,000
5,000
10,000

Deduction limit (inunits of 10,000 yen)
3.1
6.7
11.8
16.4
18.8
39.4
106.2
209.2
436.2

Inheritance donations

What is Social Impact Investment?

Based on the revision of the specified non-profit corporation system in 2011, inheritancebequeathed to specified NPOs was excluded from taxable income. On the other hand, there has
been a rise in inheritance tax, with basic deductions reduced from 50 million to 30 million yen andthe deductions per heir being adjusted from 10 million to 6 million yen, resulting in a 40% decreasein basic deductions.30 The inheritance tax rate depends on the amount bequeathed; the rate is 15%
for 30 million yen or less, 20% for 50 million or less, and 30% for 100 million or less. While it isestimated that Japan’s inheritance assets are approximately 40 trillion yen and there is a tax
deduction advantage in inheritance donations, relatively few are taking advantage of thisarrangement in Japan, with the total inheritance donation being 740 billion yen in 2009.31
On the other hand, according to a questionnaire regarding inheritance aimed at those 40 years
and older, approximately 20% have a keen interest in inheritance donations.32 With the increasingly
aging society and the inheritance asset market growing at a constant pace, the inheritance donation
market will no doubt expand steadily.
Donations and subsidies from foundations
There is no distinct concept of grant-making foundations in Japan. Per the public-interest
corporation system enacted in 2008, the following corporation types coexist: general incorporated
foundations and associations, public interest incorporated foundations and associations and under
the former law, corporations (foundation, association). According to a report submitted by JapanFoundation Center in 2015, regardless of the corporation type, the definition of a grant-making
foundation is one that meets the following criteria: (1) provides funding for research and projects
conducted by individuals and groups, (2) provides scholarships for students and exchange students,(3) presents awards and prizes to individuals and groups for their superior performance 33. As shownin Figure I-10, the number of annual establishments of grant-making foundations reached its peak in
1990, being on a downward trend thereafter.

30

September 29, 2014 “Inheritance assets on the increase with the aging society”（Dai-Ichi Life Research Institute)

31

2013 “Donation White Paper 2012” (Japan Fundraising Association)

32

2015 “Donation White Paper 2015” (Japan Fundraising Association)

33

2015 “Current State of Japan’s Grant-making Foundations” (Japan Foundation Center)23

Main Subject “The Current State of Social Impact Investment in Japan”

Relationship between annual income and Furusato Tax System deductibility limit

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Table I-1

On the other hand, according to a survey conducted on 938 incorporated foundations, although
the number of incorporated foundations with total assets of 3 billion yen or less makes up for 73%,
approximately 10% have total assets exceeding 10 billion yen.34 Of the total assets of the grantmaking foundations, approximately 70% have assets of 10 billion yen or more, and the total assetsof all grant-making foundations are 4.5 trillion yen. When examining the changes of 84 foundations
with data from over 27 years, total assets, which had been 440 billion yen in 2005, rose to 1 trillion
yen in 2014.

What is Social Impact Investment?

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

The total amount of grants has been on a downward trend since 1994, leveling off after 2005,
and then being on somewhat of an increase after 2011. The decrease in grant money is attributed
to the effect of the long years of Japan’s extremely low interest rate policy and to the severe funding
situation of grant-making foundations which has remained unchanged to the present.

Figure I-10

Change in the annual number of foundation establishments from 1990 to 2014 35

34

2015 “Current State of Japan’s Grant-making Foundations” (Japan Foundation Center)

35

Ibid.

24

What is Social Impact Investment?

Figure I-12

Number of foundations according to asset size and total assets 36

Asset size of 84 foundations and changes in subsidy program costs(detailed figures are unknown)37

36

Prepared by author based on 2015 “Current State of Japan’s Grant-making Foundations” (Japan Foundation Center)37

2015 “Current State of Japan’s Grant-making Foundations” (Japan Foundation Center)

25

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure I-11

There was a landmark event regarding ESG investment in Japan in September, 2015. The
Government Pension Investment Fund (GPIF) signed the United Nations Principles for Responsible
Investment (UNPRI). It is anticipated that this move will stimulate investors’ interest in ESG.

What is Social Impact Investment?

UNPRI is a global platform for ESG investment established in 2006, with the UN being the prime
mover. UNPRI stipulates principles to guide the decision-making of institutional investors so as toreflect the ESG perspective. Those signing the UNPRI include asset holders such as pension funds
including the GPIF (289 institutions), asset managers which manage the aforementioned assets (916
institutions), and service-providing institutions (189 institutions). As of September, 2015, 1,394
institutions have signed the UNPRI. Those who have signed are required to give consideration to
non-financial information (environmental, social, and corporate governance) in the investment
process in addition to financial information.39
Due to this signing, not only will the ESG be considered in the management of the GPIF, but it will
also impact the external asset management institutions. The GPIF requires the external asset
management institutions to sign the UNPRI and report on its activity. If they do not sign, a reason
for not doing so will be demanded, and if no legitimate reason exists, they must sign and implement
the ESG investment.
In addition, because the GPIF is a benchmark for other types of public and corporate pension
funds, if it becomes a standard for investment evaluation in the future, changes can be expected tooccur in listed companies’ management policies and their stance toward information disclosure.
There is the possibility that not only financial information, but also information on a wide range ofcorporate activity such as ESG will be disclosed proactively to investors. With further progress inresearch and analysis, it is anticipated that ESG will spark the interest of more investors. ESG
investment is also thought to lead to improvement in medium to long-term investment income andrisk reduction, and will affect long-term investments in the development stage of the market.40

38

2014 “Global Sustainable Investment Review” (GSIA)

39

October, 2015 “The impact of GPIF signing the PRI” (Daiwa Institute of Research, Ltd.)

40

Ibid.

26

Main Subject “The Current State of Social Impact Investment in Japan”

The SRI market scale in Japan, including ESG investment, cannot be described as adequate in size
when compared to Western countries. Based on information from the Global Sustainable
Investment Alliance (GSIA), the SRI market scale of various countries is as shown in Figure I-13.38
Asia occupied 0.6% of the market in 2012 and grew to 0.8% in 2014, still a minor presence.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Spread of SRI (Socially Responsible Investment) / ESG Investment

What is Social Impact Investment?

SRI market scale in various regions around the world41

Spread of social impact investment as general financial products
General investment markets have also begun to handle some financial products related to social
impact.
In September, 2015, BlackRock Japan Co., Ltd., the Japanese subsidiary of BlackRock, a globallyrenowned investment trust company, set up the “BlackRock impact equity fund” with impact
investment as its theme. This fund is Japan’s first impact investment targeting shares in a developed
country, selecting companies with social impact by utilizing unique analysis models and the latest
technology such as big data. The fund focuses on the areas of health, the environment, management
status, in addition to bolstering research on diseases, strengthening initiatives geared toward
environmental conservation, the possibility of reducing litigation, reducing immoral businessactivities, and the improvement of business culture, 42 investing in companies with a greater
motivation toward social impact among ESG investment options. On the other hand, the companies
who receiving funding through BlackRock are so-called listed companies, which means that they are
not included in the calculations of social impact investment market scale in this report.
Commons Asset Management, Inc. is an investment trust company founded in 2007 which
specializes in long-term investment. The total assets under management exceed 24 billion yen (asof the end of August, 2016). The company handles the “Commons 30 fund” which specializes inlong-term investment and focuses also on non-financial information, and “2020 Vision,” an active
fund which invests in companies which are making a “change.” In the Commons 30 fund, there is a
program called “SEED Cap” which supports social entrepreneurs. This program donates 1% of thetrust fee to support social entrepreneurs and is noteworthy as a system which creates sustainable41

Prepared by the author based on 2014 “Global Sustainable Investment Review” (GSIA)

42

BlackRock Impact Fund website

27

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure I-13

What is Social Impact Investment?

Japan International Cooperation Agency (JICA) is an institution which primarily provides technicalcooperation to developing countries and provides grant aid and loan cooperation. In September,
2016, JICA will issue 20 billion yen in social bonds.45 This will be Japan’s first issuance of the above
type of bonds in accordance with the definition set forth by international institutions. 10-year and20-30-year yen-denominated bonds will be issued in lots of 10 billion yen, and the procured funds
will be used for yen loans and investments in developing countries. Based on related events such as
the GPIF signing the UNPRI and the spread of ESG investment, there is a potential for such
“authorized” social bonds to be purchased on a priority basis.
In the future, social impact-oriented funds are predicted to gain strength in Japan stemming fromprogress in ESG investment.
Low-interest loans by financial institutions
A trend characteristic of Japan which can be seen in many financial institutions including regionalbanks is providing relatively low-interest loans to nonprofit organizations. In this report, due to NPOs
being “social impact-oriented fund recipients,” loans directed at NPOs are included in the social
impact investment market scale.
In addition, as previously mentioned with regard to the trends in fund recipients, due to the startof the NPO credit guarantee system in October, 2015, loans for NPOs by various financial institutions
have been on the rise. According to an independent survey46, financial institutions which have set
up new loan products for NPOs include: 29 regional banks (45%), 77 shinkin banks (29%) and 50
credit unions (32%), manifesting how the launching of this system has greatly affected the expansionof loans for NPOs. Moreover, financial institutions which provide loans to NPOs include 100% ofregional banks, 90% of shinkin banks and 63% of credit unions.

43

Commons Asset Management website and interviews

44

Kamakura Investment Management website

45

August 23, 2016 “JICA to issue 20 billion yen social bonds as development fund in September” (Nikkei Shimbun), interview with
JICA
46
Independent survey on 65 regional banks, 265 shinkin banks and 154 credit unions in July, 2016

28

Main Subject “The Current State of Social Impact Investment in Japan”

Kamakura Investment Management Co., Ltd. is an investment trust company in Japan, and its
method of operation consists of allocating 3.4% of its portfolio to social enterprises while making
profit in investment trust. Their financial product called “Yui 2101” envisions the cooperative
creation of an affluent society which connects people with people and one generation with another,with the next century “2101” as the target.44 This interesting approach will be discussed in detail in
Chapter II under market scale measurement.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

social impact. 2020 Vision implements a program to support sporting events for persons withdisabilities. The company’s initiative in regarding donations as an “ultra-long-term investment” issaid to be a progressive approach which takes advantage of synergy with long-term investment.43

What is Social Impact Investment?

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Japan Finance Corporation (JFC) was founded in October, 2008 as a policy-based financial
institution wholly owned by the government, with National Life Finance Corporation, Agriculture,
Forestry and Fisheries Finance Corporation and Japan Finance Corporation for Small and Medium
Enterprises as its predecessors. Loan performance directed to the corporation’s social business is asfollows: 7,746 loans (128.1% of the previous year) of a total of 60.7 billion yen (117.2% of theprevious year) in 2015, which is a record high in both the number of loans and the loan amount.
Additionally, in February, 2015, a financing system dedicated to social businesses called the “social
business support fund” was started. Low-interest loans of other financial institutions will be referred
to in Chapter II under market scale measurement. Many financing systems have recently been
established and will undoubtedly increase in the future.

Figure I-14

Status of low-interest loans for NPOs provided by financial institutions※Independent survey conducted in July, 2016

Heightening of social impact orientation in the support of venture businesses
In Japan, as in various Western countries, startups and growth of venture businesses 47 areessential for the growth and development of the economy. On the other hand, in comparison toWestern countries, the standards for venture businesses, including financing and management
support, is low. Thus, the promotion of financing venture businesses is a vital issue 48. Venture
capital is an essential element in financing and providing management support for venture

47

General term for enterprises which have recently been founded, aiming for rapid growth through the development of new
business models, etc. from innovative technology and ideas, etc. Also called startups.
48
2014 "Final Report on Corporate and Venture Assistance: an Angel Investor-Centered Venture Ecosystem" (Nomura ResearchInstitute)

29

What is Social Impact Investment?

The mission of Mistletoe, a seed accelerator/incubator corporation operating at a full scale from2016, is to promote startups which contribute to major global issues. In addition to financing andmanagement support, providing a location for the investee and generally joint founder-like support,
it develops businesses taking the growth of the ecosystem into consideration including event
operation support and investment in independent-type venture capital. Projects handled by
Mistletoe are issue-driven; namely, they are mid to long-term projects which contribute to theresolution of fundamental problems facing mankind such as global food shortages, declining
birthrate and aging society, logistics, etc. Therefore, it can be said to be a social impact-oriented
investment. We can anticipate this company’s future progress, which has plans to establish aventure business ecosystem in East Asia by 2030, aiming to surpass Silicon Valley 50.

d) Investment intermediaries/organizations trends
Expanding from venture philanthropy
In an effort to achieve venture philanthropy, some investment intermediaries in Japan have
expanded their funding method from subsidy to investment. Venture philanthropy refers to theproviding of medium to long-term funding and management support to non-profit organizations andsocial enterprises as a means to solve complex social issues, with the goal of promoting businessgrowth. This concept goes back to 2003 when it was introduced to Japan by the Tokyo branch ofSocial Venture Partners (SVP Tokyo), a company founded in 1997 in Seattle. 51 SVP Tokyo is an NPO
which finances and provides management support to businesses endeavoring to find solutions tosocial issues, with each member paying 100,000 yen per year as a “partner.” It supports over 30
different organizations and there are over 100 partners. Conventionally, the funding method was
primarily through subsidies; however, in 2012, a first attempt was made to invest 1 million yen in
the form of third-party underwriting of share issuance to businesses conducting self-healthcheckups.52 Equity investment in the startup of social enterprises without an initial public offering(IPO) as the objective, as well as the idea of engendering potential future profit by circulating funds
through reinvesting into new social enterprises instead of distributing to partners, can be classified
as advanced initiatives. They plan to consider funding in the form of investments in the future.53
In 2012, a philanthropic organization named Social Investment Partners (SIP) was founded byprofessionals in the fields of private equity and corporate finance. Its purpose is to provide medium
to long-term financial and management support to organizations which are aimed at making social
49

2015 “Venture White Paper 2015” (Venture Enterprise Center)

50

March 8, 2016 “Taizo Son ‘Out-of-the-park homer or strike-out investment’” (Toyo Keizai Online)

51

July, 2014 “Current state of Impact Investment in Japan“ (Nippon Foundation)

52

January 10, 2012 press release (SVP Tokyo)

53

Interview with SVP Tokyo

30

Main Subject “The Current State of Social Impact Investment in Japan”

The primary objective of venture capital is the growth of businesses; however, social impact isincreasingly being taken into consideration as well. Globis Capital Partners, a leading venture capital
firm in Japan, has launched KIBOW, Japan’s first social impact investment fund, which implementssocial impact investment while utilizing the know-how of venture capital. Case studies related to
KIBOW and its leading role in social impact investment will be referred to in II-3.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

businesses, and the amount invested in Japan for venture capital, etc. was 117.1 billion yen in 2014,of which 74 billion was directed at domestic businesses49.

