The Current State of

Impact Investing in Japan2018
March 31, 2019
Global Soc ial Impact In v estmen t Steerin g G roup (G SG ) th e N ation al Adv isory Bo ar d

E x ecu t i ve S u m m a r y
The Japanese impact investing sector is a product of its unprec edented super aging
demography, its advanced economy led by powerful corporates, and its nonproﬁt sector
with strong expertise in disaster relief, elderly care, and healthcare. The key features ofthe demand and supply sides of the impact investing sector include the following:

Demand side
Japanese society faces major structural issues such as the world's fastest ageing
demographic, poverty among children, and shrinking regional economies. The
government-led resource reallocation model from the post-war economic growth period
has its limit in addressing these social challenges. Developing a new ﬂow of privatemoney to social challenges is critical.

Healthy growth in the number of nonproﬁt organizations especially in the period
immediately following the devastating earthquake and tsunami in eastern Japan in 2011.

Emergence of social enterprises in the recent past, leading to approximately 200,000
ventures in number and employing 5.8 million people. Given the lack of a legalorganization, many social enterprises operate as for-proﬁt entities.

Expansion of corporate engagement in social issues, particularl y with the spreading ofconcepts such as creating shared value (CSV) and base of the pyramid (BOP).

Supply side
Substantial role of crowdfunding platforms to mobilize individual donations andinvestments for impact investing projects.

Involvement of mainstream ﬁnancial institutions, notably the largest pension fund in theworld, Japan's Government Pension Investment Fund (GPIF), which has made acommitment to ESG investing.

Entrance of major private foundations that are willing to provide risk capital that enables
other investors with lower risk appetite to participate in impact investing projects.

The size of the Japanese impact investing market
The size of the Japanese impact investing market in 2018 is estimated at JPY 344 billion,
up nearly ﬁvefold from ﬁscal 2017. Factors that led to this growth are the increase ofinvestments by existing impact investors from 2017 or before, and the entry of new
investors into the market.
Of the new impact investors, notable in 2018 were those who succeeded in adding
scalable investments, such as organizations that shifted their conventional investments
to impact investments upon studying impact investment methods, as well as investment
trusts that oﬀered investment opportunities to individual investors and contributing JPY
100 billion to the investment balance. Meanwhile, many organizations steadily increased
their investment balance from the year over by adding hundreds of millions of yen to
impact investing.

Figure 1

The trend of the Japanese impact investing market size

（JPY 100 Million）
4,000
3,440

3,500
3,000
2,500
2,000
1,500
1,000
500
0

718
337

2016

2017

2018

2018 Highlights
Three key highlights are observed in the Japanese impact investing market in 2018.

❶ Expansion of ﬁnancial products oﬀered to individual investors
The research found that there was an increase in ﬁnancial products for impact
investments made available to individual investors in the general public, throughcrowdfunding and investment trusts. This trend is expected to continue, with more
oﬀerings to become available to individual investors.

❷ The expansion of Social Impact Bonds
In November 2018, a Social Impact Bond (SIB) was successfully implemented through aregion-wide partnership among Hiroshima Prefecture and six cities. The collaboration
between numerous regional governments helped to lower barriers to implement the SIB
model. Modeled after an SIB issued in Hachioji City, Tokyo in 2017 to boost colon cancer
screening and follow-up examination rates, the case proved that this SIB could be applied to
diﬀerent regions, paving the way for the modelʼs proliferation to the 1,741 regional
municipalities across Japan.

❸ Increased participation by mainstream ﬁnancial institutions
The 2017 report conﬁrmed the active participation of mainstream ﬁnancial
institutions in the Japanese impact investing sector, including life insurancecompanies, major commercial banks, and venture capital ﬁrms. This trend continued
in 2018, further expanding to asset management companies and other insurancecompanies. Additionally, Environmental, Social and Corporate Governance (ESG)
investing and activities towards the achievement of Sustainable Development Goals(SDGs) also increased. This entry of mainstream ﬁnancial institutions is expected tocontinue.

The Current State of Impact Investing in Japan 2018

Introduction

04
05

The Global Social Impact Investment Steering Group and the National Advisory Board
About this Report

CHAPTER 1

06
11❶ History and Current State of Impact Investing❷ History and Background of Impact Investing in JapanCHAPTER 2

16
17
18
27
45

❶ Estimating the Market Size
❷ Selection Process of Impact Investing Cases❸ Research Scope for Market Estimation❹ Market Size Estimation Findings❺ Case Studies❻ Insights from the Current Social Impact Investment Market

CHAPTER 3

47
51

THE JAPANESE IMPACT INVESTING MARKET

EXPANDING THE JAPANESE IMPACT INVESTING SECTOR❶ Impact Investing and Impact Measurement ‒ The importance of impact visualization❷ Impact Investing and the SDGs ‒ A common language for financiers and recipients

53❸ Impact investing and Advanced Technology ‒ The potentiality of blockchain

57

Conclusion

03
Table of Contents

15

Overview of Impact InvestingI nt r od u c t i o n
The Global Social Impact Investment Steering Group and the National Advisory Board
The Global Social Impact Investment Steering Group (GSG) was established with the objectiveof globally promoting social impact investment, based on the call by UK Prime Minister David
Cameron at the G8 Summit in June 2013. Formerly known as the G8 Social Impact Investment
Task Force, GSG was rebranded in August 2015 when ﬁve additional member countries joined.
Sir Ronald Cohen, founder of the British dormant account fund called Big Society Capital, serves04

as the chairman and has organized a series of meetings from 2013 to 2014, which culminatedIntroductionin the Task Force Report published in 2014. Since the rebranding in 2015, the GSG has met oncea year at its annual conference while various working groups have congregated to tackle
speciﬁc issues.

The GSG requires its member countries to form a national advisory board. Founded in 2014,
Japanʼs National Advisory Board is comprised of experts from various sectors throughout Japan.

As of December 2018, the GSG Japan National Advisory Board consists of the following
members:
Chairman● Hiroshi Komiyama, Chairman, Mitsubishi Research Institute, Inc.

Vice Chairman● Masataka Uo, President and CEO, Japan Fundraising Association

Board members● Shuichi Ohno, President, Sasakawa Peace Foundation; Director,

Social Impact Investment Foundation● Teiko Kudo, Managing Executive Oﬃcer, Sumitomo Mitsui Banking Corporation●

Ken Shibusawa, Founder and Chairman, Commons Asset Management, Inc.

● Tomoya Shiraishi Co-CEO, Social Investment Partners● Masataka Fukao, Chairman, Plus Social Investment● Takehiro Fujimura, General Manager,

CSR & Environmental Aﬀairs Department, Mitsubishi Corporation● Hiroshi Mikitani, Representative Director, Japan Association of New Economy (JANE)● Hidenobu Mukai, Managing Executive Oﬃcer, Mizuho Bank, Ltd.
● Junichi Yamada, Senior Vice President, Japan International Cooperation Agency (JICA)

The Secretariat of the GSG Japan National Advisory Board is comprised of the Japan Social
Impact Investment Foundation (SIIF), Asian Venture Philanthropy Network (AVPN), K.K. Kaze to
Tsubasa, K-three Inc., and the Japan Fundraising Association.

About this Report
This report is a report on impact investing in Japan that dates back to July 2014 when
the ﬁrst edition was published, titled the “Current State of Social Impact Investment inJapan.” Subsequent editions published in May 2015 “Proposals for the Expansion ofSocial Impact Investment” (May 2015), and the “Current State of Social Impact
Investment in Japan” in 2016 (September 2016) and 2017 (February 2018) precede thisreport which documents the current state of the Japanese market.

Chapter 1, “Overview of Impact Investing,” oﬀers a glimpse of impact investing in thecontext of global trends, with a focus on its history and deﬁnitions. Chapter 2, “Thein Japan. Finally, Chapter 3, “Expanding the Japanese Impact Investing Sector,”
introduces ongoing discussions over impact investing.

With regards to market size estimation, in addition to a questionnaire survey ofpractitioners in the impact investment market, interviews and in-depth research on
publicly available reports and information were conducted to calculate market size.

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

Researchers and authors of this report:
K-three Inc.: Tomohiro Onisawa, Masaki Kochi, Chika Ochiai, Go Suzui, and Risako Imai

For any questions or comments, please contact the SIIF Secretariat:
Japan Social Impact Investment Foundation - info@siif.or.jp

05
About this ReportJapanese Impact Investing Market,” reports on the study of the impact investing market

CHAPTER 1

Overview of Impact Investing❶ H i s t o ry a n d C u rre n t S tate of Impact Inves tingAccording to the Global Impact Investing Network (GIIN),1 “impact investing” is deﬁned
as investment that aims to generate ﬁnancial returns, social and/or environmental
returns at the same time. Various needs among investors, investees, and intermediaries
accelerate the steady expansion of the impact investing market, especially in Europe andNorth America.
This chapter summarizes the history and background of impact investing as well as thedeﬁnitions and market seizes in diﬀerent countries.

06
CHAPTER 1 Overview of Impact Investing❶-1 Impact Investing ‒ History and Background
The term "impact investing" was ﬁrst mentioned more than a decade ago in 2007 at aconference organized by the Rockefeller Foundation.
Further back in history, in the Netherlands in 1968, a study group, which later developed
into Triodos Bank, was formed to discuss the need for ﬁnancial institutions that
contribute to solve environmental and social issues. The eventual establishment of afoundation that provides funding to social enterprises in 19712 marked the beginning of
impact investing in Europe. Subsequently, numerous ﬁnancial institutions andcooperatives that focused on social ﬁnance, community ﬁnance, environmental ﬁnance,and so on emerged. In addition to Triodos Bank, some institutions developed from❶History and Current State of Impact Investing

cooperatives such as the Co-operative Group in the UK and the GLS Community Bank inGermany. In this way, the origin of impact investing is observed in Europe and North
America, and the history of impact investing in each country is reviewed as follows.
In the almost 50-year history of impact investing in Europe, a turning point occurred in2000 when Sir Ronald Cohen established the Social Investment Task Force. As a result,
new foundations, organizations and companies were formed, contributing to the
expansion of impact investing activities, mainly in the UK. In the following years, several
more milestones were achieved in the UK: in 2002, the establishment of Bridges
Ventures, Community Development Financial Institutions (CDFIs), and the Charity Bank,f ollo wed by t he l au n c h o f a n e w l e g al e n t i t y in 2 0 0 4 c al l e d t h e Co m m u n i ty Interest
Company, for limited companies that are designated to use their proﬁts and assets forthe public good. In 2010, the ﬁrst-ever social impact bond (SIB)3 whereby the public andprivate sectors partner to fund projects in a pay-for-success ﬁnancing model wasconstituted. Additionally, in 2012, Big Society Capital was founded as a fund of funds
that provides ﬁnancing to the impact investing market, using bank ﬁnancing and funds
from dormant bank accounts. Then in 2017, Barclays Capital became the very ﬁrst major
British bank to launch an impact investing fund called the Multi-Impact Growth Fund.