Flow of funds from citizens
The institutions in Japan which correspond to the social banks and Community Development
Financial Institutions (CDFI) in Western countries are called “NPO banks” and “community
foundations.” Another type of institution which specializes in the flow of funds in the energy sector
is the citizens’ energy fund. In a broad sense, it is a system in which the capital, consisting primarilyof donations from citizens and local companies, is allocated to NPOs and regional social enterprises.
The funding methods can be roughly divided into subsidies, investments and loans.

What is Social Impact Investment?

NPO banks refer to “non-profit banks for citizens,” established with the objective of financing
NPOs and individuals engaged in activities related to the local community, welfare or environmental
conservation, through funds gathered through voluntary citizen donations. It is also called a“financial NPO” or “citizens’ finance.” The operational features of NPO banks are as follows: thecitizens who agree with the purpose of the bank become NPO union members; they must makeinvestments in several tens of thousands of yen a share, and with the aforementioned as capital,
they must provide loans to NPOs and individuals at a low interest rate (about 1-5%). There are somedisadvantages for the funder such as having no principal guarantee and not being able to withdraw
funds freely. However, fund management being carried out in a visible form makes this an appealing
investment. 54 The history of NPO banks in Japan goes back to the mid-1990s, when Mirai Bank
Partnership was founded as the first endeavor. The number of NPO banks as of March, 2016 has
increased to 14, with a cumulative loan total of 3.38 billion yen, and a loan balance of approximately
240 million yen.55
A citizens' fund is a type of structure which collects funds from members of the public who support
it and then circulates the funds as grants to NPOs and other organizations who are involved in
activities which serve the public interest, creating a society in which citizens are supporting eachother. 56 A promotion committee was founded in 2011, defined as "a civilian structure,
independently established and operated by citizens, based primarily on donations from the publicwhich are used to subsidize civic activity in order to solve social problems and create new value.”
Community foundations are public philanthropic institutions operated by board members which
consist of citizens selected from those who have knowledge of the local community and who
represent the common public interest. The institution receives donations from individuals,
companies and organizations, and manages numerous funds bequeathed by individuals. 57 The
business target is the geographical “community” (region) with its various complex and stratified
54

National NPO Bank Network website

55

March, 2016 “Current state of Japan NPO banks” (Japan NPO Bank Network)

56

July 6, 2011 “Establishment of Citizens’ Fund Promotion Liaison Committee” (NPOWEB)

57

1996 “All about Community Foundations” (Osaka Community Foundation edition, Yoshihiro Mishima, Seibunsha)

31

Main Subject “The Current State of Social Impact Investment in Japan”

From the perspective of efforts toward venture philanthropy, the trend towards social impact
investment with assumed financial return has the potential to continue gaining strength in the future.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

contributions. In 2013, Japan Venture Philanthropy Fund (JVPF) was established as a joint endeavor
by The Nippon Foundation and SIP, becoming a pioneer of cooperation between private foundations
and the business sector. JVPF has been supporting 4 organizations up to the present (2016), andone such organization it has been supporting since 2015 is AsMama, Inc. Details on this matter will
be presented in II-3.

What is Social Impact Investment?

The features of these organizations are as follows: the business and activities are societyoriented; there is willing participation on the part of the citizens; and social returns are expected.
This type of structure, in which donations are solicited from local residents and enterprises for the
purpose of regional revitalization and community development, and support is provided for theactivities and businesses of NPOs and resident groups, will likely continue to prosper in the future.
Each organization, respectively, has a nationwide network, such as Japan NPO Bank Network (activity
started in 2005), Citizens Fund Promotion Liaison Committee (established in 2011) and Community
Foundations Japan (established in 2014). It is thought that they will play a vital role in the spread ofsocial impact investment in Japan in the future.
Table I-2
Name
NPO bank

Citizens’ fundCommunity
foundation

Summary of the structures for the flow of funds from citizens

Definition/summary“Citizens’ non-profit bank” founded
for the purpose of financing NPOs
and individuals engaged in activities
related to the local community,
welfare and environmental
conservation, through funds
voluntarily provided by citizens.
A private structure established andoperated by citizens to subsidize civic
activities, based primarily on
donations from citizens for new value
creation and the resolution of social
issues.
A public philanthropic institution
operated by board members who
have knowledge of the local

Form of funding
Loan

Examples● Mirai Bank
● Community Youth Bank
momo, etc.

Subsidy● Civil Society Initiative Fund
● Kanagawa Children’s
Future Fund

Subsidy● The Sanaburi Foundation

58

Japan Community Foundation Association website

59

July, 12, 2015 “The Future of the Natural Energy Fund Launched in Fukushima” (Harvard Business Online)

32

Main Subject “The Current State of Social Impact Investment in Japan”

A citizens’ energy fund is a fund initiated by the public with the intention of developing“renewable energy” through the strength of the local residents, after the nuclear power disasterfollowing the Great East Japan Earthquake. It takes the form of a silent partnership fund and thefunds are provided for the establishment and operation of clean energy power plants. The
renewable energy Feed-in Tariff which started in July, 2012 is one reason for the spread of this fund.
For example, in Fukushima Prefecture, there was a movement pursuing independence from nuclear
power plants through natural energy, and in 2013, a fund was set up by Aizu Electric Power Company
through the efforts of local managers59.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

regional issues. The business content consists of serving as a mediator for donations and the like,setting up and managing funds by collecting financial resources from multiple donors with a specifictheme, and providing funding which reflects the intentions of the investors. 58 The concept of acommunity foundation goes back to the “Cleveland Foundation” founded in 1914 in Cleveland, Ohioin the United States. In Japan, the first such foundation is the Osaka Community Foundation,founded in 1991. After the reform of the public-interest corporation system in 2008, establishmentsof foundations in various localities ensued, such as the Kyoto Foundation for Positive Social Change
in 2009.

Citizens’ energy
fund

A form of silent partnershipinvestment from citizens providing
funding for the establishment andoperation of clean energy power
plants.

● Kyoto Foundation for
Positive Social Change
Silent partnershipinvestment● Community Wind Power/
Hamatonbetsu No. 1
Generator Silent
Partnership● Aizu Solar Citizens Fund2014, etc.

Spread of crowdfunding

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”● Aichi Community
Foundation

community and share public interest,
which manages various funds
donated by individuals, enterprises
and organizations, as well as
bequeathed funds.

What is Social Impact Investment?

Presently, the market scale of domestic crowdfunding (new project funding amount base) is 68.1%
higher than the previous year at 36.3 billion yen60. Crowdfunding is the method in which a projectrequiring funding procures relatively small amounts from an unspecified number of people throughthe Internet. There is the purchase type, donation type, investment type (funds), loan type (social
lending) and equity type (investments). The reason for its large-scale expansion compared to theprevious year is thought to be due to the many highly philanthropic and appealing projects whichhave been launched and the expansion of the high-yielding investment type, reflecting theestablishment of major projects and the negative interest rate policy era. By analyzing the types, as
shown in Figure 1-15, the loan type has yielded 32.3 billion yen (88.7% of the whole), followed by
the purchase type which has yielded 3.2billion yen, the investment type which has yielded 600
million yen, and the donation type which has yielded 100 million yen. With the investment type, asubstantial increase is seen when a large project is achieved and although there are ups and downs
throughout the year, it is growing steadily at roughly 600 million yen. There has been an increase in
the purchase type due to the commission reduction and the increase in the awareness thereof, andwith the increase in highly appealing project startups. With the loan type, we have come into a
negative interest rate era from the low-interest era, and with the increase of supporters (investors)
seeking a high-yielding return, continued growth is to be expected.
In addition, as of end of July, 2015, there were approximately 100 companies handlingcrowdfunding. However, as of the end of June, 2016, this number has increased to approximately
140.61This type of fund procurement no longer remains a mere means of fundraising, but is evidently
considered an effective means for test marketing and sales promotion, in addition to its continued

60

August 19, 2016 “Domestic Crowdfunding Market Research” (Yano Research Institute, Ltd.)

61

Ibid.

33

What is Social Impact Investment?

As a means of procuring funds, crowdfunding continues to grow, with the Great East Japan
Earthquake as a particular trigger for this growth.

What is Social Impact Investment?

Figure I-15

Change in the amount of support funds for new domestic crowdfunding projectse) Intermediaries trends
Intermediaries which aim to create and train social entrepreneurs have been increasing since thelatter part of the 1990’s. Organizations which give advice to newly sprung-up entrepreneurs as
mentors and provide business model brush-up sessions and a venue for mutual exchange among
entrepreneurs are called “incubators” or “accelerators” according to the venture capital terminology
used in the West. NPO ETIC (hereafter, “ETIC”) and NPO Edge, which operate primarily in the Osaka
area, have spread the social entrepreneurial concept and mindset in tackling social issues with
innovative methods and ideas. Examples of the two organizations follow.
ETIC is an NPO founded in 1993 which mainly provides social entrepreneurial support. Various
programs are provided for social entrepreneurs and social entrepreneur candidates, through startup
support and community development projects. From 2012, in collaboration with Seibu Shinkin Bank,ETIC launched “Change,” a growth support loan which targets NPOs, social enterprises and medium
to small-scale businesses.
RCF, a general incorporated association, was established after the Great East Japan Earthquakeof 2011 with the vision of working towards reconstruction in Tohoku. Initially engaged in addressing
issues in the Tohoku Region, this corporation is currently expanding their operations through theirexperience and connections to nationwide projects related to social issues, transcending the sectorsof business, non-profit and government. They promote community support projects in various
regions as a social enterprise coordinator.62

62

RCF website

34

Main Subject “The Current State of Social Impact Investment in Japan”

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

use for business expansion activities. The crowdfunding market continues on an upward trend as it
addresses various needs.

The market is still nascent; however, according to various reports, it has shown expansion in its
market scale in various countries, and can be said to be a highly promising potential market in the
future.

What is Social Impact Investment?

Moreover, various countries have issued reports calculating its market scale. Table I-3 and FigureI-16 are compilations of a portion of such reports. In both cases, the social return and financial returnfrom the funder perspective are based on assumption and differ in the accuracy of the calculationbasis. The G8NAB63 report from Germany most accurately calculates the market scale.
Table I-3 Social impact investment market scale in the respective countries and the calculationbasis thereof 64
Classification
US (G8NAB 2014)
UK (G8NAB 2014)UK
Social investment(BSC (Segment A)
2016)

Social impact
investment market
Calculation basis
scale
N/A
N/A
200 million pounds Limited to funds provided to charity organizations
and social enterprises from social investment/social
lending-specified intermediaries (funds provided
through other financial institutions not included).
1.5 billion pounds Where both investors and users of capital intend to
make a positive social impact
1 Projects particularly in line with the BSC strategy
theme・SME Charity Finance・Social Innovation
・Mass participation

63

National Advisory Board in various countries in the GSG

64Jun. 2014 “Private Capital, Public Good” (US National Advisory Board on Impact Investing), Sep. 2014 “The UK experience” (UK’s
Presidency of the G8), Mar.2016 “Social Investment Insights Series” (Big Society Capital), Mar.2016 “Social Impact Investment inGermany” (Bertelsmann Stiftung), Jan. 2015 “The Hows and Whys of Social Impact Investing” (the French National Advisory Board
on Impact Investing)35

Main Subject “The Current State of Social Impact Investment in Japan”

At present, the concept of social impact investment itself is still new and the measurement of themarket scale is difficult. However, the social impact market scale is said to be 60 billion dollars(approximately 6 trillion yen). The market for socially responsible investment, which places greater
emphasis on financial return, is said to be 21.4 trillion dollars, and by comparison, the scale of social
impact investment is less than 1% thereof. In addition, the scale of the social impact investment
market makes up approximately 0.03% of the global financial market, which said is to be 210 trillion
dollars.

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

4. GLOBAL TRENDS AND MARKET SCALE OF SOCIAL IMPACT INVESTMENT
Social impact investment has developed in many countries, most notably in the U.S. and U.K. It is
now developing in Germany, India, China, France, Belgium, Canada and other countries. The U.K.,
amid a pressured financial situation, is proactively promoting social impact investment as an answer
to the question of how to efficiently and effectively implement social welfare projects, such assupport for poverty.

What is Social Impact Investment?

France (G8NAB 2014)3.25 billion pounds Where only the investor intends to make a positiveor moresocial impact(A+ Project in which the investor has a social intent
but the recipient does not)68 billion pounds
Where only the user (investee) intends to make aor morepositive social impact(B+ Project in which the investor does not have asocial intent but the recipient does)
1 Has a record of social impact measurement
6.9 million Euros

1.8 billion Euros

2

Investee’s social impact intention is clear

3

Investments in Germany using capital managed
in Germany

1

Investee’s social impact intention is clear

2

Social impact is clarified and both social andfinancial returns are expected.

3

The social mission is protected by governance,
contract or through its legal form (Non-profit
legal entities are always vehicles for locking in asocial goal)

36

Main Subject “The Current State of Social Impact Investment in Japan”

Wider impact
investment(investor-led)①(Segment B)
Wider impact
investment (userled) ② (Segment
C)
Germany (G8NAB 2016)

What is Social Impact Investment?

Main Subject “The Current State of Social Impact Investment in Japan”

・Scale2 Other social impact investments

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANII

Social impact investment market measurement method in reports of various countries

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN1. SOCIAL IMPACT INVESTMENT MARKET SCALE MEASUREMENT
Projects meeting the conditions of the concept set forth in Chapter I as specified below weregathered and carefully examined, with reference to the various market scale measurement methods
in different countries, in order to measure the social impact market scale in Japan.
1.

The funder, through the investment, has the “intent” to pursue social and/or environmental
impact
The primary mission of the funder organization is the creation of social value(specifically corresponding to one of the following):
●

●

●

➢

The funding target is an NPO.

➢In determining whether to fund a microfinance organization, projects related toearthquake disaster reconstruction and other social enterprises, a standard
should exist regarding social impact creation set forth by the funder.

Cases in which the government is the funding target are excluded.
General investments with the purpose of maximizing the profit margin and ESG
investments, which take social and environmental factors into consideration in
implementing the investment, are excluded.

37

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure I-16

Donations and subsidies without the intent of a financial return, and venturephilanthropy in which management support is provided through human resourcesalong with monetary donations, are excluded.

The method of measuring the social impact investment market in this report is similar to that of
the BSC in Figure I -16, in particular, Segment A.
In the “Current State of Social Impact Investment in Japan” issued by the National Advisory Board
in 2014, funding by venture philanthropy as a means of managerial reinforcement was included in
the market scale measurement. However, due to condition 2, “should be expected to yield financial
return," this was excluded and a recalculation was made. In addition, an overall review was
conducted with consideration to the above conditions and newly added conditions. As in the reportcompiled in 2014, the figure was calculated for each item, and by conducting surveys on thebusinesses concerned and holding interviews as needed, the total sum was calculated. The figuresaccording to the 2014 report, the revised figures for the 2014 report and the newly calculated 2016
figures are shown in Figure II-1. The breakdown of the projects is as shown in Table II-1.

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANThe resulting actual amount (or balance amount) of investments and loans in the social impact
investment market for 2016 was 33.7 billion yen, a 41% annual average increase from 2014.

Figure II-1

Change of the social impact investment market in Japan

38

Main Subject “The Current State of Social Impact Investment in Japan”●

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

2. The investment should be expected to yield profit on capital and financial return●Entries that decreased from the 2014 report: -14.16 billion yen➢

3 entries in which part of the item had not shown an annual sum but a cumulative
sum: -7.35 billion yen➢

3 entries in which not the actual amount but the total fund management value had
been included: -3.35 billion yen➢

2 entries in which all items within a broad definition, regardless of whether social
impact was intended or not, had been included: -3.28 billion yen➢

2 items which had been included as philanthropy: -180 million yen

Entries that increased from the 2014 report: +6.67 billion yen

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN➢

5 entries which had not been included: +5.71 billion yen➢

3 entries which showed a particular increase for some other reason: +960 million
yen

The main reasons for the approximately twofold increase from 2014 to 2016 can be summarized
as follows:●

There are 5 entries for which a growth of more than 500 million yen was seen.

●

There are 4 entries for which new investments and loans were initiated.

On the other hand, only Daiwa Microfinance Fund saw a decrease with 900 million yen. The
analysis thereof will be discussed in section II-2, and the item topics will be discussed in II-3.
Furthermore, detailed measurement methods or standards with regard to market scalemeasurements are summarized with explanatory notes in Table II-2. The calculated amounts were
carefully examined based primarily on interviews, questionnaires, and so on. However, please notethat these figures are not intended to be accurate.
Table II-1
No.
1
2
3
4
5

Breakdown of the social impact market scale in Japan (unit: million yen)65
Name

Japan Finance Corporation (JFC)
Social business support
Citizens Energy FundMusic Securities, Inc.
Mitsubishi Corporation Disaster Relief Fund
Gojo & Company, Inc.

65

2014

2014

Original

Revised

2016

5,000

5,867

17,114

No entry
4,400
1,500
―

3,078
1,963
1,532
―

3,917
3,789
2,050
2,000

Confirmation through each corporate website and interviews (Organizations which were interviewed are as follows by number:
1,3,4,5,6,8,11,13,14,15,20,21）39

Main Subject “The Current State of Social Impact Investment in Japan”●

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

The difference between the revised and original market size for 2014 can be accounted for as
follows:

8
9
10
11
12
13
14
15

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

16
17
18
19
20
21
22

Total

Name

1

Japan Finance Corporation (JFC)
Social business support

2
3

Citizens Energy FundMusic Securities, Inc.

5

Gojo & Company, Inc.

6

Daiwa Microfinance Fund

1,995

1,060

3,470

1,000

1,000

No entry

421

924

1,500
2,700
3,120

0
252
120

396
309
262

Amountunknown

183

230

200

228

228

500
70

134
100

164
142

50

50

50

120
No entry
1,500
―
60
280

0
33
20
0
1
―

45
35
20
10
1
―

24,470

Table II-2 Details of the market scale measurement basis
No

No entry

16,97733,747※ Numbers correspond to Table II-1.

Detailed standards
Of the businesses which deal with 3 fields of social businesssupport, namely, (1) NPOs, (2) nursing care public welfare
services and (3) solutions for social issues. The loan amounts for(1) and (3) are included.
Projects with citizen funding are included.
Investment balance of silent partnership funding is included.
Subsidy acquisition of microfinance institutions in various
regions is carried out by fund procurement, not through funds
per se but through share issuance as capital, and themicrofinance business is carried out as their own business.
The financing amount to each microfinance institution(procurement through share issuance) is included.
Out of the total net asset value of 3.6 billion yen in 2016, thecomponent of 29.1% for MFI-directed loans, as well as 32.4% of
the 6.2 billion yen in 2014 are included.

40

Main Subject “The Current State of Social Impact Investment in Japan”

7

Daiwa Microfinance Fund
National Association of Labour Banks NPO
loans
Kamakura Investment Management Co., Ltd.
Investment trust “Yui 2101”
Toyota Tsusho CSV Africa Pte. Ltd.
NPO Bank
The Nippon Foundation “Wagamachi Fund”
Nationwide regional banks, shinkin banks,
credit associations
Low-interest loans for NPOs
Japan International Cooperation Agency
Overseas investment and loan projects
Relationship Capital of Japan
ARUN LLC
The Nippon Foundation
Comprehensive finance support in Vietnam
Japan Venture Philanthropy Fund（JVPF）
Oikocredit Japan
Benesse Social Investment Facility
KIBOW Foundation
NPO SVP Tokyo
Other

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

6

9

Toyota Tsusho CSV Africa Pte.
Ltd.

10

NPO Bank

11

The Nippon Foundation“Wagamachi Fund”

12
THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN13

Nationwide regional banks,
shinkin banks, credit associations
Low-interest loans for NPOs
Japan International Cooperation
AgencyOverseas investment
and loan projects

17Japan VentureFund（JVPF)

Philanthropy

19

BenesseFacility

Investment

20

KIBOW Foundation

21

NPO SVP Tokyo

2.

SocialLoan balance of 2009 is quoted (latest amount unknown).
Of the net assets, the incorporated receivable ratio of social
enterprises of 3.4% is included.
Of the fund management scale of 1.5 billion yen, the amountinvested for the Zambia agricultural business and Ethiopian
leather industry is included.
Based on the “Current State of National NPO Banks” issued by
Japan NPO Bank Network, the loan balance total is included.
Regardless of social orientation, the total amount of interest
subsidy proposal made for loans provided to NPOs throughregional financial institutions by The Nippon Foundation is
included in the 2014 figure. However, in addition todetermining the social nature, from 2016, only Seibu Shinkin
Bank’s social business growth support loan “Change” is included.
As a low-interest loan for non-profit organizations, only the
projects of the five financial institutions with approved
performance are included on a secondary survey basis.
Of the overseas investment and loan projects, only theinvestment in Pakistan’s MFI is included (investment rate 8.9%).
Not only the 30 million yen JVPF investment, but also Nishikawa
Associates’ 15 million yen investment in the project as a joint
investor is included.
Of the 1.5 billion yen fund management scale total, investment
for education venture which develops and provides contents forcomputer science education in India and was implemented in2013 is included.
Of the 500 million yen fund management scale total, a 10 million
yen investment for social enterprises is included.
1 million yen investment to social enterprises offering
healthcare services is included.

ANALYSIS OF SOCIAL IMPACT MARKET SCALE

In this section, various types of analyses were conducted on the market scale measurements.
Analysis and potential was looked at from four different perspectives: (1) the method of funding,(2) corporate structure of the funding destinations, (3) the target field of the funding destinationsand (4) the region where they are located.

1

Funding method

From 2014 to 2016, equity investment increased most significantly, and investment in stockcompanies, which was 2 billion yen in 2014, expanded to 4.4 billion yen in 2016. Investment inmicrofinance institutions (MFI) has also expanded from 260 million yen to 2.26 billion yen. Due tothe overall number of projects being few and consequently the impact of one project being great,

41

Main Subject “The Current State of Social Impact Investment in Japan”

8

National Association of Labour
Banks NPO loans
Kamakura Investment
Management Co., Ltd.

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

7THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

Figure II-2

2

Market scale according to funding method

Corporate structure of the funding destinations

Among the different corporate structures receiving funding, stock companies constituted the
majority with 21.35 billion yen, with a growth rate of approximately 70%. This corresponds to thehigh growth rate of equity investment mentioned in the preceding paragraph. The next largest
common funding destination was NPOs, with 8.8 billion yen, manifesting a slight increase. The
growth rate of funding directed at MFIs is also steady at approximately 20%.
On the other hand, the scale of low-interest loans to NPOs by regional banks, shinkin banks andcredit associations cannot be accurately calculated. This type of funding is not only estimated to
exceed several billion yen, but due to the start of the NPO credit guarantee system in 2015, growthis expected to continue in the future.

66

Interviews with various investors

42

Main Subject “The Current State of Social Impact Investment in Japan”

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

accurate analysis is difficult. However, because hands-on support can easily be provided, there aremany investors seeking equity investment, contributing to the ongoing growth of this method.66
Loans represent the next area of noteworthy growth, with an average annual growth rate of
approximately 60%. This is attributed to the substantial growth in the funding of socially oriented
enterprises within JFC’s “social business support.”

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

3

Market scale according to the corporate structure of funding destinations

Target field of the funding destinations

The analysis based on the target fields of funding destinations revealed cases in which, due to thesmall number of projects, funding appears to be directed to specific fields. However, in general,most projects are without such limitation (80% of the whole when reconstruction projects areincluded). Specific fields in which the funding target is stipulated include microfinance and theenvironment, and other fields which are limited include education and disability-related. While themicrofinance and environmental fields have a scale of approximately 3-4 billion yen, other projects
with limited fields are still few and far between. All target fields show a trend of steady growth.

Figure II-4 Market scale according to the funding target field

43

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure II-3

The background of social impact investment in Japan has been previously outlined; however,there are many projects which began to receive funding in the context of earthquake disasterreconstruction. Organizations which initially limited funding to the Tohoku Region have expanded
their funding nationwide, regardless of the region. Relationship Capital of Japan, whoseorganizational name at the time of founding in 2011 was “Tohoku Relationship Capital,” changed
their name in April, 2016, with the intention of expanding their nationwide mission, utilizing theknow-how acquired in the reconstruction work. The item in Figure II-5 labelled “Domestic (Tohoku)”
refers to funding directed to the disaster-stricken areas of the Great East Japan Earthquake, forwhich funding continues to grow in 2016 even after the elapsing of 5 years. This can largely be
attributed to the increased funding by the Mitsubishi Corporation Disaster Relief Fund. Steady
growth can be seen in all regions; however, in comparison to the funding directed overseas (mainly
to developing countries), domestic funding is seen to be growing at a faster pace.

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

Figure II-5

3.

Market scale according to the funding destination region

EXAMPLES OF SOCIAL IMPACT FUNDING IN JAPANThe establishment of the social impact investment fund, KIBOWThe KIBOW fund can be considered a noteworthy topic for the 2016 report. The KIBOW fund,which was established in September 2015, is the first social impact investment fund in Japan. The
purpose of this fund is described as follows:67●

67

To invest in and support the growth of entrepreneurs contributing to solving social
issues, in addition to accelerating societal reforms.

General Incorporated Foundation KIBOW, Website

44

Main Subject “The Current State of Social Impact Investment in Japan”

Funding destination region

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

4

To create a new structure for the returning flow of funds in which funds from thedomestic private sector are used for the purposes stated above.

An interesting point regarding this fund is that it utilizes its know-how of venture capital
investments in addition to the network used in the Great East Japan Earthquake support activities.
The background of the establishment of this fund can be traced back to the Great East Japan
Earthquake.68 The earthquake relief and reconstruction project “Project KIBOW” was launched on
March 14, 2011. After commencing activities as a general incorporated foundation from February
22, 2012, the foundation expanded its reconstruction activities by providing multiple support groups
in the affected areas, holding events, and donating approximately 100 million yen to the parent bodyof support activities in each affected area. In 2015 Yoshito Hori, the Representative Director of
KIBOW, and Sir Ronald Cohen, the Chairman of the Social Impact Investment Taskforce establishedby the G8, had a meeting, in which Sir Cohen asked Mr. Hori to jump-start social impact investment
in Japan, which led to KIBOW considering its business commencement. Yoshito Hori is also the fundrepresentative for incubation funds as well as venture capital funds, and it is interesting to note that
he is utilizing his experience with venture capital in the operation of social impact investment funds.

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”●

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

Table II-3

Total amount and duration of the KIBOW fundCommitment Total
Commitment Duration

500 million yen
September 2015-August 2035 (20 years)

At present, as a result of focusing on providing funding through equity investments, the corporate
structure is limited to stock companies and associations. The investment targets must clearly referto "working toward finding solutions for social issues" or their "scalability," a "management team"or being "a corporation with a background or story." After carrying out due diligence, the last step is
specifying the organization's mission and then the investment contract, which is geared towardachieving that mission, is finalized. If it is a project which will contribute to resolving social issues,
there is no particular restriction on the business field, but businesses receiving funding are mainly
early-stage operations with a business scale of under 100 million yen.
For the first project, by means of preferred stock investment, 10 million yen was invested in adelivery business called Ai Sansan Meal Delivery, which has been providing packed lunches and/or
prepared food for the elderly since 2013, in addition to promoting employment for persons withdisabilities. The exit goal is under 10 years, and fund members have assumed the position of directors
in order to support management.
As KIBOW intends to continue expanding its investment scale, for the second project, a 10million-yen investment was made in August, 2016 in Seeds of Wish Co., Ltd, a corporation which
operates movie theaters that are closely connected to the local community.69 KIBOW aims to find 35 projects within a year and invest 500 million yen over the course of five years. In addition, theestablishment of a second fund is also being considered, and with the anticipation of a scale of 2

68

September 28th, 2015 News Release (General Incorporated Foundation KIBOW)

69

August 31st, 2016 Press Release (General Incorporated Foundation KIBOW)

45

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANThe commitment total, investment target, and duration of funds are as shown below.