https://thegiin.org/
Monitor Institute (2009) “Investing for Social & Environmental Impact”
3 Not a typical bond, SIBs are a combination of pay-for-success contract with the public sector and fundraising from third party investors
1
2

Around the same time, on the other side of the Atlantic in the United States, the originof impact investing was observed. In 1968, the Ford Foundation initiatedProgram-Related Investments (PRI) to invest in social enterprise activities through whichfoundations invest or loan capital to social businesses by utilizing a part of theirendowments. Some examples include low-interest student loans, social businesses thatgenerate employment for the poor and aﬀordable housing projects. In 1994, with theintroduction of the Riegle Community Development and Regulatory Act, CDFIs helped
activate more regional economies, and the PRI market size reached more than $3 billion
in 2000.
After the Rockefeller Foundation introduced the term “impact investing” in 2007, theﬁnancial crisis in 2008 underscored the need for new mechanisms which allowed
investments to create healthier and more balanced societies. This ushered in a new wave

involvement in impact investing from the U.S. tech industry as illustrated by the Gates
Foundation; and from the ﬁnancial sector, Morgan Stanley's Impact Investment Services(2012) and Goldman Sachs' Social Impact Fund (2013). In 2011, the Rockefeller
Foundation, the Global Impact Investing Network (GIIN), and JP Morgan published theﬁrst annual report on impact investing.4 This trend is expanding outside of the ﬁnancial
sector; in recent years in the United States, Mark Zuckerberg, the founder of Facebook,announced a lifetime donation of 99% of his shares in Facebook stock and launched the
C h a n - Z u c k e r b e r g I n i t i a t i v e .5 T h i s w a s f o l l o w e d b y t h e U S b u y o u t - f u n d T P G G r o w t hestablishing the Rise Fund with the rock band U2 in 2018,6 which raised USD 2 billion for
impact investing.

promote impact investing on a global scale at the UK Summit 2013. These nations went
on to launch the Global Steering Group for Impact Investing (GSG) in 2015. Chaired by Sir
Ronald Cohen, the GSG currently has 21 nations plus the EU as members, through which
each government has implemented policies and promoted the growth of the market.7

5

4 J.P. Morgan, the Rockefeller Foundation and the GIIN (2010) “Impact Investments”
The Guardian (2015) ʻMark Zackerberg and Priscilla Chan announce baby girl ‒ and $45bn charity intitiativeʼ6 World Economic Forum (2018) “The Rise Fund”
7 http://gsgii.org/❶
History and Current State of Impact Investing

As a culmination of this trend, the Group of Eight (G8) industrialized nations decided to

CHAPTER 1 Overview of Impact Investingof ﬁnancial institutions and foundations from the private sector, including increased07❶ -2 Impact Investing ‒ Public Policies and Current State around the World
Beyond the overall trends in Europe and the United States reviewed above, this report takes acloser look at the state of impact investing in GSG member countries, speciﬁcally the United
Kingdom, Australia, Portugal, India and South Korea, mainly looking at updates in each impact
investing market, in public policy and among key organizations.
❶ -2-1

In 2000, then-prime minister Gordon Brown set up the Social Investment Task force, in which Sir

The United

Ronald Cohen served as a chairman until 2012. At the G8 Summit presided by the UK in 2013,

Kingdom

Prime Minister David Cameron launched the Social Impact Investment Taskforce, followed
closely by the launch of the UK National Advisory Board on Impact Investing.

08

Then in 2012, led by the Cabinet Oﬃce, Big Society Capital was established as a wholesaler,

CHAPTER 1 Overview of Impact Investing

gathering GBP 4 million in funds from unclaimed assets and the main banks in the UK. In
addition, while the government does not limit itself to impact investing, it provides ﬁnancial
services reserved for social businesses such as Future Builders, which oﬀers ﬁnance to public
service contractors, and British Business Bank, which supplies credit to small and medium
enterprises (SMEs).
The UK also has a history of taking initiative in the ﬁeld of Social Impact Bonds (SIBs), and today,
47 of the 130 existing SIB projects around the world are based in the UK.8 A kind of impact
investing scheme, SIBs link the project outcomes to ﬁnancial return, enabling stakeholders suchas governments, businesses and investors to pursue more precise social impact. Key projects led
by the government include the Central Outcome Fund, which can be used for Pay-for‒Success(PFS) payments; Unit Cost Database, which shows an estimated cost per single outcome by❶
History and Current State of Impact Investingareas; and Outcome Lab, which researches and practices PFS and contract methods.
❶ -2-2Australia joined the G8 Social Investment Taskforce in 2013, and established the Australian

Australia

Advisory Board for Impact Investing in 2014. Impact Investing Australia, a non-proﬁtorganization founded around that time, has played a key role in the advancement of impact
investing in the country. The government of Australia announced an initiative to support social
impact investments and grow the market, committing AUD 30 million over 10 years starting in2017. In 2018, they announced an additional AUD 6.7 million would go towards a joint initiative
under the partnership with Impact Investing Australia.
The government works actively to improve the investment environment related to aﬀordable
housing for low income households, and has provided AUD 1 billion to set up the National
Housing Infrastructure Facility. In relation to the environment, the Clean Energy Finance Corp
has committed AUD 10 billion over the course of a decade to invest in clean energy projects.
Furthermore, Indigenous Business Australia is investing AUD 50 million for the economic
development of the indigenous peoples. And in 2017, the Department of Foreign Aﬀairs andTrade spent AUD 40 million to establish the Emerging Markets Impact Investment Fund (EMIIF),
to support impoverished regions in South and Southeast Asia by investing in SMEs, as well as
encourage the empowerment of women living in those regions through investment inenterprises that positively impact women.

8Social Finance (2019)”Impact Bond Global Database”

❶ -2-3

The Portuguese Social Investment Task force was established in 2014. A consortium of entities

Portugalincluding ﬁnanciers such as Caloute Gulbenkian Foundation, and intermediaries like MAZE andSocial Finance UK contribute greatly to the task force and the development of the social
investment ecosystem in Portugal. Furthermore, the wholesaler Portugal Inovação Social (PIS)
initiative plays a key role in developing the Portuguese emerging social investment market,
leveraging EUR 150 million to operate from 2015 to 2023, mainly from the European UnionʼsEuropean Social Fund.
The Portuguese government has set up a EUR 15 million fund for capacity building of impact
businesses. The government also plans to launch Revenue Participation Agreements (RPAs)
whereby investors can take a return from ﬁnanced organization through PIS. Portugal also
launched an SIB outcomes-based fund with EUR 20 million.

Indiaʼs social impact investment taskforce, the National Advisory Board, was founded in 2014.

India

The government has been actively trying to engage the private sector to become more involvedin the social sector. India adopted the Corporate Social Responsibility (CSR) law in 2013 which
mandates that all corporations spend 2% of average net proﬁts over three most recent years on
CSR activities, and this legislation has played a signiﬁcant role in the development of the social
sector in India. The country is now promoting its Aspirational District Plan which utilizes thisCSR law and impact investing methods with the aim to increase investment from the private
sector. India is also in the process of establishing a billion-dollar impact fund known as the
India Impact Fund of Funds (IIFF).

South Korea launched a Social Investment Taskforce in 2017, and subsequently its National

South Korea

Advisory Board in 2018.9 The Social Enterprise Promotion Act of 2007 provided the frameworkfor developing national policies and for providing social enterprises oﬃcial legal status. This
legal form for social enterprises makes them eligible for support from the Ministry of
Employment and Labour if they meet certain requirements. The South Korean government
supports impact investing, pledging USD 120 million in its annual budget each year to establish
a wholesale institution. In addition, in 2018, the Ministry of SMEs and Start-up and Financial
Services Commission is scheduled to set up two social impact funds, respectively USD 100
million and USD 200 million per annum in size. The government is also partnering with thecredit union KODIT, where social enterprises can get a credit guarantee with an interest rate
discounted between 1.0 to 1.5%. With regard to the SIB market, there are two projects focusing
on education and children with special needs in the country. However, faced with a lack of legal
basis for the government to allocate portions of their budget to SIBs, talks are currently
underway for future regulation reforms.

9

The Global Steering Group for Impact Investment (2018)“Catalysing an Impact Investment Ecosystem”❶
History and Current State of Impact Investing❶ -2-5

CHAPTER 1 Overview of Impact Investing❶ -2-409❶ -3 Trends among Impact Investing Organizations
In addition to GSG, there are three representative organizations that aim to advocate
impact investment globally, which are the Global Impact Investors Network (GIIN),
Impact Management Project (IMP) and SDG Impact.
❶ -3-1The Global Impact Investing Network (GIIN) was envisioned and created by a group of

Global Impact

investors centered on the Rockefeller Foundation to activate social impact investing.

Investors

GIIN pursues the creation of a global network for social impact investors, and that of a

Network（GIIN）

standardized impact measurement index to evaluate social and environmental impact.
Their initial project was the launch of an investment working group focused on10sustainable agriculture in Sub-Saharan Africa.

CHAPTER 1 Overview of Impact Investing

The GIIN Investor Forum 2018 was held in October 2018 in Paris, France, where morethan 1200 individuals from over 650 organizations attended. The following month, inNovember 2018, the forum titled, “Impact Investing in Asia: A Diverse and Dynamic
Market” was also held simultaneously in Japan, Vietnam, Indonesia, the Philippines,
Hong Kong and Singapore.
❶ -3-2

In 2016, Bridges Fund Management led a group of over 2000 organizations in an

The Impact

initiative known as the Impact Management Project (IMP). This initiative led to theManagement

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

10
Project（ IMP）

knowledge, pursue synergistic partnerships, and generate a common understanding onsocial impact measurement and impact management. 11 The IMP network is a❶
History and Current State of Impact Investing

collaboration of global organizations including the United Nations Development
Programme (UNDP), the International Finance Corporation (IFC), the Organisation for
Economic Co-operation and Development (OECD), Social Value International (SVI), theGlobal Reporting Initiative (GRI), GIIN, the Principles for Responsible Investment (PRI),
the World Benchmarking Alliance (WBA) and the GSG, which compose the core members,
together with partner members. In Japan, K-three Inc. joins as a strategic partner 12
member.
❶ -3-3
SDG Impact 13