JVPF was introduced as a venture philanthropy fund in the 2014 report. They can be consideredan advanced case, as the organization went from the form of ”Grant + Management Support” that
did not seek financial return to a new form of “Investments in Stock Companies + Management
Support,” which seeks financial return, in 2015.
The Japan Venture Philanthropy Fund, which supports organizations that work towards solvingsocial issues with the objective of developing sustainable activities, was established in April 2013
based on the funding of the Nippon Foundation in addition to corporations, corporate managers,
and those formerly in the investment business 70. The support target areas are (1) education andemployment support for youths, (2) child-care and success for women, and (3) local communities.
Funding and management support were provided for the three non-profit organizations, and in theother case, investments were made by means of convertible bonds (Refer to Table II-4).

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

Table II-4
No.

Destination of funds provided by JVPF

Name of organization receiving
supportBusiness Field

SupportTotal(million ¥)SupportDuration(years)1

Non-Profit Organization
Hokago NPO After-school

Education Support(After-schoolsupport)20

3

2

Certified Non-Profit Organization
Teach For Japan

Education Support

30

3

3

AsMama, Inc.

30

3

4

Non-Profit Organization
Hattatsu Wanpaku Kai

30

3

Support for working
mothers
Support for children
with developmental
disorders

The investment in AsMama is the first equity investment for JVPF, and its business growth isbolstered by assigning the director positions to fund members as management support as well as
providing hands-on support for a minimum of three years. Management support including impact
measurement as well as legal affairs, strategy consulting, and pro bono support for accounting. In
addition, Nishikawa Associates, which is an Angel Investor, has made an investment of 15 million yen
as a partner.
Using the philosophy of AsMama, Inc., “to create a structure for and strive to create a society
where anyone can raise their children, work, and do what they want exactly how they want to,” thebusiness has expanded towards creating a space where parents who need support in raising theirchildren and those wanting to support them, as well as corporations can enjoy meeting in a safe and70

August 12th, 2015 News Release (Nippon Foundation)

46

Main Subject “The Current State of Social Impact Investment in Japan”

Investments made towards joint-stock corporations by means of the Japan Venture
Philanthropy Fund (JVPF)

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

billion yen including private investors, there is also a possibility that they will be considering boththeir investment methods and the corporate structures to invest in with a wider perspective.

Although it was not included in the social impact investment market mentioned in the 2014 report,
the investment trust structure, operated by Kamakura Investment Management, which incorporated
approximately 3.4% of corporate bond into social enterprises (unlisted) in the portfolio, is also a caseof great interest.

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANKamakura Investment Management Co., Ltd. is an investment trust management company (asset
management company) founded in 2008. The operation policy for the investment trust called Yui
2101 which is operated and marketed by the company is, “a company that will be needed by society
in the future and an investment trust that invests in good companies, which will turn customers intofans making them want to provide support.” 71 The investment targets, or “good companies” asmentioned above, are companies that will take their time to grow while building harmony withsociety instead of having short-term profit or stock prices as their main focus. As a result, out of thewhole portfolio, 3.4% is allocated to social enterprises, and approximately 800 million yen iscurrently invested.
Concerning the brand selection process, “talent, harmony, and skill” are set as the threeevaluation criteria. Respectively, they refer to “an enterprise that makes the most of talent”, “anenterprise that creates a recycling-oriented society” and “an enterprise with excellent Japanesetechnology and corporate culture, as well as impressive service”. In addition, each criterion has
evaluation points, and after confirming a total of 40 points, an investment decision is made.72
By investing in a number of listed stock, while gathering a sizable fund (the fund net asset iscurrently approximately 23 billion yen), as well as investing in corporate bonds for high-risk social
ventures, the publicly offered investment trust is made in order to function as investment products.
The ideal stable return is 4-5%, and the percentage change during the 5 years from March 2011 to
February 2016 was 11.4%. In addition, regarding the stock investment in listed enterprises,
enterprises with relatively high sociability, including the enterprise that was ranked 1st among thelisted enterprises for employment of persons with disabilities with a rate of 16%, are also included.
Regarding social enterprises which were invested in, sample organizations are shown in Table II-5.
In Japan, where there has been a gradual change from general investments with maximized
financial return to ESG investments, incorporating social enterprises in investment trust while
mitigating the price change risk of the whole portfolio as well as the credit risk is an advanced
initiative. As it has made a strong showing compared to 2014, future growth can be anticipated.

71

Kamakura Investment Management Co., Ltd. Website

72

Kamakura Investment Management Co., Ltd. Interview

47

Main Subject “The Current State of Social Impact Investment in Japan”

Kamakura Investment Management -Yui 2101

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

secure environment, in addition to expanding the support structure of child care using the internet.
Because of the societal context, such as the decrease in labor force population due to the decreasing
birthrate and aging population in addition to the cultural background, women in Japan still face many
challenges when returning to their carriers after childbirth.

Social Orientation

Business Description
Forest management,
producing/processing/marketing forest
resources (material), and regional branding

Capital Fund(million)

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

Tobimushi Inc

Regional
revitalization
through reforestation

MOTHERHOUSE
Co., LtdCreation of worldwide
brands from developing
countries

Planning, producing, and providing quality
guidance for apparel products/generalmerchandise concerning developing countries,
in addition to the selling the above products indeveloped countries.

27.95

Aiming to bring happinessto everyone involved,
from the mining site to
the distribution, throughprocessing of the jewelry.

Production/sales of jewelry (Fair Trade)

39.2

HASUNA Co.,
Ltd

77.7

The Mitsubishi Corporation Disaster Relief Foundation’s Fukushima Winery Project
Mitsubishi Corporation (Japan’s largest trading company) established a support fund forreconstruction work after the Great East Japan Earthquake in 2011. The scale of this fund amounted
to a total of 10 billion yen in 4 years up to 2014.
Based on the same fund, the non-profit incorporated foundation Mitsubishi Corporation Disaster
Relief Foundation was established in 2012. This foundation provides a wide variety of support
including grants, investments and loans, in addition to scholarship programs for the affected areas,
and in 2015, contributed an additional 3.5 billion yen for five years’ worth of activity funding. 50
businesses have been supported in three disaster-stricken Tohoku prefectures, and as the name“Industry reconstruction and employment creation support” implies, focusing on businesses thatutilize food processing, agriculture, fishery, and other local industries, the Foundation provides
broad support for starting up businesses including the production and sales of musical instruments
and sewn products.

48

Main Subject “The Current State of Social Impact Investment in Japan”

Corporation
Name

Social enterprises involved in Yui 2101

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

Table II-5

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANThe following are the main items they consider when screening companies to invest in.74●

Information from local financial institutions is the starting point.

●

Having a ripple effect on the development of the local economy, including creating jobs.

●

The managers’ consciousness and judgment of character.

●

Priority is placed on locality (greatly affected areas such as Iwate, the coast of Miyagi,
and the entire Fukushima prefecture, which suffered from reputational damage due tothe nuclear power plant disaster).

The Fukushima Winery Project, established by this foundation in 2015, has an interesting
structure where the corporation provides social enterprise support which transcends the businessand public sectors.
In February 2015, a partnership agreement was concluded between Koriyama City in Fukushima
Prefecture and the Mitsubishi Corporation Disaster Relief Foundation. The Winery Project wasstarted as a “sixth industry75” fruit farming project, which involves the developing and marketing ofwine and liqueur using fruit grown in Fukushima. The corporation, the government and local farmers
have collaborated to create new business schemes in order to offset issues such as sluggish demandand lack of successors due to reputational damage. The Fukushima Winery was founded for theoperation of this project, and a staff member from the Mitsubishi Corporation Disaster Relief73

2015-2016 Mitsubishi Corporation Disaster Relief Foundation Report (Mitsubishi Corporation Disaster Relief Foundation)

74

Mitsubishi Corporation Disaster Relief Foundation Interview

75

Sixth industrialization of agriculture is a growth strategy of the Japanese government in which farmers not only produce
agricultural commodities but also process and market them (thus raising their added value) as well as engaging in agri-tourism; italso involves establishing new public bodies at the prefectural level.

49

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Figure II-6 Breakdown of Support provided by the Mitsubishi Corporation Disaster Relief
Foundation73

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPAN

Figure -II-7 General representation of the Fukushima Winery Project
As for its future direction, the Mitsubishi Corporation Disaster Relief Foundation intends toreinvest in public enterprises with the acquired dividend and continue providing industry support inareas affected by the Great East Japan Earthquake. In addition, based on its experience in providing
aid as well as investments and loans for five years, the foundation plans on focusing more on
investments and loans instead of aid for the method of funding.77
Toyota Tsusho Corporation’s Africa Fund and Benesse Corporation’s Social Investment Facility canalso be listed as enterprises which provide investments and loans for social enterprises. Both of the
projects above have synergy with their main business and have provided funds.
In 2013, Benesse started investing in an education venture which involves the development andprovision of contents related to computer science education in India.
In 2014, Toyota Tsusho founded a social venture development fund called Toyota Tsusho CSV
Africa Pte. Ltd. in Mauritius, Africa. Instead of focusing on the investment efficiency and return of76

February 27th, 2015 “Koriyama City × Mitsubishi Corporation Revitalization of Fruit Farms, 1 billion investment for the buildingof a brewery” (Tohoku Fukkou Shimbun)
77
Mitsubishi Corporation Disaster Relief Foundation Interview

50

Main Subject “The Current State of Social Impact Investment in Japan”

In March 2016, the first shipment of the produced wine and liqueur started, and by cooperatingwith local fruit farmers, the foundation will move forward with this project towards its goal of 100
million yen in sales within the next 5-7 years as well as having local people take over the business 10
years from now.76

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

Foundation has assumed the position of representative director. Mitsubishi Corporation Group will
make use of their network and know-how for branding and marketing.

Table II-6

Corporate-operated fund operation scale and duration

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANName of Fund

Fund operation scale

Fund operation duration

2 billion yen

N/A

Mitsubishi Corporation
Disaster Relief Foundation(Included investment and loan
projects only)
Benesse Social Investment
Facility
Toyota Tsusho CSV Africa Pte.
Ltd.

approximately 1.5 billion yen
5 years or longer(15 million US dollars)
1.5 billion yen

8 years

Seibu Shinkin Bank’s Social Business Growth Support Loan, “Change”
An interesting precedent in Japan is Seibu Shinkin Bank, a local financial institution which offers
low-interest loans to non-profit organizations and provides financial and operational support withthe cooperation of foundations and intermediary support organizations.
Seibu Shinkin Bank, which operates in Tokyo, Saitama, and a part of Kanagawa, is a cooperative
financial institution that aims to contribute to the development of local communities. As of the endof March 2016, this bank is a top-class shinkin bank in Japan with 1.6 trillion yen in balance, in
addition to 1.25 trillion of lent money. Compared to the previous year, there has been a growth ofapproximately 100 billion yen, and when also considering the capital-to-asset ratio and non-

78

Main Subject “The Current State of Social Impact Investment in Japan”

Corporate donations which are also related to CSR have been making steady progress, andalthough the numbers are low, investments and loans, which make use of the synergy between
corporations’ main businesses and other social enterprises, can be expected to continue growing in
the future.

January 7th, 2014 Press Release (Toyota Tsusho Corporation)

51

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

this Africa support project, this fund provides employment creation and income improvement incountries where there are social issues including a high unemployment rate in addition to a low
income level, and aims to improve the living and welfare environment as well as to find and develop
projects that are directly connected to solving issues such as foreign currency acquisition. It has
made investments in the agricultural business of Zambia and the leather industry of Ethiopia, whichmake use of the strengths of Africa. The hands-on approach for management support involves
regular monitoring and sending personnel from Toyota Tsusho to be officials. Asia Africa Investment
and Consulting Pte. Ltd.’s Susumu Tsubaki, who has had much success in venture investments, andfounder of the Kenya Nuts Company Yoshiyuki Sato, who is an expert on entrepreneurial venturesin Africa, have been invited as partners by Toyota Tsusho in order to formulate projects and provide
support by means of funds and the Toyota Tsusho global distribution and sales network78.

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANFor the implementation of loans, after the social factor is judged by the project evaluationcommittee which consists of experts including members employed by The Nippon Foundation, thefinancial audit is ultimately conducted by the bank. The loan conditions include a maximum of 5
million yen, a 0.1% fixed interest rate, in addition to a 12-month deferment period. Before and after
the loan, ETIC, which has achieved many results related to support for social entrepreneurs, supports
the party receiving loans as an intermediary support organization by providing programs that help
with the furtherance of businesses, including support for project planning and management.
Although social businesses have great potential, there are many issues concerning financing as wellas sustainability, and because this scheme involves support before and after the loan, it is no doubt
a win-win program in which there is a complementary relationship of the three parties providing
funds and expertise as well as the party with a demand for funds.

Figure II-8 Structure of Change, a social business growth support loan system

79

Fiscal 2015 Achievement Highlights (Seibu Shinkin Bank)80

December 2nd, 2013 Press Release “The “Wagamachi Fund” collaboration project with local financial institutions starting with 5credit associations of Tohoku/3 affected prefectures! 2.5 billion yen for subsidized interest” (Nippon Foundation)

52

Main Subject “The Current State of Social Impact Investment in Japan”

From 2013, Seibu Shinkin Bank has partnered with The Nippon Foundation and ETIC to start a
program called “Change,” a loan which supports the growth of social businesses (the loan productof The Nippon Foundation’s “Wagamachi Fund” project). The duration of this project was from June
1st, 2013 to August 31st, 2016 (to be extended after this date) during which time The Nippon
Foundation and Seibu Shinkin Bank both contributed 250 million yen and low interest/unsecuredloans were provided with the establishment of a credit line of 500 million yen.80

THE SOCIAL IMPACT INVESTMENT MARKET IN JAPANMain Subject “The Current State of Social Impact Investment in Japan”

performing loan ratio, the growth of the soundness of management has become noteworthy inrecent years.79

Eﬀorts to Expand Impact Investment in JapanAs an innovative example of a regional financial institution financing system, its great potential in
the future is anticipated.