SDG Impact was founded in 2018 by the United Nations Development Programme(UNDP), in cooperation with the Impact Management Project. SDG Impact provides
standards and tools, and networking opportunities to enable eﬀective investment for the
Sustainable Development Goals (SDGs) adopted by the United Nations in 2016. SDGs,
also known as the 2030 Agenda for Sustainable Development, are a collection of 17 goals
and 169 targets set by the United Nations General Assembly in 2015. The agenda pledges
to “leave no one behind,” and the goals are unique in that they call for action by all
countries including both developed and developing. It is estimated that USD 5 to 7
trillion is needed annually to achieve these goals. 14

https://impactmanagementproject.com/
Social Impact Management Initiative (2018) “Social Impact Management Guidelines Ver 1”
12 K-three news release (2019)13 https://sdgimpact.undp.org
14 UNDP (2017) “Impact investment to close the SDG funding gap”
1011❷ History and Background of Impact Investing in Japan
The impact investing market in Japan continues its growth trajectory. The estimatedmarket size grew from JPY 33.7 billion in 2016 to JPY 71.8 billion in 2017. 15 An increase in
Environmental, Social and Governance (ESG) investments, a demographic shift caused byan aging society and decline in birthrate, and the eﬀect of natural disasters have played
a role in the formation of the impact investing market in Japan. ESG investment is thepractice of investing taking into account environment, social and governance factors. In
2018, ESG investments reached JPY 232 trillion, more than 1.7 times greater than theprevious year.16 Much like in the West, this growth is driven by events such as theheightened long-term risks of worldwide environmental degradation, the reorientationof the ﬁnancial market against short-termism triggered by ﬁnancial crises, a series ofsocial and environmental issues. Structurally, issues such as the rise of social security andmedical insurance costs due to aging demography, and the need for childcare services tosupport working mothers go beyond what the public resources that have supported thesystem in the past can cover. In relation to calamities, the Law to Promote Speciﬁed
Nonproﬁt Activities was passed in 1998 following the Kobe Earthquake of 1996. After theearthquake and tsunami of 2011 in eastern Japan, monetary donations from within andoutside of Japan poured into the region; in addition, low-interest loans for nonproﬁts
and companies addressing post-disaster recovery and subsidies were established during
this time. Such activities have continued beyond emergency support, with several social
impact investments originating from these activities. 17

towards the growing social impact investment market. The enactment of the Dormant
Accounts Utilization Bill in 2016 will eﬀectively start in 2019, with the Cabinet Oﬃceʼsappointment18 of the Japan Network for Public Interest Activities (JANPIA) as its
Dedicated Utilization Organization. The countryʼs ﬁrst SIB projects backed by local
governments came about in 2017 in Kobe City in Hyogo and Hachioji City in Tokyo, andin 2018, a wider regional collaboration model was implemented in Hiroshima Prefecture.
Several more SIB projects are currently in development or under consideration.

❷-1 Trends in Demand
Two key trends are seen among service providers (the demand side of funding).
First is the growth of social enterprises. While social enterprises have no legal specialized
form in Japan, the cases listed here refer to organizations that address social issues regardlessof their status as nonproﬁts or for-proﬁt companies. According to the 2015 “Survey on
Aggregated Activity Size of Actors in Societies of Mutual Assistance in Japan” commissionedby the Cabinet Oﬃce, the size of social enterprise activities in Japan is estimated as follows.
Social enterprise here is deﬁned as organizations that fulﬁll these seven elements:
15 GSG (2018) “The Current State of Impact Investing in Japan 2017”
Japan Sustainable Investment Forum (JSIF) (2018) “Fourth Sustainable Investment Survey in Japan”
17 GSG (2016) “The Current State of Impact Investing in Japan 2016”18 Cabinet Oﬃce (2019) Appointment of the Dormant Utilization Organization based on the Act on Utilization of Dormant Deposits”
16❷
History and Background of Impact Investing in Japan

Moreover, national and local governments are also considered to have contributed

CHAPTER 1 Overview of Impact Investing

major corporate scandals, and the growing interests towards business models that solve11

① Working to “improve or solve social issues through for-proﬁt activities”② Main business objective is social mission rather than proﬁt③ Proﬁts are mainly re-invested into the social project(s),not allocated to dividend payouts or to ﬁnancial investments (in the case of for-proﬁt organizations)④ Less than 50% of proﬁts are paid out to investors and shareholders (in the case of for-proﬁt organizations)⑤ Total revenues from social project(s) comprise more than 50% of the organizationʼs total revenues⑥ Less than 50% of revenues are derived from public insurance (medical, nursing care and so forth)⑦ Less than 50% of the revenues (not including subsidies, membership fees and donations)are derived from government-commissioned projects

12
CHAPTER 1 Overview of Impact Investing

Figure 2

Overview of social enterprises in Japan 19
Number of social enterprises

205,000

Total added value

JPY 16 trillion (3.3% of GDP)

Paid employees

5,776,000

Revenue on social business

JPY 10.4 trillion
Source: Cabinet Oﬃce

The number of nonproﬁt organizations among social enterprises has also increased
compared to 2017. There has been a rise in nonproﬁts that earn business revenue in
addition to donations or subsidies, and there is an increase in demand for supplying
funding to nonproﬁts operated with earned revenue.

❷
History and Background of Impact Investing in Japan

Figure 3

Number of nonproﬁt entities 20・21

Nonproﬁt organizations

51,770（+47）

Certiﬁed nonproﬁt organizations

1,088（+57）

Public-interest associations and foundations

9,631（+145）

Cooperatives

42,924（+412）

Social welfare organizations

21,706（+780）

Education organizations

8,127（+25）*Parentheses indicates changes from 2017 22

Sources: The Cabinet Oﬃce NPO Survey, National Tax
Agency Corporate Number Publication Site

A second emerging trend has been the increase of startups that may not necessarily
fulﬁll the seven criteria listed above, but that have a social mission while also indicatingpromises of high economic performance. In conjuncture, there has been a rise in venture
capital and institutional capital investing in such startups as impact investment targets. 23

Cabinet Oﬃce (2015) “Survey on activities size of social enterprises in Japan”
Cabinet Oﬃce (2015) “NPO Statistics Information”
21 National Tax Agency (October 2018) “Public website for enterprise identiﬁcation number”
22 GSG (2018) “The Current State of Impact Investing in Japan 2017”23 Dai-ichi Life Insurance news release (2018)1920

❷-2 Trends in Supply
In t er m s o f s upply s id e tr e n d s o f i m pac t i n v e s t i n g, fu n d i n g s up p l i e r s c an m ai nl y b e
categorized as corporations or individuals. In 2018, there was an increase in products
geared toward individual investors, such as the Social Investment Declaration by Crowd
Credit Inc.24 and the social impact investment fund launched by Nomura AssetManagement Co., Ltd.. 25
From the organizational side, as their ﬁrst investment from its impact investing fund tosupport women, Sasakawa Peace Foundation invested JPY 1 billion in a microﬁnanceinvestment fund by BlueOrchard Microﬁnance Fund SA of Switzerland. 26
Trends in funding supply are categorized below by types of suppliers: individual

Figure 4

Cases of ﬁnancial services providers oﬀering products for individual investors

Overview

Crowd Credit Inc.

A corporation that oﬀers crowdfunded loans. Funds are crowdsourcedin Japan, then loaned to companies in developing countries. In June
2018, Crowd Credit made a public declaration to proactively invest insocial enterprises around the world.

Plus Social
Investment K.K.

Headquartered in Kyoto, the company provides investment-based
crowdfunding services. The majority of investments go to domesticsocial enterprises and projects related to renewable energy and SIBs.

Music Securities Inc.

An impact investing platform for individuals where investors canderive both ﬁnancial and social returns, aiming to solve global andsocial issues. The company oﬀers investment-based crowdfunding
services. It is involved in the 2018 Hiroshima prefectural regional
collaboration SIB. 27

Nomura AssetManagement
Co., Ltd.

Nomura partnered with American Century Investment Management
Inc. (ACI) to oﬀer the Nomura ACI Advanced Medical Impact Fund asof October 2018. The fund focuses on pursuing investments that areboth potentially ﬁnancially viable and solve social issues.

With respect to foundations, their contributions are signiﬁcant in a still immature social
investment market, where high economic returns cannot be realistically achieved acrossthe board. As such, the strategic use of blended ﬁnance, or public-private development
funds, from foundations could be eﬀective to mobilize private capital .

24 Crowd Credit news release (2018)
Nomura Asset Management news release (2018)
26 Sasakawa Peace Foundation news release (2018)27 Music Securities news release (2018)25❷
History and Background of Impact Investing in Japan

Organization

13
CHAPTER 1 Overview of Impact Investing

investors, foundations, ﬁnancial institutions and venture philanthropy.

Figure 5

Examples of foundations

Organization

Overview

Japan Social
Impact Investment
Foundation (SIIF)

Established in 2017, the foundationʼs mission is to promote social impact
investment in Japan. SIIF invests in intermediaries such as Plus Social
Investment Inc. (see above); SIBs or other impact investment deals; andprovides funding for research and hosts events related to the ﬁeld of
impact investment.28

Sasakawa Peace
Foundation (SPF)

SPF engages in the execution, support, research and survey of activities
which contribute to world peace and the welfare of mankind. In 2017, SPF
launched the “Asian Womenʼs Impact Fund” aimed to grow to JPY 10
billion. In 2018, SPF made its ﬁrst investment from the fund, providing JPY
1 billion to the BlueOrchard Microﬁnance Fund.

As the number of social entrepreneurs that address social issues increases, impact
investment capital is also starting to originate from ﬁnancial institutions, corporations

14and venture capitals (VCs) that have started to invest in such startups in hopes of

CHAPTER 1 Overview of Impact Investingﬁnding solutions to social issues while gaining economic returns. Moreover, ﬁnancial
institutions which are primarily in the loan business like banks, credit unions andcredit associations have recently started proactively evaluating senior care andenvironmentally-friendly enterprises and package them. This trend was initiallytriggered around 2003 when CSR had its public reckoning in Japan, whereby ﬁnancial
institutions were then expected to reﬂect CSR in their main lines of business.
Figure 6

Examples of ﬁnancial institutions

Method❷Venture ﬁnance

History and Background of Impact Investing in Japan

Loan ﬁnance

Organization

Overview

Shinsei Corporate
Investment
LimitedIn 2017, Shinsei Bank and Shinsei Corporate Investment
launched a fund dedicated to childcare support inJapan. Invested from the fund to COMPASS Inc. andArcterus Co., Ltd. in 2018.29

Dai-ichi Life
Insurance
Company, Limited

Following its 2017 foray into impact investing when
Dai-ichi backed Gojo & Company Inc., the company had
made 8 additional investments by December 2018.30

Japan FinanceCorporationJ F C in vests in soc ia l busin esses an d dissemi n at es
related information thought to be useful for corporate
management.

Development
Bank of Japan Inc.
(DBJ)

The DBJ introduced a certiﬁcation loan program in
2004. Ratings include the DBJ environmentally rated
loan, business continuity management (BCM) rated
loan, employeesʼ health management rated loan andthe green building certiﬁcation.

The approach which applies the philosophy and methods behind venture capital
known as venture philanthropy, which began in the West Coast of the United States in
the 1990s, has also taken foot in Japan.
Figure 7

Examples of venture philanthropy

Organization

Overview

Japan Venture
Philanthropy Fund(JVPF)

Co-founded jointly between Social Investment Partners (SIP) and the Nippon
Foundation in 2013. As of end of 2018, the fund has provided nonproﬁts andsocial enterprises with ﬁnancial support in the form of investments or
grants, and organization management and development support.31

SIIF (2018) “Japan Social Impact Investment Foundation Annual Report 2017”
Shinsei Corporate Investment news release (2018)30 Dai-ichi Life Insurance news release (2018)31 Japan Venture Philanthropy Fund news release (2018)28

29

CH APTER 2 THE JAPANESE IMPACT INVESTING MARKET❶ E s ti m a t i n g th e Ma rk e t S i z e❶-1 Research Perspective
This research seeks to estimate the market size of impact investing in Japan to identify
the potentials, possibilities and challenges towards the growth of the market, and tocompare the Japanese market to the global one.
In addition to market size estimation, the survey also gathered information on
respondentsʼ level of interest in impact investing, as well as the challenges in impact❶-2 The Deﬁnition of Impact Investment
The deﬁnition of impact investment in the 2018 survey is determined by the Cabinet
Oﬃce and the GSG, which was likewise applied in the 2017 survey.

Figure 8

Deﬁnition of Term of Impact Investment

Term

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

Social impact
measurement

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

Social impact
investment

Investments with both social impact and ﬁnancial returns. In this report, allforms of ﬁnancial transactions with economic returns such as equity andbond investment, loans, lease, etc., are considered investments. Donations,subsidies and grants are excluded.
Sources: Cabinet Oﬃce and the GSG (2017)❶

Estimating the Market SizeSocial impact

15
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

investing.

❷ Selection Process of Impact Investing Cases❷-1 Approach to selecting impact investing cases
To identify cases of social impact investing, this report assessed whether an investment
decision process takes into account social and environmental outcomes, as well as whether it
accounts for social impact measurement.
Emphasis was placed on how an investment contributed to solving social and environmental
issues; mere measurements or assessments for risk avoidance purposes did not qualify.
Furthermore, if social impact was measured post-investment rather than at the time
investment decisions were made, such cases were excluded as they were deemed not to have16

intentions of social impact.

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❷-2 Comparing against the 2017 Research Findings
The 2017 research report assessed intention of impact investing based on two inclusion
criteria:（A）Restricted use of funding towards social and environmental businesses/projects.
For instance, clear links between investment and use of funding, such as funding
to build and operate hospitals or daycare facilities, build and operate renewableenergy plants, or for microﬁnance institutions were sought. Such connections
were not only limited to contractual restrictions, but investments made tobusinesses dedicated to social and environmental causes applied.
（B）Evaluation of social and environmental outcomes in the investment decision
making process.

❷Selection Process of Impact Investing Cases

Based on the ﬁndings from 2017, in the 2018 research, “B” was solely selected to objectively
assess intent. This was due to the thinking that “A,” namely the “restricted use of funding,”
could be subsumed by further specifying what constitutes “the evaluation of social andenvironmental outcomes” reviewed under B. Speciﬁcally, by setting performance indicators
for “B” (investing in social and environmental outcomes) and conﬁrming that evaluations wereconducted, it could be determined whether funds are restricted, and regardless of such
restrictions, whether the investor had an intention to achieve social impact.
In organizations that promote impact investing on a global scale such as the Impact
Management Project (IMP) 32 and the International Finance Corporation (IFC), 33 there is greater
emphasis on impact measurement than on restricted use of funds. The rationale is that having
restrictions in place is not as critical as the measurement of investing outcomes whenpursuing greater positive social impact and managing impact.
Given that more newcomers with diverse backgrounds are likely to join the impact market in
the coming years, and the diverse ways in which the market itself will develop, “A” may limit
the scope of such research, and thus, “B” was selected as the sole criteria for the 2018 survey.
32
33

https://impactmanagementproject.com/glossary/
IFC (2018) “Investing for Impact: Operating Principles for Impact Management”

❸ Research Scope for Market Estimation
This research initially compiled a list of research samples which included all
institutions potentially related to social impact investing in order to select impact
investing cases. Speciﬁcally, the list honed in on Japanese domestic investors thathave made public statements such as signatories of PRI, Principles for Financial
Action for the 21st Century (PFA21) and others, and looked at a wide researchsample. The list is as follows:

Figure 9

Research sample

Selection criteria (some overlapping)

Insurance

27

Japan Sustainable Investment

Securities

17

Forum survey participant

Asset management ﬁrms (namely listed companies)

51

Private equity and VC

123

Lease & non-bank institutions

60

PRI signatory
PFA21 signatory

Social Impact Measurement
Initiative member●

Venture capital●

Securities

Other organizations

55●

Other relevant organizations

Pension funds

5

Listed companies

8

Local governments

2

Governmental ﬁnancial institutions

12

Total

517

17
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

157

●

●

NumberBanks, credit unions and credit associations●●

Type of organization❸
Research Scope for Market Estimation

❹ Market Size Estimation Findings❹-1 Overview
To estimate the market size of impact investing, questionnaires were sent to selectedorganizations, and the responses were reviewed against the criteria outlined above todetermine whether the cases qualiﬁed as impact investments.
The questionnaires were mailed out on October 2, 2018, with a deadline to remit by October 23,
2018. Of the 517 organizations sampled, 10.4% or 54 organizations34 responded. Of those 54, a
total of 20 were acknowledged as impact investment cases.

18

Based on the survey using the questionnaire, interviews and desk-based research, an estimated

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

questions from this questionnaire were compared to the global GIIN Annual Impact Investor

investment balance of JPY 344 billion was allocated to impact investing in Japan. 35 Some of theSurvey ﬁndings..36
Figure 10

Total estimated impact investing balance in Japan（JPY 100 Million）4,000

3,440

3,500
3,000
2,500
2,000
1,500
1,000
500
0

337
2016

718

2017

2018

The latest ﬁndings indicate that the market size of impact investing in Japan in 2018 grew 4.8
times greater compared to 2017. This growth can be attributed to the additional capital❹Market Size Estimation Findings

commitments by existing investors and the increase in the number of organizations that newly
began impact investing.
What stood out in the 2018 survey is that some of the newcomers to the market had achieved
scale, such as by intentionally shifting their traditional investments to impact investing upon
careful review, or by setting up investment trusts that were oﬀered to individual investors toeﬀectively add JPY 100 billion to the market. Meanwhile, many organizations continued theircommitment to impact investing by allocating an additional several hundred million yen,contributing to the balance increase from 2017.
The following table summarizes the impact investors who contributed to the estimatedinvestment balance. Especially noteworthy are the number of new entrants to the market thatare major ﬁnancial institutions, such as Nomura Asset Management Co., Ltd., and MS&AD
Insurance Group Holdings Inc. Of those continuing from the 2017 survey, there were several
organizations that increased their investment balances, including Gojo & Company Inc., Sophia
School Corporation, Japan Finance Corporation (JFC) and Japan International Cooperation
Agency (JICA)
Includes responses submitted past the deadline
Includes equity investments as well as funds managed on behalf of clients
36 GIIN “ANNUAL IMPACT INVESTOR SURVEY 2018”34
35

Figure 11

Impact investors conﬁrmed through the survey

Type

Organization nameExamples of impact investing

Japan International
Cooperation Agency (JICA)

Loans to overseas agricultural supply chain enhancement
projects, renewable energy projects

Sophia School Corp
(Sophia University)

Global Green Bond Fund, Microﬁnance Fund, Global
Sustainability Fund, JICA bonds

Nomura AssetManagement Co., Ltd.

Nomura ACI Advanced Medical Impact Fund

Kamakura Investment
Management Co., Ltd.

Investment Trust “Yui 2101”

Securities ﬁrm

Daiwa Securities Co., Ltd.

Daiwa Microﬁnance Fund

Major bank

Sumitomo Mitsui
Banking Corporation

SIB in Kobe City for chronic kidney disease and preventionof severe diabetic nephropathy

Regional
ﬁnancial
institution

Seibu Shinkin BankCHANGE, i.e., the Seibu social business development
support loan

The Dai-ichi Life
Insurance Company,
LimitedInvesting in healthcare and insurance tech startups
that address social issues

MS&AD Insurance Group
Holdings, Inc.
(co-investment by 4group companies)

The World Bankʼs Sustainable Development Bond

Digisearch &Advertising, Inc.

Structuring and investing in an SIB for colon cancer
screening in Hachioji City, Tokyo. Includes CEO Seiji
Kurokoshiʼs personal investments as a qualiﬁed
institutional investor.

Shinsei Corporate
Investment Limited

Shinsei Child-care Support FundJapan Social Impact
Investment
Foundation (SIIF)

SIBs in Kobe, Hachioji and Hiroshima; investing in
healthcare tech startup with an impact evaluation
system; investing in impact investment intermediaries

Sasakawa Peace
Foundation

Asian Women Impact Fund

Gojo & Company, Inc.

Microﬁnancing through microﬁnance subsidiaries
and partner companies in other Asian countries

KIBOW Foundation

Investing in businesses operating social enterprises

Social Investment
Partners

Unlisted social enterprises and nonproﬁts throughthe Japan Venture Philanthropy Foundation (JVPF)

MAKOTO

Investing in unlisted social enterprises

Plus Social Investment

Establishment and sales of a social impact investment fundNextshift Co., Ltd.

Loans to microﬁnance institutions

Asset owner

Assetmanagement
ﬁrm

Insurancecompanies

Venturecapital ﬁrms

Foundations

Organizations
specializing in
impactinvesting

When asked about number of investments, 47% reported they had executed one to three
investments in the latest ﬁscal term, and 77% replied they had cumulatively executed
more than four investments in total. Many investors are taking the “slowly but surely”
approach by executing one investment at a time, but as the number of investments
executed by such investors increases, so is expected an overall market expansion in Japan.

19❹
Market Size Estimation Findings

Loans to businesses operating social enterprises

Governmental
ﬁnancial
institutions

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

Japan FinanceCorporation (JFC)

Figure 12

Number of impact investments (latest ﬁscal term) (SA 37 , n=15 )
1〜3
47%

0

Figure 13

20

33%

40

60

7%

80

13%

100％

4〜10
11〜30
31〜

Number of impact investment cases since establishment (SA, n=13 )
1〜3

20

23%

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

0

46%

20

40

15%

60

80

15%

100％

4〜10
11〜30
31〜

❹-2 Comparison of the current state of impact investing in Japan with the global market
To better understand the state of impact investing in Japan, the survey compared theﬁndings to those of the 2018 GIIN survey, based on the following ﬁve criteria.