III Efforts to Expand Impact Investment in JapanIn May, 2015, the formation of a social impact ecosystem in Japan was discussed and sevenparticularly important topics were brought up at the National Advisory Board in May, 2015. After
analyzing the issues at hand as well as looking at the present situation, proposals were formulated
for how to tackle each of the topics. 82
The contents of this chapter are an organized compilation on these proposals, and by presenting
new developments from the time of the proposal to the present, the current progress of each
proposal and the issues which it faces in order to encourage the parties concerned to take solid steps,
it is hoped that the aims of the proposals will be immediately attained.

81

April 20th, 2015 Press Release “A maximum of 50 million yen to the social business support loan “CHANGE” for NPO and social
entrepreneurs” (Nippon Foundation)82
May 19th, 2015 “Proposals for the expansion of social impact investments” (G8 Social Impact Investment Taskforce National
Advisory Board)

53

Main Subject “The Current State of Social Impact Investment in Japan”

Change had been advertising for the 12th term as of August 2016. The principal loan targets must
be businesses in a field that greatly contributes to society such as welfare, education, theenvironment, or community development. Total results as of May 2016 were 241 million yen in a
total of 42 cases including 7 cases in the welfare/medical field, 5 cases in the culture and traditions
field, 10 cases in the education field, 9 cases in the child-care field, and 11 cases in other fields. In
addition, the “Social Change Support Course” was newly launched, and the maximum of 5 million
became 50 million yen (with a 0.1% fixed interest rate and 12-month deferment period) as of April
2015.81Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

For a one-year period before the project began, ETIC built up the foundation by having a staff
member from the same bank come and work with them temporarily, getting advice from a social
entrepreneur and assigning them to coordinating duties and on implementing and managing ETIC's
government-subsidized business. Because of doing this, Seibu Shinkin Bank was able to gain anunderstanding of social business and a sense of speed, while ETIC gained the ability to makesomeone unrelated to their business understand what ETIC was all about, as well as learning about
financial institutions' viewpoint on assessment. The direct catalyst of the project launch was the
Nippon Foundation staff in charge sounding out the concept of the "Wagamachi Fund" project, but
it was because of this kind of foundation that Change came into being.

Content of the proposals for the expansion of impact investments※ Taken from the proposal documents83

Eﬀorts to Expand Impact Investment in Japan

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

Table III-1

83

May 19th, 2015 “Proposals towards the expansion of social impact investments” (G8 Social Impact Investments Taskforce
National Advisory Board)

54

Eﬀorts to Expand Impact Investment in Japan

Figure III-1 Placement of the seven proposals

1.

UTILIZATION OF DORMANT BANK ACCOUNTS

1

Proposal Background

Dormant bank accounts are bank accounts which have had no activity for a long period of time.
Banks generally manage accounts with no activity in over 10 years as well as accounts for which thedepositors cannot be reached as dormant accounts, and according to the bylaw of the Japanese
Bankers Association, such dormant bank accounts are included in the profit of financial institutions.
However, even if accounts are managed as dormant bank accounts, withdrawals are re-enabled if
the established procedures are followed.
According to the estimate provided by Mitsubishi UFJ Research & Consulting,84 dormant bankaccounts in financial institutions including banks amount to approximately 85 billion yen annually,
84

October 9th, 2014 “How to make the most of dormant bank accounts? Creating a system that supports the ‘solving of social
issues by means of the people’” (Mitsubishi UFJ Research and Consulting)55

Main Subject “The Current State of Social Impact Investment in Japan”

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

Each of the 7 proposals have a complementary relationship and are important for theenhancement of the impact investment ecosystem. Although the individual realization of each
proposal is important, effecting all 7 proposals will result in the expansion of impact investment andwill ultimately contribute to maximizing the total social benefits in Japan.

2

Proposal Content (as of May 2015)

At the time of the proposal presentation, bills related to dormant bank accounts85 were being
considered by the Parliamentary Association of Dormant Bank Account Utilization Promotion, andassuming the points to be considered included in the institutional design of the designatedorganizations (the organizations to which the dormant bank accounts will be transferred to) after
the bills were enacted, the following proposals were made.

Eﬀorts to Expand Impact Investment in Japan

Table III-2

Overview of the proposals related to the utilization of dormant bank accounts

Proposal Theme
Overview
Main point with regard
to implementation

Items which should beprioritizedSpecific actions andcurrent progress○：In Progress

Utilization of dormant bank accounts
Enactment of the Dormant Bank Accounts Utilization Promotion Bill andsupport for the promotion of speedy project implementation after theenactment of the bill.
In order to promote investments and donations with the impetus ofdormant bank accounts, the environment for results-based investments
must be improved.
Expansion of social impact investments with dormant bank accounts asa trigger.
The institutional design and staffing of the designated organizations, tool
development and personnel training for the universal implementation ofsocial impact measurement, as well as the capacity building of financial
intermediary organizations should be progressing simultaneously.
× The designated organizations will carry out the selection andinstitutional design with a good balance of defense (implementing
transparent governance) and offense (prioritizing social impact), as
well as secure board members and internal secretariat personnel
who are appropriate for the implementation.
○

Active tool development and personnel training towards creating anenvironment where social impact measurement is common.

×

The government will create opportunities for capacity building inorder for citizen community foundations’ intermediary financialorganizations to be able to uncover issues and financial demands.

△：Under consideration
×：Not yet started

85

Bills related to the utilization of funds pertaining to dormant bank accounts to promote activities in the public interest

56

Main Subject “The Current State of Social Impact Investment in Japan”

Such dormant bank accounts exist universally in any financial institution with depositary functions,and there have been cases where dormant bank accounts are collected and used to promote thesolving of social issues, including countries such as England and Korea. In Japan, measures for theutilization of dormant bank accounts to support public welfare activities, while maintaining a systemthat can respond to refund requests from depositors, are being considered.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

and although 35 billion yen are paid back to the depositors, the remaining 50 billion yen is includedin the profit of financial institutions. In addition, there is an annual amount of 2.4 billion yen in thefinancial institutions for agriculture and fishery associations, and of this amount, it is estimated that
600 million yen is paid back to the depositors.

△In order for social impact investments using dormant bank accounts
to show results in both social welfare and business, the government
as well as intermediary support organizations will actively work
towards capacity building of support organizations to secure
investment projects as well as the fulfillment of the players on the
supporting side.

3 Major new developments and future outlook related to the proposal

Eﬀorts to Expand Impact Investment in Japan

Public comments regarding dormant bank accounts-related bills were collected by the nonpartisan Parliamentary Association of Dormant Bank Account Utilization Promotion from May 22nd
to June 20th of 2015, and the bill overview and main points of the collected comments were madepublic on September 2nd of the same year. Afterwards, from October to December of the same year,
the Dormant Bank Account National Conference and the Parliamentary Association of Dormant Bank
Account Utilization Promotion ran a combined national caravan which was held in a total of fivedifferent locations (Okayama, Osaka, Ehime, Miyagi, Tokyo), providing explanations of an overview
of the bills as well as the opportunity to exchange opinions.
In May 2016, although the deliberation of bills related to dormant bank accounts was initiated at
the Financial Affairs Committee of the House of Representatives of the ordinary Diet, it resulted incontinuous deliberation.
Table III-3
Year/Month
2011

July

2012

March
July

2013

NovemberJanuary

Major developments related to the utilization of dormant bank accounts 86
Major developments
Consideration of utilizing dormant bank accounts was mentioned in the report
documents of a new public promotion conference, “Expert Examination
Meeting Related to the State of Public Contracts of the Government and thePrivate Sector.”
Inauguration of the Dormant Bank Account National Conference
The effective utilization of dormant bank accounts as the supply source ofgrowth money was mentioned in the Growth Finance Promotion Conference 87
Dormant bank accounts are positioned as a priority measure regarding
financial strategies in the Japan Revitalization Strategy 88
Dormant bank account White Paper issued
Discussion on dormant bank account utilization among congressmen of allparties at the symposium “Dormant Bank Accounts Make the Future Of Japan”
held by the National Council of Dormant Bank Accounts

86

The activities are arranged in chronological order and no other connection is indicated. (Same for other proposals)

87

July 9th, 2012 “Summary of the Growth Finance Promotion Conference” (Growth Finance Promotion Conference)

88

July 31st, 2012 Japan Revitalization Strategy (Cabinet decision)

57

Main Subject “The Current State of Social Impact Investment in Japan”

The intermediary financial organizations will perform capacity
building to find investment projects and cases that will attract
investors.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

×

May

OctoberNovember

2015

May

Eﬀorts to Expand Impact Investment in Japan

September
October

2016

May

Establishment of the Parliament Association of Dormant Bank AccountUtilization Promotion (there have been many working conferences since).
The First Dormant Bank Account Utilization National Caravan (Miyagi, Aichi,
Osaka, Fukuoka) was hosted by the Dormant Bank Account National Council(May-June)
The Dormant Bank Account National Council submitted a petition89 fordormant bank account utilization to the Parliament Association of Dormant
Bank Account Utilization Promotion
Utilization of dormant bank accounts was mentioned in the expert examination
meeting, “Selecting Future Committee Reports,” held by the Council on
Economic and Fiscal Policy
The Parliament Association of Dormant Bank Account Utilization Promotion
collected public comments concerning “bills regarding the transfer,management, and utilization of dormant bank accounts.”
Proposals for measures regarding the utilization of dormant bank accounts
were presented in “Proposals for the expansion of social impact investments”
by the National Advisory Board.
“Outline of a bill on utilization of funds provided by dormant bank accounts forthe promotion of private social welfare activities” was made public
The Second Dormant Bank Account Utilization National Caravan (Okayama,
Osaka, Ehime, Miyagi, Tokyo) was hosted by the Dormant Bank AccountNational Council (October-December)
Deliberations on “Bills regarding the transfer, management, and utilization of
dormant bank accounts” started in the ordinary Diet (continuous deliberation)

Furthermore, as for the specific operating standards and policies for the dormant bank accountutilization, after the enactment of the bill, a detailed consideration will take place at the Dormant
Bank Account Utilization Deliberation Council, which was incorporated into the Cabinet Office. The
dormant bank account utilization plans as presented in the bill summary are shown below.

Figure III-2

Transfer/management/utilization plan (draft) for dormant bank accounts90

89

Dormant Bank Account National Congress “Request”

90

As of August 26th, 2016, Deposit Insurance Corporation of Japan website

58

Main Subject “The Current State of Social Impact Investment in Japan”

April

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

2014

2. INTRODUCTION OF THE SOCIAL IMPACT BOND (SIB) AND DEVELOPMENT IMPACT BOND
(DIB)
1

Proposal BackgroundEﬀorts to Expand Impact Investment in Japan

Eﬀorts to Expand Impact Investment in Japan

SIB91 involves the provision of effective service based on funds supplied by investors, and is amethod of social impact investment by means of results-based public-private partnerships, in which
the government repays funds to investors according to the service results. The main source of theredemption fund provided to the investors comes from future administrative cost reduction effectedby preventive service, and if the target set beforehand is not reached, the government does notprovide the investors with the redemption fund.
The SIB arrangement is as follows:

Figure III-3

91

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

In the future, we can anticipate continuous adjustments to be made working towards theenactment of the bill at the extraordinary Diet held in the fall of the same year, promoting capacity
building for support organizations which will cultivate an environment in which dormant bankaccounts can be utilized for social impact investments, including the concurrent proposal for the"permeation of social impact measurement.”

Structure of Social Impact Bonds

Social Impact Bond: A social impact investment method which started in England in 2010.

59

SIB, which was first introduced in England in 2010, has had 60 projects in countries including the
USA and Australia amounting to 20 billion yen (as of Jul 2016,)93 in fields such as recidivism, youth
employment, support for the homeless, early education for children, and preventive medical care.
Although SIB has not officially been introduced in Japan, plans for introducing SIB by conducting apilot program94 have been introduced.

2

Proposal Content (As of May 2015)

Eﬀorts to Expand Impact Investment in Japan

As mentioned previously, although pilot programs have been started in Japan, because SIB has
not yet gathered much interest, the following proposal was made geared towards the official
introduction of results-based payment contracts with the government.
Table III-4
Proposal Theme
Overview
Main point with regard
to implementation

Items which should beprioritizedSpecific actions andcurrent progress○：In Progress

Introduction of SIB・DIB

Introduction of Social Impact Bonds and Development Impact Bonds
Develop a suitable Japanese version of the SIB scheme in order to carryout projects introducing Social Impact Bonds (SIB).
There is a need to consider the introduction of schemes that reduceinvestor risk as well as special measures to ensure that the merits ofintroduction for projects subsidized by the national government orprefectures are not lessened.
Consideration of the Japanese version of Social Impact Bonds.
The creation of a place where stakeholders can gather to hold discussions
and the trial/verification of the Japanese SIB scheme with intermediarysupport organizations taking the lead.
△ Budgetary measures by the Japanese government and prefecturesin order to acquire good results through SIB.
△

The Japanese government and private foundations will provide risk
capital in order to reduce investor risk.

△：Under consideration

92

Using employment support services as an example, specific changes due to the services provided, such as “improvement of
employment incentive” and “10 employed and still employed a year later” instead of “10 seminars held” and “interviews with 100
people”, are considered to be results and are evaluated.
93
July 2016 “Social Finance: Social Impact Bonds, The Early Years” (Social Finance)
94

Projects that test the SIB implementation process and service results by means of foundation aid and government contracting,and do not have a results-based contract with the government.

60

Main Subject “The Current State of Social Impact Investment in Japan”

In addition, by making results-based payments, it is possible to promote the implementation of
preventive services that have a limited track record but are effective and efficient, which was difficult
for the government to actively take part in until now. This is thought to reduce future administrative
costs as well as promote finding answers for social issues.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

Because SIB evaluates the outcome92 of service instead of the process or results, and provides
services that makes the most of the know-how of local people instead of what the government
decides, it is a system in which innovation in government services can be expected.

The issuer of bonds will provide adequate explanation andinformation disclosure in order to obtain good ratings and satisfy
investors.

△

Government and aid organizations will increase medium and longterm aid projects instead of one-year projects.

○

Intermediary support organizations will create a place forstakeholders to gather and hold discussions concerning various
schemes including a scheme which uses payment guarantees toreduce investor risk, and build up a track record by conducting
small-scale trials.