（1）Industry of targeted investment
Respondents in the Japanese survey allocated the most capital to medical/healthcare(50% of respondents), while food & agriculture gathered the most capital in the global
GIIN survey (57% of respondents). It can be surmised that an aging society and increase
in medical expenditures is seen as a critical social issue in Japan, leading to the❹Market Size Estimation Findings

popularity of the sector. It is noteworthy that in the GIIN survey, medical/healthcare
came in second (49% of respondents), thus speaking to the worldwide popularity of this
sector as an investment target. Regarding housing, however, no respondents in Japan
invested in the sector, while it came in high at fourth in the global survey (45% of
respondents).
Two areas identiﬁed by the 2017 and 2018 Japanese survey, womenʼs empowerment andclimate action, have not been selected as investment sectors in the GIIN survey.

37

SA stands for single answer where respondent can choose one answer from multiple choices.

Figure 14

Sector allocations（ Number of respondents, MA 38 , n=18）

Medical/healthcare
IT & advanced technologies
Renewable energy
Education
Microﬁnance
Womanʼs empowerment
Food & agriculture
SME support

21

Water, sanitation, and hygiene

Financial services (excluding microﬁnance)
Conservation
Infrastructure
Arts & culture
Housing

Japan

Other

GIIN
0

10

20

30

40

50

60％

*The GIIN survey allowed for multiple answers, n=229（2）Instrument of investment
Both the Japanese and GIIN surveys found that most investors chose private equity andprivate debt as the instrument of investment. There appears to be a general trend

Figure 15

Instrument of investment（Number of respondents, MA, n=17）

Private equity
Private debt
Public equity
Public debt
Equity like debt
Deposits & cash equivalents

Japan

Other

GIIN
0

10

20

30

40

50

60

70

80％

*GIIN survey allowed for multiple answers, n=229

38

MA stands for Multiple Answer. Respondents can choose one answer or more answers from multiple choices.

❹
Market Size Estimation Findings

regardless of country or territory in terms of investment methods in impact investing.

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

Climate action

（3）Allocations by stage of business
When reviewing allocations by stage of business, the greatest share of funds in Japanwas invested in early and growth stage investees similar to the global survey.
Figure 16

Allocations by stage of business (Number of respondents, MA、n=9)

Early stage
Growth stage
Seed/Start-up stage

22

Mature,private companies

Japan

Mature,publicly-traded companies

GIIN

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

0

20

40

60

80

100％

*GIIN survey allowed for multiple answers, n=190（4）Returns
In a comparison of the Japanese survey and global survey in returns, the majority of
respondents indicated that their investments met both their social and ﬁnancial
performance expectations. In the case of the Japanese survey, in relation to social
impact returns, all replied that their expectations were met.
Figure 17

Financial performance (SA, n=13)

GIIN

15%

76%

9%

Outperforming
In-line

Japan

❹

11%

Market Size Estimation Findings0

Underperforming

89%

20

40

60

80

100％

*GIIN survey: n=216, “not sure” responses excluded*Japanese survey, “not sure” responses excluded

Figure 18

Social impact performance (SA, n=6)
3%
GIIN

15%

82%

Outperforming
In-line日本

Underperforming

100%

0

20

40

60

80

100％

*GIIN survey: n=218, “not sure” responses excluded*Japanese survey, “not sure” responses excluded

（5）Changes within the organizations
When asked about internal changes, in Japan, more than half of the respondents (56%)
replied that “the organization was making/planning more impact investments”; however,
only 11% found that “the organization has a greater commitment to measuring andmanaging the impact of impact investments.” In Japan, challenges remain to bringing an
increase in impact investment opportunities into an increase in commitment to impact
management. Meanwhile, in the global survey, “my organization is making more impact
investments” and “my organization has a greater commitment to measuring andmanaging the impact of impact investments” overwhelmingly came out on top, with 84%
responding yes to both. These numbers indicate there is a diﬀerence in the penetration of
impact investment as well as expectation of quality, between Japan and other countries.
Figure 19

23

Changes in the organization from the year before (MA, n = 26)

There is greater buy-in from internal stakeholders
to have an impact investing arm
The conversations with internal stakeholders have moved
more from the ʻwhyʼ to the ʻhowʼ of impact investing
It is easier to persuade others in my organization
to make impact investments
My organization has a greater commitment to measuringand managing the impact of impact investments
Japan

Key decision-makers are more reluctant
to make impact investments

GIIN
0

10

20

30

40

50

60

70

80

90％

*GIIN survey: multiple answers, n=60, 3-year comparison❹

When asked whether impact investments were tracked to the Sustainable Development Goals(SDGs), 31% replied yes, and in total, 77% either replied yes or that they planned to do so in the
future. Because the SDGs can be universally shared among stakeholders, the optimization of
impact investmentʼs contributions to the SDGs facilitates discussions about the outcome of
impact investing among stakeholders.
Tracking impact investment performance to the SDGs (SA, n = 13)

23%

0

8%

20

46%

40

23%

60

80

Yes, for all of our investments
Yes, for some of our investments
No, though we plan to do so in the near future
No, and we do not have any foreseeable plans to do so

100％Market Size Estimation Findings❹-3 Tracking impact investment performance to the SDGs

Figure 20

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKETMy organization is making more impact investments❹-4 Awareness of impact investing
The survey asked about the awareness of impact investing. When asked about familiarity
with the term “impact investing,” 67% responded that they knew the deﬁnition of the term;
Combined with those who were familiar with the term, awareness among respondents
reached 80%. It is possible that only respondents with awareness of social impact investing
participated in the survey, but in any case, it can be said that most respondents werefamiliar with the term “social impact investing” within the scope of this survey.

Figure 21

Awareness of the term “social impact investing” (SA, n = 54)

24
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET
❹

5.6%
66.7%

13.0%

A respondent knows the deﬁnitionof “social impact investment”

A respondent is familiar with a term of

14.8%“social impact investment”

A respondent is not familiar with

0

20

40

60

80

100％

a term of “social impact investment”
Unknown❹-5 Future plans for impact investing
The survey asked about future plans for impact investing, and conditions under which
respondents would increase their investments.
F ir s t ly , r ega r d in g s e c t o r s w h e r e re s p o n d e n t s p l an n e d t o i n c re ase al l o c at i on s in th e
future, 31% selected medical/healthcare, already the most popular sector of impact
investing in Japan. Meanwhile, “housing” and “arts & culture” were also selected as areasof future impact investments despite there being no cases of investments in the present,
indicating that an expansion in investment range could occur in Japan.

Market Size Estimation Findings

Figure 22

Future plan for increased allocation by sector (MA, n = 35)

Medical/healthcare
IT & advanced technologies
Education
Womanʼs empowerment
SME support
Infrastructure
Climate action
Food & agriculture
Conservation
Renewable energy
Water, sanitation, and hygiene
Financial services (excluding microﬁnance)
Arts & culture
Microﬁnance
Housing
Other
0

5

10

15

20

25

30

35％

When asked what conditions would make increasing impact investments easier, the mostpopular reply was “an interest in or understanding of impact investing by top
management” (46%). “An interest or engagement from my companyʼs stakeholders” wasalso considered to help to grow impact investments (44%). As such, heightened interest
among not only upper management but also asset owners, shareholders and investors are
critical.
Other popular choices among respondents were “sharing information on successful impact
investing cases” and “changing internal structure to facilitate impact investing.” As more
impact investing cases are created and shared, together with increased awarenessregarding impact investment instruments, there is a chance for social impact investing toaccelerate.

Conditions to engage in more impact investing - 2018 vs 2017 survey ﬁndings 39(MA, n = 41 (2018 survey), n = 46 (2017 survey))

An interest in or understanding of
impact investing by top management
An interest or engagementfrom my companyʼs stakeholders
Regulatory approach to promote
impact investing by the government
Sharing information
on successful impact investing cases
Changing internal structure
to facilitate impact investing
Recognizing correlation of ﬁnancial
creditworthiness and social impact
The increase of the number of investment cases
in a social/environmental ﬁeld

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

Figure 23

25❹

Eﬀective use of external resources
for social impact investments
Call to action by PRI or UNGC etc

Other

Japan（2018）
Japan（2017）

Unknown
0

10

20

39

30

40

50

60％

GSG (2018) “The Current State of Impact Investing in Japan 2017”Market Size Estimation Findings

Validation and evaluation of an investee
by a third party entity/rating system❹-6 Disclosure of impact investments
The survey also inquired on organizationsʼ disclosure of their impact investments, towhich 87% replied “disclose as part of overall activities.” In most cases, the media
channels used for disclosure were disclosure journals, CSR reports and CSR websites.
Some organizations had dedicated pages set aside on their websites, while others
utilized social media to disclose their impact investing activities.

Figure 24

26
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❹

Information disclosure (MA, n = 15)

Disclosure as part ofoverall activities
Disclosure as a part of CSR
Limited disclosure to a part of investors etc.
(not open to public)
No disclosure
Disclosure as a part ofenvironmental accounting
Other
0

10

20

30

40

50

60

70

80

90

100％

In addition, of the free-form comments received, there were occasional comments on
demand growth, such as “There is an increase in the exposure of terms like SDGs, PRI,ESG investments, and the ground is fertile for impact investing,” and “There is highdemand from investors (for impact investing).” On the other hand, there were also

Market Size Estimation Findingscomments as to the challenges in impact investing, such as “ﬁnding and selecting
portfolio companies is our bottleneck,” “the need for more cases,” and “a need for an
established method of impact investing measurement and evaluation.”❺ Case Studies
Three case studies have been selected from the aforementioned players in the impact
investment industry to represent recent shifts in the market.

Figure 25

Case studies and reason for selection

No.

Case study

SectorReason for selection● Provide impact investing opportunities

Impact investing throughthe Nomura AssetManagement investment
trust

Medical/healthcare❺-2

Multiple impact
investments by Dai-ichi
Life Insurance

Medical/healthcare❺-3

Region-wide SIB andcrowdfunding for thepromotion of colon cancer
screening in Hiroshima
prefecture

to general individual investors throughan investment trust● Share insights gained through overseas
asset management partners● Market entry by a major ﬁnancial

institution● Building and improving the impact
investment process in-house● Provide impact investing opportunities

Medical/healthcare

to general individual investors throughcrowdfunding● A collaboration model by numerous
regional government oﬃces❺-1 Impact investing through the Nomura Asset Management investment trust❺-1-1This case study takes a closer look at the ʻNomura ACI (American Century Investment

Investment

Management Inc.) Advanced Medical Impact Fundʼ, set up by Japanʼs largest asset

overview

management company, Nomura Asset Management.
For clarity, this case study is not meant to endorse the fund, nor can it be held liable forthe investment process or any outcomes.

Investment Overview

Fund name

Nomura ACI Advanced Medical Impact Fund
−Investment A Currency-hedged asset growth type
−Investment B Unhedged asset growth type
−Investment C Currency-hedged dividend type
−Investment D Unhedged dividend type

Fund establishment

October 23, 2018

Fund period

Through December 19, 2028

Fund size

JPY 81.5 billion (as of November 5, 2018)

Fund manager

Nomura Asset Management Co., Ltd

Investment target

Advanced medicine and healthcare related companies worldwide

Additional
stakeholders

A portion of the mother fund is contracted to American Century
Investment Management Inc. as the fund manager

Expectedsocial impact

The development of new or innovative treatments, access to medicine
and healthcare services, new solutions that lead to the lowering ofhealthcare costs, and the development of more productive and eﬃcientequipment, service and software

Highlights● Provides impact investing opportunities to individual investors● A unique portfolio structure based on the Sustainable Development

Goals (SDGs)❺
Case Studies

Figure 26

27
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺-1❺ -1-2
Fund details（1）Investor (Fund manager)【Fund manager: Nomura Asset Management Co., Ltd.】
Established (year): 1959
Capital: JPY 17.18 billion
Main activities: Japanʼs largest asset management company, oﬀering investment trusts and fund management.
Cultivated a global client base from early on, and continues to be active in the United States, Europe and Asia.

【Fund management company: American Century Investment Management Inc. (ACI)】
Established (year): 1958
Capital: Undisclosed
Main activities: A privately-controlled, independent investment management ﬁrm with headquarters in Kansas

28
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺

City, Missouri. Its principal shareholder is the nonproﬁt organization Stowers Institute for Medical Researchwhich was established by ACIʼs founder James E. Stowers in 1994 and dedicated to medical research.

（2）Fund scheme① BackgroundIn the healthcare sector in Japan, an aging population and a concentration of population in urban
cities has led to rapid demand growth for medical services, more chronic diseases, and ballooning
healthcare costs. In other parts of the world, many challenges including incurable diseases thathave no known eﬀective treatments, and lack of accessibility to medical services continue toplague mankind. Moreover, issues such as an aging population and the ﬁscal burden of medical
costs are not challenges that are unique only to Japan, but a shared concern among countries
across the world.
At the same time, technological advances are continuously revolutionizing the healthcare sector.
There are tremendous developments such as robots that support nursing and caregivers,
automated diagnostics (applying artiﬁcial intelligence to medical diagnoses), data tracking by
wearable technology and apps, and advancements in biotechnology including regenerative
medicine. Through the application of next generation technologies, the healthcare market isCase Studies

shifting towards providing total healthcare solutions; that is diagnoses, treatments, prevention
and caregiving. In this way, the healthcare industry will likely continue to create new markets as
research and technology advance.
② History
May 2016, Nomura Holdings announced a strategic partnership with ACI, which has its own
unique ecosystem known as the ownership model in the healthcare sector, revolutionizing theway companies contribute to society. The partnership combined this ownership model created by
ACI with Nomuraʼs strong sales channels, aiming to achieve both proﬁtability and social impact.
Characteristics of the ACI Ownership Model:●ACI uses stock dividends to support research conducted by Stowers Institute for

Medical Research, its majority shareholder and home to one of the worldʼs largest
biomedical research funds.

●Stowers Institute employs over 550 experts, and seeks out innovative new cures,

working in conjunction with BioMed Valley Discoveries, a disease-related research anddevelopment organization.

●The sum of dividends paid out from ACI to the institute totals USD 1.4 billion between
2000 and 2018.

Figure 27

ACI Ownership Model
Potential number ofindividuals seeking treatment
investment

American Century Investments

approximately

160

millioncustomers（Asset management company）
dividends

returns

Stowers Institute for Medical Research（A nonproﬁt organization/biomedical research organization ）research & treatment

BioMed Valley Discoveries（A disease-related research and development organizationthat applies research ﬁndings made by Stowers Institute）
Source: Nomura Asset Management

The implementation structure and interests of each stakeholder are outlined below. Note that
"advanced medicine and healthcare companies" refers to companies within the pharmaceutical,
biotechnology, medical appliances, or medical/healthcare service sectors that research anddevelop new advanced technologies or contribute to the supply or demand of advanced medical
services.

Figure 28

Implementation structure
Field of advanced medicine

Biomed Valley Discoveries

Advanced medicine & healthcarecompanies around the world

Stowers Institute for Medical ResearchControl

Dividends

ACI

Invests
Fund management
Management fee

A portion of the fund management consigned

Management fee

Contracts to offer and sell products

Fund seller

Invests

Nomura ACI Advanced
Medical Impact Fund
Courses ABCD

Returns

Applications

Invests

Investors
Source: K-three, based on public information*Additional stakeholders such as investment trust management companies and auditors

Figure 29

Interests of stakeholders

Stakeholder
Investors

Role
Investor

Nomura Asset

FundManagement

Manager

ACI

FundManagerInterests & expectations in the project● Address issues in medicine by investing● Economic returns● Promote impact investing● Manage fund performance● Achieve economic returns and social impact● Link to the Sustainable Development Goal 3● Contribute to the medical ﬁeld through dividends paid to Stowers Institute❺Case Studies

Nomura Asset Management

Fund management

Nomura ACI Advanced
Medical Impact Fund
Mother Fund

29
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET③ Stakeholders

④ Approach to social impact
ACI looks to the Sustainable Development Goals (SDGs) in their impact investing
practices. This portfolio was constructed to align with Goal 3 (SDG-3), “ensure healthy
lives and promote well-being for all at all ages.” Each stock in the portfolio must be tied
to one of the impact themes corresponding to SDG 3, and is mapped out according to
the deﬁned targets as to their contribution.
Below are examples of the portfolio companies and their anticipated impact.

＜ Example 1 ＞

30
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺

PurposeDevelop medical appliances, services and software that is productive andeﬃcient, to be used in research, diagnostics and treatment.

Investee

Illumina, Inc.
【 Eﬀective medical appliances, services and more 】
Illumina develops and produces integrated systems to the analysis ofgenetic variation and function. The companyʼs next-generation sequencing

Expectedsocial impact

technology enabled the dramatic cost reduction of human genome
sequencing from USD 10 million in 2007 to USD 1000 a decade later.
Through cost reduction and speed enhancement, their contributions are
anticipated to bring about improvements in biomedicine, research, anddisease diagnostics and treatment.

＜ Example 2 ＞
PurposeInnovative treatments for diseases including cancer

Investee

Intuitive Surgical, Inc.
【 Innovative treatments 】

Expectedsocial impact

Case Studies

Intuitive Surgical develops, manufactures and markets industry-leading
surgical products. Their da Vinci Surgical System, a robotic surgical systemof which there are 4,528 units worldwide, has treated over 2 million
patients in the last decade, for urological and gynecological conditions andother general surgeries.
Their innovative products which enable minimally invasive surgery (MIS)
are expected to reduce medical costs and the rate of infections, through 1)
a decrease in blood loss; 2) enhanced visualization and access forsurgeons; and 3) a reduction in hospitalization period.

＜ Example 3 ＞
PurposeAccess to medicine and medical services in both developed and emerging
markets

Investee

Teladoc Health, Inc.
【 Access to medicine and medical services 】

Expectedsocial impact

Teladoc Health is a telemedicine company that uses telephone andvideoconferencing technology to provide on-demand remote medical care via
mobile devices, the internet, video and phone through their platform
Telehealth.
In addition to enhanced convenience for patients, telemedicine decreases
medical exam costs, and increases access to doctors for patients in remoteareas. Nearly 1.7 million patients used Telehealth in 2017.

（3）Highlights① Providing impact investing opportunities to individual investors
Traditionally, major impact investors have been ﬁnancial institutions, venture capitals
and angel investors. This fund is unique in that as a publicly oﬀered investment trust,it enables individual investors to take part in impact investing, even with small
amounts.
According to the Bank of Japan, the level of household ﬁnancial assets at the end of2017 was a record-breaking JPY 1.829 quadrillion (roughly USD 16.4 trillion). An inﬂux
o f ind ivid ua l ﬁ na nc ia l a s s e t s c o u l d p o t e n t i al l y b o l s t e r t h e i m pac t i n v e s t i n g m ar k e t .
Moreover, while it is believed that individual investors have more diverse values
compared to institutional investors, they often have less expertise to ﬁnd investment
opportunities that align with their values. This fund is notable as it oﬀers andiversiﬁcation❺

this fund adopts the family of funds method, oﬀering four diﬀerent funds under themain fund, with varying dividend payout schedules and the option to currency
hedge, addressing various investor needs.

② Unique portfolio structuring process
ACIʼs process in structuring the portfolio of the mother fund is as follows.

Figure 30

Portfolio structuring process

1

2

3

Investment
universe

Screening of blue-chipcompanies

Select portfolio
companies

Select 300 ~ 400 stocks
related toadvanced

medical company
from around the world

A quantitative evaluationaccording torevenue growth speed,ﬁnancial conditions,
track record,
and market value(is it undervalued)
and more,
to identify 100-150 stocks

Conduct a thoroughfundamental analysis
reﬂecting

impact investing and
ESG practicefor each individual stock,
to select 30-50 stocks

Structure

the portfolio
account risk proﬁles,and so forth

What stands out is the approach to impact investing noted in step ③. First, the fundestablishes the four criteria listed below that are based on SDG-3 to “ensure healthy lives
and promote well-being for all at all ages.” The investee companies are then selected
upon social impact evaluation against these four criteria.

1

Provides innovative
treatments

2

Access to medicine
and medical services

3

Solution for
decreasing medical
costs

4

Eﬀective medical
appliances andservices

The company provides innovative treatments such as those impacting
cancer, mental disorders, and infant and child mortality rates.

The company contributes safe, eﬀective and reasonably priced medicines,

and/or provides high-quality medical services or medicines in emerging anddeveloped countries.

The company contributes to the reduction of medical costs to facilitate
better access to high quality medical services, and to safe and eﬀective
medicines and vaccines for all.

The company develops or provides medical appliances, services andsoftware that are more productive and/or more eﬀective in order todrastically advance treatments of serious disease and illness.

Case Studies

taking into

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

investment opportunity that is not solely focused on economic returns. Furthermore,31

③ Method of social impact measurement
ACI takes an integrated approach to the analyses of impact and fundamentals. While thesocial impact varies by investee, ACI concentrates on reduction of healthcare costs, numberof persons impacted and expanded access to healthcare. Under this fund, unless suchimpact is met, a company is not selected for the investment portfolio, regardless of
expectations of high economic returns. In addition to monitoring their investments throughregularly-held meetings with portfolio companies, ACI actively participates in conferences
related to their investments, engaging with medical experts to discuss the latest productson the market. Meanwhile, ACI sets long-term goals for the fund due to the fact that social
impact takes time to achieve; however, the ﬁeld of advanced medical industries is an

32
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺

especially fast-moving market, making social impact and fundamentals analyses/projections
extremely challenging, and in turn, evaluations are also diﬃcult. Presently, ACI provides a
few assumed scenarios to countermeasure such diﬃculties.