Major new developments and future outlook regarding the proposal

Eﬀorts to Expand Impact Investment in JapanThe first SIB pilot project on special adoption was launched 95 in Yokosuka City in April 2015, andpilot programs for dementia prevention96 were held by several local governments including Fukuoka
City in June of the same year, while a pilot program in the field of youth employment97 was also heldin Amagasaki City in July of the same year.
Furthermore, the introduction of SIB programs in Japan is slated to be put up for consideration
per government objectives 98 approved by the Cabinet in 2015 and 2016, which positions it as
national policy. The Ministry of Economy, Trade and Industry (METI) and the Ministry of Health,Labour and Welfare (MHLW) in particular have been taking concrete steps. Continuing on from thepilot programs from 2015, in 2016 METI began project development aiming for the full-scale
introduction of SIBs in 2017, considering results-based multi-year contracts in the healthcare
industry with a number of local governments as well as ongoing formulation of manuals on the
project development process. MHLW is looking into the possibility of introducing SIBs for research
investigation projects related to child abuse prevention,99 and it was reported in August, 2016 that
there may be a request for budgeting related to the implementation of SIB model projects. and in
August 2016, it has been reported that there may be a request for a budget for the implementationof SIB model projects100.
In addition, The Nippon Foundation started its grant program for intermediary support
organizations which develop SIB projects in April 2016, an SIB pilot project plan regarding child95

April 2015 Press Release “Participating in the first SIB pilot project in Japan, Nippon Foundation × Yokosuka City, for special
adoption promotion” (Nippon Foundation)
96
March 2016 “Fiscal 2015 Forefront of the healthcare industry, Promotion project for the development of industries that
increase healthy life expectancy” (Ministry of Economy, Trade and Industry)
97
July 2015 “Third SIB Pilot Project, Nippon Foundation × Amagasaki City, Cooperative project for youth employment support”(Nippon Foundation)
98“Revised Japan Revitalization 2015,” “Basic Policy for Overcoming Population Decline and Revitalizing Local Economy 2015,”“Basic Policy for Economic and Fiscal Management/reformation 2016,” “Japan Revitalization 2016,” “Nippon Ichioku-sokatsuyaku(Promoting Dynamic Engagement of All Citizens) Plan” and “Basic Policy for Overcoming Population Decline and Revitalizing Local
Economy 2016”99
March 2016 “Survey results report of a study contributing to the promotion of regional child abuse prevention” (Ministry of
Health, Labour and Welfare)100
August 24th, 2016 “Ministry of Health, Labour and Welfare, utilizing private funds for poverty alleviation” (Kyodo 47 NEWS)61

Main Subject “The Current State of Social Impact Investment in Japan”

3×Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

×：Not yet started

Table III-5
Year/Month
2014

2015

May
Novem
ber
April

Eﬀorts to Expand Impact Investment in Japan

May
June

2016

July
March

April
June

July

Major developments related to the introduction of SIB and DIB
Major Developments

The Nippon Foundation started its SIB promotion project
The Council on Economic and Fiscal Policy held discussions on social investment
promotion at the expert examination meeting, “Selecting a Future Committee.”
The first SIB pilot program in Japan, for special adoption, was launched in
Yokosuka City.
Measures regarding the introduction of SIB were proposed in the National
Advisory Board’s “Proposals for the expansion of social impact investments.”
As a commissioned project by the Ministry of Economy, Trade and Industry, an
SIB pilot project in the dementia prevention field was run by several local
governments including Fukuoka City.
The consideration of introducing SIB in Japan was mentioned in the Revised
Japan Revitalization Strategy 2015 as well as the Basic Policy for Overcoming
Population Decline and Revitalizing Local Economy, approved by the Cabinet on
June 30th.
An SIB pilot project for youth employment was started in Amagasaki City.
The possibility of SIB introduction for child abuse prevention was mentioned in
an investigative study to aid the promotion of regional child abuse prevention
conducted by the Ministry of Health, Labour and Welfare.
The Nippon Foundation started a grant project targeting intermediary support
organizations which develop SIB projects.
SIB utilization was mentioned in the Fundamental Policy for Economic and Fiscal
Management and Reformation 2016, Nippon Ichioku-sokastuyaku (Promoting
Dynamic Engagement of All Citizens) Plan, and the Basic Policy for Overcoming
Population Decline and Revitalizing Local Economy 2016, which were approvedby the Cabinet on June 2nd.
As a commissioned project by METI, the development support for the official
introduction of SIB in 2017 by multiple local governments was started.
Yokohama City advertised an SIB pilot program in the child poverty field.

101

July 2016 ”Public Proposal: Yokohama City Social Impact Bond (SIB) Model Project Commission” (Yokohama City)

102

July, 2016 “Commissioned project of promoting migration/settlement in Himi City 2016” (Himi City)

62

Main Subject “The Current State of Social Impact Investment in Japan”

As mentioned above, the first official introduction of SIB by means of government results-based
payments, which has been the initial goal, can be anticipated to take place in 2017. In the future,
there will be a need for measures to cope with new issues, such as capacity building for those looking
towards nationwide expansion, as well as institutional and financial backing for government
implementation.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

poverty was announced in Yokohama City in July of the same year101, and a one-year results-based
business consignment was offered related to promoting relocation to Himi City.102

1

Proposal Background

In Japan, because there is no legal structure nor certification system specific to socially-oriented
projects, current projects utilize the legal structures 103 of business corporations or nonprofit
corporations. Although each corporation has a historical context and role within its own system,
because cross-sectional structures concerning social projects do not exist, they have sufferedproblems such as a lack of public understanding of these types of projects as well as insufficient
support system formulation.

Eﬀorts to Expand Impact Investment in JapanFor example, if the party in demand of funds to make social impact investments has the legal
structure of a nonprofit corporation, funds procurement is limited because investments cannot be
made, regardless of the assumption that socially-oriented projects will be carried out. In addition,according to the general rule104 in which income must not exceed the necessary costs when public
interest corporations take part in social projects, although flexible financial operation which isnecessary for smooth project operation may not be possible, if business corporations take part insocial projects, problems such as not being able to have the support systems that nonprofit
corporations have and not being able to obtain the understanding of the public arise.
Although corporate entities which are classified as business corporations are not expected to takepart in social projects, there are businesses and nonprofit stock companies105 that conduct social
projects and there are many other situations like this where the actual situation is different from theinstitutional design.
It is assumed that businesses with the intention of solving social issues will continue expanding,and therefore, whether they are business or nonprofit corporations, the importance of structuresthat support businesses that solve social issues with flexible ideas will keep increasing.
Based on the situation at hand, corporate systems and authentication systems that can facilitate
the implementation of social projects and are suitable for Japan are currently being investigated.

2

Proposal Content (As of May 2015)

Based on the above description of the situation, the following proposals were presented.

103 This includes business corporations (joint-stock companies, limited liability companies, unlimited partnership companies,

limited partnership companies), nonprofit corporations (NPO corporations, certificated NPO corporations, social welfare
corporations, public interest incorporated associations/foundations, general incorporated associations/foundations, andcooperative associations such including small-to-medium-sized businesses), as well as unincorporated organizations (partnerships
based on the civil law, dormant partnerships, LLP (Limited Liability Partnership: Limited Liability Business Partnership), andundefined corporations).
104

Regarding the law (Act No.49, 2006) concerning the certification of public interest incorporated associations and foundations,for public interest projects as well as the amount of property not specifically decided whether to be used (idle property amount)
for activities necessary for such projects, restrictions towards possessing public interest project costs equivalent to that of one
year was installed as a standard for the public interest certification, and this standard must be met.
105
Corporations which have specified in the agreement that profit will be used to contribute to society instead of giving all profit
available for dividend to shareholders. (The same applies in the case of dissolution)

63

Main Subject “The Current State of Social Impact Investment in Japan”

CORPORATE SYSTEMS AND CERTIFICATION WHICH FACILITATE SOCIALLY ORIENTED
PROJECTS

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

3.

Overview
Main point with regard
to implementation

Items which should beprioritizedSpecific actions andcurrent progress

Eﬀorts to Expand Impact Investment in Japan○：In Progress△：Under consideration
×：Not yet started

3

Corporate systems and certification which facilitate socially oriented
projects
Creating corporate systems and certification systems in order to facilitate
project implementation and financing of social corporations.
It is necessary to promote the establishment of new corporate systems
suitable for social projects as well as to consider certification systems.
Creating opportunities to consider new corporate systems/legal
frameworks or the establishment of certification systems.
Keeping the goal of social investment tax reduction in view, discussions
between the government and private sectors on new corporate systems
and the establishment of certification systems for social projects shouldbe immediately arranged.
○ Develop discussions between the government and the wholesocial sector on the establishment of a new legal structure or legal
framework for social projects.
× Along with the above, certification systems for social corporations
should be built cross-sectionally with the current legal system.
△ The government and private sectors should cooperate in creating
opportunities to consider these two points. In addition, when
considering these points, a concrete approach should be discussedwith the possible application of social investment tax reduction,
which is mentioned in this proposal, in mind.

Major new developments and future outlook regarding the proposal

In terms of major steps taken by the government, METI's Research Society for the Creation ofJapanese Earning Power made a reference in June, 2015 to "Local Management Corporations"(provisional name) which would "provide basic services in a comprehensive and effective manner tosupport local communities, under adequate governance." In addition, the Cabinet Secretariat's"Basic Policy for Overcoming Population Decline and Revitalizing Local Economy" (2015 Revised
Edition) from December of the same year specifies that by 2019, "necessary systematic
improvements will be made based on the results of studying the state of business entities." In
response to this, METI's Research Society on the State of Service Business Entities Supporting Local
Communities began looking into the situation in November, 2015, compiling a report in April, 2016.
As for the private sector, the Silk Wave Industry obtained certification as a “B Corporation106”
created and managed by the American nonprofit organization B Lab, for the first time in Japan. Thiswas followed by the Ishii Zoen also receiving B Corporation certification in May of the same year. In
addition, the B Lab Japan Establishment Preparation Committee, for the promotion of obtaining B
Corporation certification, was created.

106

B Corporation is a private assessment system, operated by B Lab based in the USA, which certifies corporations which meet thestandards regarding society, environment, community and governance, and over 1,300 corporations in 42 countries have beencertified.

64

Main Subject “The Current State of Social Impact Investment in Japan”

Proposal Theme

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

Table III-6 State of corporate systems and certification which facilitate socially oriented projects

Table III-7 Major developments related to the state of corporate systems and authentication whichfacilitate socially oriented projects
Year/MonthEﬀorts to Expand Impact Investment in Japan

2005
2008

June
February
April
June

2010

February

2011

February
March

2015

May

June

Major Developments
Establishment of the public welfare community site, CANPAN.
Establishment of a parliamentary association which considers the Cooperatives
Act for cooperative investments/cooperative management.
METI’s “Social Business Research Society” mentions the evaluation of social
business structure and improving the certification framework.
Nonprofit stock companies were mentioned in the Cabinet Office’s“Investigation of the funds flow system which supports public wealth.”
Proposals on institutional investigation geared towards social business
revitalization were presented in METI’s “Research project on the statistics andinstitutional examination of social business.”
Establishment of the Social Authentication Development Promotion
Organization.
The organization of discussions as well as the state of support for social
businesses were examined in METI’s “Social Business Promotion ResearchSociety.”
The possibility of introducing social firms108 in Japan was considered in
MHLW’s “Research survey concerning social firms as a new form of
employment for persons with disabilities.”
Measures concerning the state of corporate systems and authentication tofacilitate social projects were proposed in the National Advisory Board’s“Proposals for the Expansion of Social Impact Investments.”
The consideration of Local Management Corporations (provisional name) was
mentioned by METI’s “Research Society for the Creation of Japanese Earning
Power.”

107

Based on the evidence presented together with the self-evaluation of the organizations, evaluation will be conducted by theJapan Center for NPO Evaluation. “Project implementation and organization mission”, “governance”, “compliance”,“transparency” and “office management” are the 5 main evaluation items. (As of August 2016)108
Social firms do not seek profit, but rather employ persons with disabilities as well as those at a disadvantage in the labormarket. In addition, it is a social project which minimizes the use of subsidies while working on equal ground with non-disabled
people, and it has spread mainly in Europe.

65

Main Subject “The Current State of Social Impact Investment in Japan”

In the future, although governmental institutionalization of social projects is expected to takeplace by fiscal 2019, there have been developments in the private sector including B Corporation
certification, and as stated in the Specific Actions in the proposal, an overall design that includes adivision of roles and which takes place in an open space will lead to synergy between the government
and the private sector, and there will be a need for facilitation of discussion on the establishment of
a new legal framework for social projects.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

In addition, the Japan Center for NPO Evaluation was established in April 2016. It conducts
organization evaluations107 aiming to enhance the support environment and improve the operationsof nonprofit corporations from an independent position, adding to the reliability of theorganizational operation of nonprofit corporations.

2016

March
April

May

4.

According to the Cabinet Secretariat in the “Basic Policy for Overcoming
Population Decline and Revitalizing Local Economy (2015 Revised edition),”which was approved by the Cabinet on December 24th, 2015, it was statedthat necessary system improvements are to be made by fiscal 2019.
Silk Wave Industry became the first in Japan to obtain B Corporation
certification.
Establishment of the Japan Center for NPO Evaluation.
METI’s “Research Society on the State of Service Business Entities Supporting
Local Communities” examined the state of corporate systems based on both
domestic and international activities.
Ishii Zoen became the second to obtain B Corporation certification in Japan.

ESTABLISHMENT OF A SOCIAL INVESTMENT TAX REDUCTION SYSTEM

Main Subject “The Current State of Social Impact Investment in Japan”

Main Subject “The Current State of Social Impact Investment in Japan”

DecemberEﬀorts to Expand Impact Investment in Japan

Social investment tax reduction refers to an incentive by way of tax reduction for investments insocial projects. The purpose is to increase motivation to invest in social projects by providing afinancial incentive for investors through social investment tax reduction; however, the feasibility ofthis system is not being studied in Japan at the present time.

2 Proposal Content (As of May 2015)
There are various methodologies which can be looked into when considering social investment
tax reduction systems, based on the investors (private/corporate, financial institution/foundation,etc.), the method of funds provision (direct financing/indirect financing), and the receiver of funds(the corporate structure/certification system of the target social business). As the receiving end of
the funds has already been touched upon under the previous proposal related to the "state ofcorporate systems and certification which facilitates social projects," proposals related to theremaining factors of the "method of funds provision" and "investors" will be shown below.
Table III-8 Establishment of a social investment tax reduction system
Proposal Theme
Overview
Main point with regard
to implementation

Items which should beprioritized

Establishment of a social investment tax reduction system
The tax reduction system will be established as a financial incentive fromthe perspective of increasing the motivation of private and institutional
investors to invest in social projects.
In order to make the system work in Japan, the definition, user, andexpected effect must be made clear.
Consideration of specific plans towards creating the framework for thesocial investment tax reduction.
With a view to getting a clear picture of the system design, the social
investment tax reduction system can be implemented on a trial basis byutilizing a special zone system. Additionally, in order to make sure thesystem will not be limited, continuous requests for tax reformation andestablishment of this system will be made.