（4）Key takeaways① Potential entry of individual investors in the impact investing market
This fund opened the gates of impact investing to a large number of individual investors
in Japan, garnering attention from overseas as a leading-edge case. It may eventually
serve to popularize impact investing among individual investors.

② Collaboration with progressive overseas investors
The concept of impact investing is still new in Japan, and the market is lacking in
ﬁnancial products as well as expertise. By structuring this fund to utilize impact investing
expertise from more advanced overseas markets, it potentially increases the options
available to investors in the domestic impact investing market.

Case Studies③ Impact evaluation that applies the SDGs
Oftentimes, while reviewing impact investment opportunities, consideration of desired
social impact can be a lengthy process because of the various stakeholders involved. To
evaluate and consider social impact, this fund applies the SDGs, a globally-recognizedconcept that is commonly and widely understood among investors, businesspersons andstakeholders around the world. Thus, this case could serve as a reference for future funds
in its approach to impact evaluation.

❺-2 Multiple impact investments by Dai-ichi Life InsuranceThis case study analyzes Dai-ichi Life Insuranceʼs impact investing activities which began in
2017.
❺-2-1
Investment
overview

Fund details

Investment Overview

Fund nameMultiple impact investments through private equity (investments in privately held companies)

Fund establishment

2017

Fund size

Approximately JPY 2.5 billion (8 companies)

Investor

Dai-ichi Life Insurance Company, Limited

Expectedsocial impact

To cause structural change in society through advanced technologies which improve qualityof life and platforms that reduce medical costs.

Highlights● The signiﬁcance and merits of a large life insurance company entering the impact
investment market● Challenges and diﬃculties in entering the impact investing market from an operational
perspective（1）Investor【 Dai-ichi Life Insurance Company, Limited 】
Established: 1902
Capital: JPY 60 billion
Main activities: A major life insurance provider in Japan, Dai-ichi Life Insurance is one of the top institutional
investors in Japan with a total asset balance JPY of roughly 36 trillion. In addition to its commitment toenhanced stewardship activities, the company is also active in ESG investing.

（2）Investment portfolio
Figure 32

List of portfolio companies
AmountinvestedCompany Overview

Expected Social Impact

Gojo & Company,
Inc

JPY 400M

Microﬁnancing in developing countries

Improved access to ﬁnancing
in emerging countries

Research and manufacturing of
next-generation synthetic
bio-materials (such as spider silk)

Reduce environmental load
(cutting greenhouse gas
emissions)

Spiber Inc.

JPY 1B

CureApp, Inc

JPY 200M

R&D and provider of a treatment app
for nicotine addiction treatment

Decrease in number of patients;
longer, healthy life expectancy;
reduction of medical costs

Crowd Credit, Inc.

JPY 100M

Oﬀers loan-type crowdfunding services
to developing country enterprises

Promote business activities indeveloping countries; job
creationR&D of a smartphone app to treat
insomnia

Decreased risk frominsomnia-related side eﬀects;
reduction of medical costs

SUSMED, Inc.

ApproxJPY 100M

Meltin MMI Co.

JPY 300M

R&D of an avatar robot with theworldʼs preemptive “most human-likehand” and related technologies

Decreased risk of workplace
injuries in high-risk
environments

MOLCURE, Inc

JPY 100M

Develops and provides the worldʼsﬁrst antibody discovery platform

Shorten the development timeof antibody drugs; reduction of
medical costs

QD Laser, Inc.

JPY 300M

Develops and provides the worldʼsﬁrst eyewear that employs
state-of-the-art laser technology

Improved quality of life forpatients with limited vision

TOTAL

ApproxJPY 2.5B❺
Case Studies

Company Name

33
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺-2-2

Figure 31

（3）Fund scheme① BackgroundDai-ichi Life Insurance Company, Limited, (“Dai-ichi Life”) has a history of domestic-stock ESG fundmanagement and of investing in renewable energy projects, but since it became a PRI signatory in
November 2015, the company has been in the process of building a system for ESG integration.
In 2016, Dai-ichi Life established a Stewardship Policy, positioning itself to become a social
responsibility institutional investor that encourages sustainable growth of investee companies, aswell as systematic integration of ESG investing, or the practice of pursuing both social good andﬁnancial returns.
In 2017, as society began to take notice of socially responsible investing, Dai-ichi Life set up

34
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺

ESG-themed investments within their ESG investment practices, eﬀectively beginning their impact
investing practices, which took into account impact measurement in their investment screening
process. A motivating factor behind Dai-ichi Life taking a step further from ESG to delve into
impact investing is that in addition to the potential for both social and economic returns, thecompany perceived the potential for such practices to lead to innovation in their core business,life insurance.

② Stakeholders
The implementation structure and roles of each stakeholder are outlined below. The Investment
Planning Department takes into consideration social needs and internal policy on social
contribution to strategize the overall direction. This overall direction then guides the impact
investing decisions of the front oﬃces and credit management oﬃce, within the bounds of
ESG-themed investing. At bimonthly Responsible Investment Meetings, participants discusscompany policy regarding ESG investments, review progress and share updates on projects. Last
but not least, the company utilizes the PRI annual assessment which is the global standard of ESG
investments to improve their internal process.

Case Studies

Figure 33

Stakeholders

Plan

Investment Planning Department● Develop and structure overall plan
● Information gathered from domestic andoverseas ﬁnancial institutions● Consider disseminating information

Responsible Investment Committee(3 External board members, 2 Internal board members)
Responsible Investment Meeting● ESG investment plan

● Share information on ESG investments● Review ESG investment progress● Review PRI assessment results

Do Investment Execution Department
Credit Management Department● ESG-themed investments● ESG integration

Annual PRI assessment

Check

Assessment based on
the global standard of ESG investments(standards reviewed annually)

Source: K-three, based on materials from Dai-ichi Life

The investment process in this case is as follows.

Figure 34

Social impact investment process

1

2

3

5

Conﬁrm whether the created impact can be regularly monitored

Meet with top management to conﬁrm intent
Meet with top management of potential investee company to conﬁrm whether
there is strong determination to create the anticipated social impact

Deliberation by the Responsible Investment Meeting
Determine the validity of desired social impact and monitoring methods from athird party perspective

Obtain clearance to execute the investment
Investment Execution Department obtains clearance to invest based on the
Responsible Investment Meeting's decision

Report to the Responsible Investment Committee
Regular reports to the Responsible Investment Committee on investments executed
Source: K-three, based on materials from Dai-ichi Life

Venture investments, whether related to social impact or not, require a discerning eye inevaluating the skills and technologies a potential investee owns. As a life insurance company,
Dai-ichi Life often chooses to invest in the areas of healthcare, biomedicine and ﬁntech. Dai-ichi
Life is able to achieve synergy from the discovery of innovations in these ﬁelds.
Dai-ichi Life does not require interviews or meetings with venture owners as part of their standard

the company places heavy emphasis on an ownerʼs vision or passion. Dai-ichi Life also requires
trackable success indicators as criteria for impact investing.

③ Approach to impact investing
At Dai-ichi Life, impact evaluation is conducted by the portfolio company, and achievements aremonitored in an annual report. Success indicators can be either qualitative or quantitative, but tomake monitoring less cumbersome, quantitative indicators are put in place whenever possible.
Impact evaluations are not in the investment contracts, but as noted above, Dai-ichi Life meetswith investees on multiple occasions and ascertains indicators for evaluation through suchmeetings.
Dai-ichi Life sets performance goals for economic returns, but in terms of social impact, thecompany does not set its own goals, rather considering whether they can align themselves with orshare in the impact goals set by the investee candidate.
Below are speciﬁc cases and the social impact and monitoring methods set for each investment
case.

❺
Case Studies

investment process. However, they do require such meetings in the cases of impact investing, as

35
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

4

Primary screening
Determine what "social impact" potential investee can create

＜ Case 1 ＞
Company name

QD Laser, Inc.
● A spin-oﬀ venture from Fujitsu Ltd.

Company
overview

Investment
overview● Operates two key divisions, in laser device sales and laser technologies

applied to visual information devices● Laser eyewear projects images directly on to the retina. Regardless of

diseases, low-vision patients with functioning retinas improve visualacuity with this groundbreaking productUnlisted stock, JPY 300 million【 Improved quality of life for low-vision patients 】

Social impact

36
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

Monitoring

By using this eyewear, low-vision patients who could not be previously helpedby vision correction can see images. This leads to an expansion in activity range,
pastime options, and an improvement in quality of life for low-vision patients.
【 Sales of laser eyewear devices 】
The units of laser eyewear devices sold as medical devices is tracked as anindicator of success.

＜ Case 2 ＞
Company nameCompany
overview
Investment
overview

MOLCURE, Inc.
● Use artiﬁcial intelligence (AI) to design antibodies as antibody drugcandidates, which are provided to pharmaceutical companies● Shorten development cycle of drugs, ﬁnd revolutionary new drugs

Unlisted stock, JPY 100 million【 1. Shorten the drug development cycle 】

Social impact

A shorter antibody development cycle leads to less time spent to develop
antibody drugs, contributing to the treatment of incurable or serious diseases.
【 2. Medical cost reduction 】
R&D costs at pharmaceutical companies are reduced through use of
Molcure, bringing down costs of antibody drugs as well as medical fees.

❺
Case Studies【 1. Scope of development time shortened for a set number of antibodies
developed at a pharmaceutical company 】
Monitoring

To monitor contributions, “the amount of time spent to develop antibodies
conventionally” minus “the amount of time Molcure spent to develop theantibodies” is tracked.
【 2. R&D costs reduced at pharmaceuticals 】
Monitors the “number of contracted projects” and “R&D costs saved per
project” to track contributions.

（4）Highlights① The signiﬁcance and merits of a large life insurance company entering the impact
investment market
Compared to conventional investments, the due diligence process required for each impact
investing case tends to take longer, and yet be a smaller investment. However, in addition to theeconomic returns and social impact expectations, the potential innovations that could be brought
about in the insurance industry are signiﬁcant. For example, some possibilities are the creation of
new insurance products, and combining technologies or products that prevent dementia with aninsurance product. At Dai-ichi Life Insurance, social impact investing is viewed as a new area inwhich the company can apply their expertise in insurance, healthcare and ﬁntech.

Another signiﬁcance of insurance companies conducting social impact investments is in
their ability to make longer-term investments compared to other investors. The need forquick exit strategies is low under the insurance business model, and they can “wait” forsocial impact to be achieved.