66

Eﬀorts to Expand Impact Investment in Japan

1 Proposal Background×

The government/private sectors will conduct research in order toclarify user profiles, volume, and social benefits which come frominvestment tax reduction.

×

The government will link this project to the promotion of utilizing
dormant bank accounts, and design an investment tax reduction
system for financial intermediaries and private businesses. In
addition, by linking this with investment tax reduction, and bymeans of both financial and management support, the capacity
building of financial intermediary organizations will be conducted.

×Social sectors will actively present policy proposals while deepening
partnerships with the sector as a whole.

○：In Progress△：Under consideration
×：Not yet started

Eﬀorts to Expand Impact Investment in Japan

3 Major new developments and future outlook regarding the proposal
The Ministry of Economy, Trade and Industry's "Research Society on the State of Service Business
Entities Supporting Local Communities" mentions social investment tax reduction and the New
Economic Union also issued a proposal for tax breaks on social impact investments, but there is noconcrete study being pursued at this time. In the wake of the progress of the proposal under review
for "Corporate systems and certification which facilitate social projects," an in-depth study of thecomplete picture of social investment tax reduction, including the receiving end of the funds, shouldbe pursued concurrently.
Table III-9 Major developments related to the establishment of the social investment tax reduction
Year/Month
2015

April
May

2016

April

Major Developments
The necessity of social investment tax reduction was mentioned in the Nippon
Foundation’s “Frontline of social investments in Japan.”
Measures concerning the establishment of a social investment tax reduction
system were proposed in the National Advisory Board’s “Proposals for the
expansion of social impact investments.”
Social investment tax reduction was mentioned by METI’s “Research Society on
the State of Service Business Entities Supporting Local Communities.”
The New Economic Union proposed the expansion of venture investment tax
reduction to social impact investment in their “Proposal concerning venturephilanthropy and social impact investments.”

67

Main Subject “The Current State of Social Impact Investment in Japan”

The government/private sectors will work together to consider
specific plans to create the framework for social investment tax
reduction. The subject of tax reduction and the fund supply method
will be made clear during this discussion.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

Specific actions andcurrent progress×Proposal Background

According to the report from the Cabinet Office 109, the definition of social impact is the “socialand environmental outcome of relevant project and activities, including both short and long termchanges,” and social impact measurement involves comprehending social impact in a quantitativeand qualitative way as well as judging the value of the projects and activities concerned. However,this definition is not absolute, and it varies according to the setting it is used in.

Eﬀorts to Expand Impact Investment in Japan

Figure III-4 Targets of social impact measurement※ Created by the author based on the Cabinet Office report
The evaluation of social impact is an important component of the expansion of social impact
investing, but the implementation of social impact measurement in Japan is not yet pervasive.
According to a survey conducted by the Nippon Foundation, 110 32.8% of the major nonprofit
organizations evaluate social impact, and in addition to financial issues, a lack of personnel with theskills or expertise needed to evaluate, and not knowing what sort of evaluation should be done wereraised as issues affecting their ability to carry out social impact evaluation.
Business corporations have created sustainability reports as well as corporate CSR reports which
use the sustainability report guidelines 111 as a reference, and as one part of this, there have beencases in which information on how much social impact was brought about by corporate activities
has been released.112
When it comes to the investors, although there are a few organizations 113 which request
evaluation or reports on the social impact of the party receiving the funds at the time of selection or
during the monitoring period after investment, the number of such organizations is small.

109 March 2016 “Towards the promotion of social impact measurement” (Cabinet Office)110

June 2016 “Implementation condition of social impact measurement related to social sectors in Japan” (Nippon Foundation)

111

Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), as well as the International Integrated
Reporting Council (IIRC) are included
112
Microsoft “Youth UP Project”, Sompo Japan Nipponkoa “SAVE JAPAN PROJECT”, and Panasonic “NPO support fund” areincluded.
113
Japan Venture Philanthropy Fund, Toyota Foundation and JICA are included

68

Main Subject “The Current State of Social Impact Investment in Japan”

1

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

5. PERMEATION OF SOCIAL IMPACT MEASUREMENT

Although social impact measurement has been carried out by some organizations, it is far frompermeating the system. Based on the need to cultivate achievement-oriented awareness, thefollowing proposals were made.
Table III-10
Proposal Theme
Overview
Main point with regard
to implementation

Items which should beprioritizedEﬀorts to Expand Impact Investment in Japan

Specific actions andcurrent progress

Permeation of social impact measurement
Establishing a measurable goal concerning the social impact brought
about by social corporations and improving the monitoring environment
A place where social corporations can logically analyze and organize theirown business results according to aspects such as input, output andoutcome, as well as present results to investors, must be created.
Implementation of impact evaluation and cultivating achievementorientation in the social sector.
Improve environment in order to facilitate impact evaluation conductedby social corporation by means of improving the application format for
subsidy as well as installing subsidized projects integrated with evaluation
processes.
△ The government and grant-giving organizations must promote theachievement orientation of companies by creating an entry column
for input, output and outcome on the application form for subsidies
and grants.
△

The government and grant-giving organizations should install
categories for subsidized projects integrated with social impact
measurement.

△

Board members of dormant bank accounts and grant-giving
foundations must cooperate with evaluation specialists so thatsocial corporations do not have to evaluate independently, andtools must be developed in order to simplify social impact
measurement with adequate interpretability for investors.

○：In Progress△：Under consideration
×：Not yet started

3

Permeation of social impact measurement

Major new developments and future outlook regarding the proposals

In March 2016, the results of a working group led by the Cabinet Office on the evaluation of social
impact were reported, and as a form of response, a private-sector-led platform to raise publicawareness of the evaluation of social impact in Japan, the "Social Impact Measurement Initiative,"
was launched in June of the same year, and along with this, the National Advisory Board also released
its social impact measurement tool set. 114

114

The manual for implementing social impact measurement is made by means of the tool set required for evaluation including
the performance indicator in each category (education, employment support as well as community building). Updates, in addition
to the expansion of object categories, are scheduled to be made.

69

Main Subject “The Current State of Social Impact Investment in Japan”

Proposal Content (As of May 2015)

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

2

Eﬀorts to Expand Impact Investment in Japan

Figure III-5 Overview of the Social Impact Measurement Initiative
Table III-11 Major developments related to the permeation of social impact measurement
Year/Month
2015

March

April
May

November

Major Developments
Measures regarding the promotion of social impact measurement were
proposed in the “Survey of actual conditions and proposals towards thepromotion of social impact measurement” from the Foundation for Advanced
Studies on International Development (a general incorporated association in
Japan).
The project management tool, “newdea,” which can manage social impact,
started operation in Japan.
Measures regarding the permeation of social impact measurement were
proposed in the National Advisory Board’s “Proposals for the expansion of social
impact investments.”
The “Promotion conference for grants/subsidies for achievement-orientation in
Aichi” began.

70

Main Subject “The Current State of Social Impact Investment in Japan”

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

In the future, with the Social Impact Measurement Initiative as the center, the formulation andrealization of a road map towards permeation of social impact measurement is expected throughcooperation and co-ownership with various parties.

May
June

Issues and countermeasures towards the promotion of social impact
measurement were considered in the Cabinet Office’s “Working Group for Social
Impact Measurement Consideration.”
A social impact measurement model project was begun as a commissioned
project by the Cabinet Office.
The current conditions of social impact measurement within leading nonprofit
corporations were reported in The Nippon Foundation’s “Implementation status
of social impact measurement related to the social sector in Japan.”The “Social Impact Measurement Initiative” platform, which is led by the private
sector and promotes the permeation of social impact measurement in Japan,
was started.
The National Advisory Board released a social impact measurement tool set.

Eﬀorts to Expand Impact Investment in Japan

In addition, with regard to international developments, the “Sustainable Development Goals(SDGs)115 ” which were raised in the “2030 Agenda for Sustainable Development” adopted by theUnited Nations in September 2015 can be cited. In order to successfully bring about the SDGs,
cooperation across various sectors including the business sector, civil society, and the governmentis important, and from here on there will be increasing discussion in Japan on initiatives which are
geared toward achieving the goals as well as discussion on how to evaluate said initiatives. Currently
in Japan, although there are some cooperative movements which transcend the industrial, academic
and private sectors, such as the OPEN 2030 PROJECT116, systematic evaluation with the perspectiveof the SDGS in mind will need to be studied over the long term. Cooperation among various sectors,
with both international cooperation and domestic issues in view, will also be important in the future.

6. CLARIFICATION OF FIDUCIARY LIABILITY
1

Proposal Background

The participation of institutional investors, which has manifested its presence in the investment
market, is crucial to the expansion of social impact investments.
When institutional investors invest, it is required that there be no violation of legal fiduciary
liabilities, 117 but there have been concerns about the possibility that managing assets by considering
ESG and social impact, which are non-financial in nature, could violate fiduciary liabilities.
However, in the Principles for Responsible Investment118 formulated in 2006, it was stated thatconsidering ESG, which is non-financial information, is within the scope of fiduciary liabilities, and as
the correlation with operational performance is being recognized, there has been a subsequentchange of thinking in Western countries, in which investments that do not take ESG into
consideration may be the ones which could violate fiduciary liabilities.

115

United Nations Information Center website

116

OPEN 2030 PROJECT website

117

According to the Financial Instruments and Exchange Act, the financial instruments business operators, who have an importantrole concerning investors’ asset management, must have a compliant attitude which involved fulfilling the duty of loyalty, due
care, and ensuring segregated management towards investors who entrusted the operation.
118
Principles for Responsible Investment：PRI

71

Main Subject “The Current State of Social Impact Investment in Japan”

MarchEﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

2016Therefore, on the matter of whether or not social impact investments violate fiduciary liabilities,
further study which uses ESG investment as a benchmark is needed.

2

Main Subject “The Current State of Social Impact Investment in Japan”

When comparing social impact investment and ESG investment, ESG investment places moreemphasis on the circumstances and intentions of the investor, while social impact investment places
more emphasis on the recipient of funds creating social impact. On the other hand, as bothinvestments take non-financial information into consideration and pursue both a financial and asocial return, it can be said that the investment activity concepts are relatively similar.

Proposal Content (As of May 2015)

Eﬀorts to Expand Impact Investment in JapanThe following proposals were made in order to clarify that social impact investments do not
violate fiduciary liabilities. They are based on the process which clarifies that ESG investments do
not violate fiduciary liabilities.
Table III-12 Clarification of fiduciary liability
Proposal Theme
Overview
Main point with regard
to implementation

Items which should beprioritizedSpecific actions andcurrent progress○：In Progress

Clarification of fiduciary liability
Confirming that social impact investments do not violate fiduciary
liabilities and improve the environment in order to make institutional
investors’ integration of investment portfolios easier.
Improve the environment to facilitate the introduction of social impact
investments by institutional investors by cultivating public understanding
and enhancing the provision of information.
Development of the first institutional investor project in Japan.
Japan’s first institutional investor social impact investment project should
be produced by means of private foundations, and after creating a
precedent for operation guidelines, the information should betransmitted to other funds including the Pension Fund.
△ Social corporations and financial intermediary organizations shouldmake the fact that social corporations are carrying out theiractivities by means of social impact investments widely known inorder to cultivate public understanding.
×

The public should take the stance of participating in planning mid tolong term community establishment projects through the pension
fund.

×

The government and intermediary support organizations will
indirectly support social corporations and work towards enhancing
high-quality information as well as improving information access.

△：Under consideration
×：Not yet started

72

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

Although Japan has been influenced by Western countries and it has become widely recognizedamong specialists that the consideration of non-financial circumstances does not violate fiduciary
liabilities, public understanding is insufficient. Currently, if a loss is suffered after social impact
investment or ESG investments, investors may assume and level the criticism that the loss wascaused because non-financial information was considered, and therefore few institutional investors
have made ESG investments.

Major new developments and future outlook regarding the proposal

Although there are no developments directly related to the clarification of social impact
investment’s impact on fiduciary liabilities, as the Government Pension Investment Fund (GPIF),
which is the institutional investor with the biggest asset management scale in Japan, signed theUnited Nations Principles for Responsible Investments (PRI) in September 2015, it can be assumed
that the interest of institutional investors, particularly the Pension Fund, in investments which takenon-financial information into consideration will increase.

Eﬀorts to Expand Impact Investment in Japan

In addition, in the same month of the same year, BlackRock Japan, which is an international-scaleinstitutional investor, set up a new investment with impact investments as its theme. Although thisis not included in the market scale measurements as it does not apply to the definition of social
impact investments of this report, it is noteworthy to see that products seeking social impact inaddition to ESG investments of institutional investors have increased.
However, as there has been little sign of progress regarding the proposed items, it is necessary totake time to deepen discussions as well as promote the development of the first project byinstitutional investors.
Table III-13 Major developments related to the clarification of fiduciary liability
Year/Month
2010

March

2015

May

September

2016

March

Major Developments
Kamakura Investment Management installed an investment trust, “Yui 2101,”
which includes investments in social corporations, into its portfolio.
Measures concerning the clarification of fiduciary liabilities were proposed in
the National Advisory Board’s “Proposals for the expansion of social impact
investments.”
The Government Pension Investment Fund (GPIF) signed the United Nations
Principles for Responsible Investment (PRI).
BlackRock Japan established an investment fund119 for shares in developed
countries with impact investments as the theme.
Social impact investments were mentioned in the “Japan Sustainable
Investments White Paper 2015”.

119

Because the “BlackRock Impact Corporation Fund” is not applicable to the definition set in this report, it is not included in themarket scale of social impact investments in Japan73

Main Subject “The Current State of Social Impact Investment in Japan”

3

Private foundations working for public welfare will implement social
impact investments by reexamining operational guidelines andsharing data on precedents with the asset owners.

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

×Proposal Background

Because increasing the number of private investors who shoulder social impact investments willlead to the expansion of direct social impact investments as well as the cultivation of public
understanding of social impact investments, it is an important activity which indirectly affects theactions of institutional investors. However, according to the survey results120 released by the Central
Council for Financial Services Information in 2015, the ratio of households with financial assets were
69.1%, and although the average amount for households with financial assets was 18.19 million yen,savings amounted to 9.7 million yen (53.2%) and only 3.21 million yen (17.7%) were in securities(stocks, bonds and investment trust), which shows that the practice of investing has not become
widespread.

Eﬀorts to Expand Impact Investment in JapanOn the other hand, there are examples of a flow of funds which is intended to have social impact
including the Daiwa Microfinance Fund, which invests in microfinance institutions in emerging
countries, the Japan International Cooperation Agency (JICA) bonds 121 geared toward individuals andutilized for technical and financial support for developing countries, securities in crowdfunding
investment, and civil funds in which citizens have made contributions towards a better community,
so there is great potential for growth in this area.

2

Proposal Content (As of May 2015)

The following proposals were made in order to reveal potential private investors and have themtake on social impact investments.
Table III-14 Increasing private investors
Proposal Theme
Overview
Main point with regard
to implementation
Items which should beprioritizedSpecific actions andcurrent progress○：In Progress△：Under consideration

Increasing private investors.
Creating opportunities for society as a whole by heightening national
investment literacy and revealing potential investors.
Potential private investors’ understanding must be promoted bycommunicating information that shows how social impact investments
are useful in solving social issues regarding wider generations.
Building an information platform for social impact investments
Building an information platform for social impact investments which
supports decision-making by private investors regarding investments.
△ By concentrating on investing in segments with relatively high risk,
grant-giving organizations will create an environment where private
investors can invest in segments with relatively low risk as well as
expect a financial return.
×

Financial intermediary organizations will develop products related
to social impact investments and gather/provide investment-related

1202015 “Public Opinion Poll concerning household financial activities (2015) (survey for households with 2 or more people)” (TheCentral Council for Financial Services Information)
121
Issued 6 times with a total of 60 billion yen beginning in 2011

74

Main Subject “The Current State of Social Impact Investment in Japan”

1

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

7. INCREASING PRIVATE INVESTORS

Eﬀorts to Expand Impact Investment in Japan

3

Bond-issuing entities will develop products limited to investmentswith social significance and explain their significance to the investors
in a simple manner. IR (investor relations) which makes use ofopportunities including inspections, seminars, and newspaper
advertisements will be enhanced.

×

The government, including local governments, will give politicalconsideration for funding entities including civil funds to be able tocontinue their activities. In addition, institutional support will beoffered to protect private investors using information platforms aswell as promoting its use.

×

Social corporations will create good practice through the project,“Social impact investments help solve social issues”, anddisseminate information about it to the public.

Major new developments and future outlook regarding the proposal

Although the entry requirements for stock-investment type crowdfunding were relaxed in May
2015 and an increase in the entry of new crowdfunding businesses was anticipated, to date there
have been no noticeable developments.122 The Cabinet Office has been promoting the “Furusato
Investments (Hometown Investments) 123 ” which utilizes crowdfunding, and a guide for Furusato
Investments with local governments and local financial institutions as its target was published in May
2015. Securite, a micro-investment crowdfunding platform, has seen an increase in projects
cooperating with local governments.
In addition, there has been nationwide expansion of citizen action with the establishment of the“Community Power Association,” a national network organization of civil energy funds, and“Community Foundations Japan,” which is a similar organization of community foundations.
Table III-15 Major developments related to increasing private investors
Year/Month
2009
2010
2014

122

Major Developments

February Music Securities began operation of Securite, a micro-investment platform.
March Kamakura Investment Management began operation of the investment trust,“Yui 2101,” which included social corporations in the portfolio.
May
The revised Financial Instruments and Exchange Law came into effect, and theentry requirements for stock investment crowdfunding were relaxed (effective
as of May 2015).
The Community Power Association was established.

In July 2016, AIP Securities Co., Ltd alone expressed their interest in participating, which would be a first for Japan.

123

At the Network Council of the Cabinet Office, “Furusato Investments” was defined as “small investments using methods suchas crowdfunding for projects that support activities which contribute to regional revitalization including the branding and utilizingof local resources, which also maintain harmony with the activities of community building organizations as well as those ofregional governments.”

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Main Subject “The Current State of Social Impact Investment in Japan”△

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

information that is reliable and easy for private investors tounderstand.

×：Not yet started

Community Foundations Japan was established.
The Cabinet Office’s “Guide for Furusato Investments” was published,promoting the utilization of small loans including crowdfunding.
Measures related to the increase of private investors were proposed in the
National Advisory Board’s “Proposals for the expansion of social impact
investments.”

Furthermore, the increase of private investors is considered to indirectly affect the market
expansion of donations as well as ESG investments. Due to private investors who make conventional
investments becoming more social impact-oriented, it can be assumed that as ESG investments
expand, there will be a pattern of making social impact investments as well as a pattern of donors
who seek financial return providing social impact investments.

Eﬀorts to Expand Impact Investment in Japan

As mentioned above, expansion in the ESG market can be expected based on BlackRock Japan’s
launch of an investment trust with impact investments as its theme as well as GPIF signing the PRI.
In December 2014, the social factor of the investment and loan policies of major banks in Japan was
evaluated and rated, and the results were shown in a simple manner in the Fair Finance Guide 2016
(Japanese Version) which was published thereafter. Although this has little direct influence on social
impact investments, it can contribute to the promotion of overall social impact orientation as it canbe used as an evaluation standard for social impact when private investors utilize funds.
According to Giving Japan 2015124, the donation market has expanded from a total of 693.1 billion
yen related to private investments in 2012 to 740.9 billion yen in 2014, the promotional campaign
for national donations, “Donation Month - Giving December”125 was held in the month of December,
2015, and additional expansion can be expected with the participation of 122 corporations and 23
official authorized projects.
Based on the current progress, building an information platform which targets the increase ofprivate investors who make social impact investments is necessary.

Figure III-6 Increasing private investors by means of the expansion of ESG investments and the donation
market.

124

2015 “Giving Japan 2015” (Japan Fundraising Association)

1252015 “Monthly Donation Report 2015” (Monthly Donation Secretariat)

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Main Subject “The Current State of Social Impact Investment in Japan”

June
May

Eﬀorts to Expand Impact Investment in Japan

Main Subject “The Current State of Social Impact Investment in Japan”

2015The social impact investment market scale in Japan is expanding, with approximately 17 billion
yen in 2014 increasing to 33.7 billion yen in 2016. However, although some of the proposals madefor the expansion of social impact investments are in progress, there are still many projects whichhave not been started yet, including some with uncertain completion stages.
While the original seven proposals should be continued in order to work towards the expansionof social impact investments, the following are additional activities which are considered to benecessary.
Necessary activities which were not proposed
The proposals contain new initiatives which are coming up in the government as well as theprivate sector. Therefore, it is necessary to draw up a plan and promote it in order for these projects
to have a synergistic effect. In addition, as the proposals are all mutually complementary, an entity
which can take the initiative in managing the entire body of the proposals as one is needed in order
to expand social impact investment in the most suitable way for Japan. The National Advisory Board
has been at the center in Japan with regard to sharing the latest information as well as considering
necessary activities including the proposals. In the future, while continuing the current endeavors, itwill also be necessary for those involved with social impact investments to establish a platform
including the demand-side of funds, investors, and those involved in financial intermediaryorganizations.
This platform will aim for the expansion of social impact investments with many players coming
together and should involve the standardization and sharing of the most up-to-date information
concerning local areas such as the know-how and tools, updates on social impact investment
projects, as well as the unifying information necessary for social impact investments including
matching support to investors.
When it comes to the government in particular, what is required are decisions from the Ministries
with jurisdiction to promote social impact investment and the promotion from appropriate
Ministries of cross-Ministry policies and investigating the financial issues.
Another important factor in order to implement social impact investments will be capacity
building of financial intermediary organizations which connect the demand-side of funds, who carryout the social projects, and the investors, including both private and institutional investors. Financial
intermediary organizations require a network with social businesses and support know-how inaddition to expertise in finance related to investments and loans. The organizations that began
making social impact investments in the two years since 2014 are KIBOW and the Japan Venture
Philanthropy Fund, and organizations that have both social and financial skills are limited. Models
for the implementation of social impact investments based on cooperation of staff with different
skill sets are necessary for the different types of know-how to be compatible. In Japan, there are
already initiatives for loan programs, such as the previously mentioned Change (the cooperative
project of Seibu Shinkin Bank, ETIC, and The Nippon Foundation), as well as for investments for which
Mitsubishi Corporation Disaster Relief Foundation cooperates with local financial institutions, andthe expansion of models which implementing social impact investments in cooperation with local

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Prospects of the Social Impact Investment Market and Necessary Activities

Prospects of the Social Impact Investment Market and Necessary Activities

Ⅳ Prospects of the Social Impact Investment Market andNecessary Activities

Education and training for the development of human resources related to financial intermediaryorganizations are also necessary. For example, in addition to the implementation of social impact
investment training in each organization, considering programs in which trainees can get the neededpractical experience by means of activities such as mutual personnel exchange between financial
institutions and intermediary support organizations would be ideal.
In addition to this, in order to promote investor activities, each organization’s proactive
participation is desirable. For instance, in the case of the Canadian Credit Union Association, 126 there
was active participation on the part of local financial institutions such as the formulation ofguidelines in order to develop social impact investment products for individuals. Basic surveys suchas opinion surveys for private investors concerning social impact investments are also thought topromote social impact investment activities among financial institutions. Additionally, althoughcurrently limited in Japan, environment improvement by means of foundations with important roles
regarding market expansion in order to promote social impact investments is anticipated.
Future Outlook
The most significant development related to social impact investments that can be expected isthe launch of SIB as well as the utilization of dormant bank accounts as shown in the proposals.
The bill concerning dormant bank accounts will be enacted in 2016 at the earliest, and it isassumed that actual utilization will begin after 2 or 3 years. Although it also depends on the decisionof the Dormant Bank Account Utilization Council, the annual amount of dormant bank accounts is
estimated to be about 50 billion yen, and considering the role in the development of social impact
investments which dormant bank account utilization had in England, a similar expansion in social
impact investments can also be anticipated in Japan. However, because of the fact that dormant
bank accounts exist on the assumption that they will be paid back to the depositor, in addition to
the improvement in the accuracy of account-holder identification and publicity, the possibility of adecrease in funds must be taken into consideration. Rather than depending on these funds on a longterm basis, it would be ideal to consider improving the overall environment for the expansion ofsocial impact investments. In addition, as a premise for the implementation of sound social impact
investments, systematic improvement incorporating the capacity building of financial intermediaryorganizations and the permeation of social impact measurement, which is still new in Japan, isnecessary.
If the first SIB is introduced in Japan in fiscal 2017, its nationwide expansion using the samemodel as the first project can be expected with the local government considering SIB implementation
taking the lead. In addition, as the model project of the Ministry of Health, Labour and Welfare is tostart in fiscal 2017, further expansion of SIB projects by local governments can be expected throughthe influence of the model projects.
Therefore, although there are various issues remaining, increased acceleration of the expansionof social impact investments can be expected by means of the promotion of the proposals. Because
social impact investment is one of the tools which can solve social issues, by measuring its social

126

May 2016 ”A Guidebook for Canadian Credit Unions” (Canadian Credit Union Association)

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Prospects of the Social Impact Investment Market and Necessary Activities

Prospects of the Social Impact Investment Market and Necessary Activities

financial institutions and intermediary support organizations which support social projects isanticipated.

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Prospects of the Social Impact Investment Market and Necessary Activities

Prospects of the Social Impact Investment Market and Necessary Activities

value, a more stable project implementation is made possible. We hope that this report willcontribute to the expansion of social impact investments as well as the solving of social issues.

APPENDIX●

Japan Finance Corporation (JFC) Social Business Support
https://www.jfc.go.jp/n/english/●

Citizens Energy Fund：Community Power Association
http://communitypower.jp/ (Japanese only)●Music Securities, Inc
https://www.musicsecurities.com/ (Japanese only)●

Mitsubishi Corporation Disaster Relief Foundation
http://mitsubishicorp-foundation.org/en/●

Gojo & Company, Inc.
http://gojo.co/●

Daiwa Micro Finance Fund：Daiwa Securities Co., Ltd
http://www.daiwa-grp.jp/english/csr/report/2011/special_04.html
http://www.daiwa-grp.jp/data/current/press-2943-attachment.pdf●

National Association of Labour Banks NPO Loans：
http://all.rokin.or.jp/english/
http://all.rokin.or.jp/english/documents/2011guide_E.pdf●

Kamakura Investment Management Co., Ltd. Investment Trust “Yui 2101”
http://www.kamakuraim.jp/ (Japanese only)●

Toyota Tsusho CSV Africa Pte. Ltd. (Toyota Tsusho Africa Fund)
http://www.toyota-tsusho.com/english/
http://www.toyota-tsusho.com/english/press/detail/161109_003865.html●

NPO Bank：Japan NPO Bank Network
http://www.npobank.net/ (Japanese only)●

The Nippon Foundation “Wagamachi Fund”
http://wagamachi.jp.net/ (Japanese Only)
http://www.nippon-foundation.or.jp/en/
http://www.nippon-foundation.or.jp/en/news/articles/2016/23.html●

Japan International Cooperation Agency, Overseas investment and loan projects
https://www.jica.go.jp/english/index.html●

Relationship Capital of Japan
http://kyoueki.jp/ (Japanese Only)●

ARUN Limited Liability Company
http://www.arunllc.jp/en/

80

APPENDIXAPPENDIX

Japan Venture Philanthropy Fund (JVPF)
http://www.jvpf.jp/en/●

Oikocredit Japan
http://www.oikocredit.jp/ (Japanese Only)●

Benesse Social Investment Facility
http://www.benesse.co.jp/ (Japanese Only)
http://blog.benesse.ne.jp/bh/ja/news/m/2013/11/22/docs/20131122%E3%83%AA%E3%83%AA%E
3%83%BC%E3%82%B9.pdf (Japanese Only)●

General Incorporated Foundation KIBOW
http://kibowproject.jp/en/●

NPO SVP Tokyo
http://www.svptokyo.org/english/

APPENDIXAPPENDIX●

81