② Challenges and diﬃculties entering the impact investing market from an operational
perspective
Before making their ﬁrst social impact investment, Dai-ichi Life Insurance spent a
considerable amount of time and eﬀort to deﬁne social impact investment and its
meaning within the company. Of the numerous deﬁnitions provided by organizations
around the world, Dai-ichi Life reviewed some 20 or so deﬁnitions and studied the subtle
diﬀerences in nuance among them to formulate their own deﬁnition. As part of theirimpact from each investment. More speciﬁcally, the front oﬃce staﬀ who are
well-informed on the potential investee and the Investment Planning Department holdrecurring discussions on the appropriate success indicators, at times sitting down withthe owner of the investee to determine what it should be. Dai-ichi Life may even be theone to oﬀer potential outcomes or success indicators, if the investee does not present
any such ideas. Monitoring is time consuming, but by limiting the occasion to once a
year, and by applying quantitative indicators, Dai-ichi Life attempts to shorten theamount of time spent on monitoring project outcomes.
Dai-ichi Life intentionally avoids setting targeted investment balances or numbers ofinvestees, due to the belief that an honest approach to social impact is a better one. The
pressure to meet target numbers is seen to serve as an incentive to invest in businesses
that may not oﬀer much social impact.
This kind of impact investing was achievable at Dai-ichi Life because of a strong

operational level, enabling the company as a whole to engage in impact investing. Firstand foremost, the president is a direct participant in the Ministry of the Environment ESG
roundtable, which is an indication of the companyʼs commitment to ESG investing. In
addition, the most recent head of the Investment Planning Department was a board
member and an ardent purveyor of impact investing. How a companyʼs key decision
makers engage in projects is critical in any undertaking. Moreover, by holding bimonthly
Responsible Investment Meetings, the Investment Planning Department facilitates acompany-wide understanding towards ESG investing at a company-wide level, helping
to build a consensus around impact investing, which is a more time andeﬀort-consuming practice, at the operational level.

❺
Case Studies

commitment from upper management, and consensus that was achieved at an

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

impact investing process, the company also spends time to derive expectations of social

37

（5）Key takeaways① Investments structured around the core businessLife insurance is by nature a ﬁnancial product which requires long-term investment. For acompany that has built its core business around such long-term investment, the need to “wait”
for impact creation can be viewed as congenial to the business. It could also be viewed as aneﬃcient and eﬀective investment when seeking potential synergy with its core life insurance
business.

② Structuring a sustainable investment and measurement process
Impact investing faces challenges in the cost and eﬀort required relative to the size ofinvestments; however, Dai-ichi Life also views the beneﬁts of economic and social returns, as

38
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❺

well as synergy with its core business. This comprehensive point of view of considering costbeneﬁts during the planning phase before implementation could be eﬀective when resources
are limited. For instance, monitoring success indicators once a year rather than multiple times
could bring down the costs associated with the task.

❺ -3 Region-wide SIB and crowdfunding for the promotion of colon cancer screening in
Hiroshima Prefecture❺ -3-1This case study analyzes the case of an implementation of a pay-for-success contract for theInvestmentcolon cancer screening promotion project by Hiroshima prefecture and six local governments,

overview

whereby funds were raised through a crowdfunding model from individual investors.

Figure 35

Investment overview

Case Studies

Project nameRegion-wide SIB and crowdfunding for the promotion of colon cancer
sc reen in g in H irosh ima Prefec ture

Planned project
periodThree years from 2018 to 2021:
October 2018 to August 2019: Promotion of cancer screening
April 2019 to March 2021: Evaluation period

Investment scale

Approximately JPY 22 million

Investment
organizations*roles undisclosed

Individual investors (Crowdfunding brokered by Music Securities, Inc.)
Japan Social Impact Investment Foundation (SIIF)The Hiroshima Bank, Ltd.
Mizuho Bank, Ltd.

Investee

Cancer Scan Co., Ltd.

End payor

Hiroshima Prefecture and six cities in Hiroshima (Takehara, Onomichi,
Fukuyama, Fuchu, Miyoshi and Shobara cities)

Intermediary

K-three Inc.

Expectedsocial impact

Early detection of cancer to reduce deaths by cancer and improve qualityof life for citizens in the prefecture

Highlights*Noted in later pages● Utilize crowdfunding to provide the opportunity for SIB investment to awide number of individual investors● A prefecture-wide collaboration model SIB comprised of the prefectural
government and six local governments❺-3-2
Investment
details（1）Investors【 The Japan Social Impact Investment Foundation (SIIF) 】① Established: March 2017 by the Nippon Foundation② Endowment: JPY 3 million③ Main activities: SIIF seeks to nurture a social impact investment ecosystem that will support Japanʼssustainable development, increasing the number of domestic social impact investors and impact capital
available for public beneﬁt, to achieve further eﬃciency and scalability in the market【 The Hiroshima Bank, Ltd. 】① Established: May 1, 1945
② Capital: JPY 54.573 billion③ Shareholder: Japan Trustee Services Bank, Ltd. and others【 Mizuho Bank, Ltd. 】① Established: July 1, 2013
② Capital: JPY 1,404 billion③ Shareholders: 100% subsidiary of Mizuho Financial Group, Inc.
④ Main activities: Commercial banking【 Music Securities, Inc. 】① Established: November 26, 2001
② Capital stock: JPY 100 million③ Main activities:【 Securitization 】Operation of impact investment and micro-investment platform“Securite”, origination and marketing of funds(Financial instrument services provider engaged in Type II ﬁnancial instruments Number 1791 by the Kanto④ Others: Crowdfunding services “Securite” is made available for individual investors (Securite SIB fund
homepage: https://www.securite.jp/sib/)（2）Investment portfolio【 Cancer Scan Co., Ltd. 】① Established: November 19, 2008
② Capital: JPY 10 million③ Main activities: Operational support to health and wellbeing projects utilizing marketing and technology
1. Cancer screening promotion programs through SIBs (pay-for-success model)
2. Promotion programs for speciﬁc health examinations
3. Healthcare costs analysis utilizing tools such as the National Health Insurance
Organization database “Kokuho Database” (KDB)
4. Prevention program for severe diabetic nephropathy
5. Intervention program for proper health exams and medication
6. Training programs geared for regional government oﬃcials❺
Case Studies

Local Finance Bureau (Kinsho) No. 1791)

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET④ Main activities: Commercial banking

39

（3）Investment Scheme① Background
There are presently more than 370,000 deaths a year in Japan due to cancer, the leading causeof death in the country since 1981. Certain cancers have been found to be eﬀectively detected
and treated early, and the national government conducts programs geared towards regional
governments to promote cancer screenings, but have yet to reach the targeted rate of 50% of
the population.40 Reducing the mortality rate caused by cancer is a serious policy issue faced byboth regional and national governments, and Hiroshima Prefecture had taken various measuresin the past to attempt to increase the rate of residents who underwent screenings. Colon cancer
was made the focus of this project, speciﬁcally because in the case of colon cancer, early
detection has been known to have signiﬁcant impact on the 5-year survival rate and related

40

medical costs compared to other cancers, and because the City of Hachioji in Tokyo had already

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

implemented an SIB program for this type of cancer.

② History
K-three supported the implementation of a wide-region collaboration model SIB in thehealthcare sector, as part of a 2017 Ministry of Economy, Trade, and Industry (METI) program topromote the new industrial structure made possible by healthier longevity. Hiroshima
Prefecture and six cities within Hiroshima applied the SIB model to advocate colon cancer
screening to residents. In 2018, screening exams were individually recommended to national
health insurance subscribers. The aim of this intervention program was to improve the rate ofresidents who undergo screenings for early cancer detection and ultimately, a decrease inmortality rate.

③ Stakeholders
The implementation structure and interests of each stakeholder are outlined below.

❺
Case Studies

Figure 36

Implementation structure

Hiroshima Prefecture&
6 regional cities①Pay-for-success
contract(Onomichi/Shobara/Takehara/Fukuyama/Fuchu/Miyoshi)④Outcome-based【 Intermediary 】
K-three【 Private sector
service provider 】
Cancer Scan

payment

Reports of those screened
and cancer detected

Medical institutions

screening②Provides capital⑤Outcome-based
payment【 Financiers 】
SIIF
The Hiroshima Bank
Mizuho Bank
【 Financiers 】
Individual investors③Promote cancer screening

broker through crowdfunding

ParticipantMusic Securities

Source: K-three 41

40
41

Ministry of Health, Labour and Welfare (2016) “Basic Survey of Living Conditions”
K-three news release (2018)

Figure 37

List of stakeholders and their roles

Organization Name

Role

Roles/responsibilities in the project

Investor

Provides risk capital to promote impact investing in Japan

Mizuho Bank

Investor

Funding the project with the goal of solving a social issue

The Hiroshima Bank

Investor

Funding the project with the goal of solving a social issue

Individual investors

Investor

Funding the project with the goal of solving a social issue

Music Securities

Investment
broker

Act as a broker to bring individual investor ﬁnancing
through the companyʼs platform Securite

End payors

Improve residentsʼ quality of life and lower mortality
rates through early detection of cancer. Pays according
to the success rate of the project.

ServiceproviderOversee and operate a business which promotes coloncancer screening.

Hiroshima Prefectureand 6 local city
governments(Takehara, Onomichi,
Fukuyama, Fuchu,
Miyoshi and Shobara)
Cancer Scan

Intermediary

K-three

Evaluate the project; construct a ﬁnancial model andoverall structure; coordinate among the stakeholders i.e.,
public administration, service provider, investors④ Approach to Social Impact
For this case, expected outcomes were categorized based on the logic model outlined below.
The categories are “Decrease in number of cancer deaths,” “Sustainable improvements in qualityof life,” “Increase in number of early cancer detection cases,” “Increase in number of follow-up
exams,” and “Increase in number of cancer screenings.” Furthermore, as a pay-for-success model
was selected for this case, success indicators were set as “number of cancer screenings” and“percentage of screenings that led to follow-up exams.”

Input
Screening
advocate
adviser❺

Logic model for this case

Activity

Advocate

screenings

OutputNumber ofpromotional

materials sent

OutcomeIncreasein number ofcancer screenings

Increasein number offollow-up exams

Success indicators
Promotional
materials

Computers
andother equipment

Case Studies

Figure 38

41
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

SIIF

Increasein number of

early detection
cases

Decreasein number ofdeathsSustainableimproved

quality of life

Source: K-threeThe payment amount, which is tied to the success indicators, is allocated in the budget at a maximum
total of JPY 22.29 million. Of that total amount, Hiroshima Prefecture will pay up to JPY 18.41 million
according to the rate of success achieved for the two indicators, “number of cancer screenings” and“percentage of screenings that led to follow-up exams” in ﬁscal 2020. The six cities will pay JPY 3.88
million in ﬁscal 2018, regardless of the outcome.

Figure 39 General payment ﬂow from the municipalities
Payment AmountJPY 22.294 million

Maximum amount paid
by Hiroshima Prefecture
and the 6 cities

42

Outcome-based payments

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

Amount paidby the 6 cities

by Hiroshima Prefecture

JPY 3.88 million(Payment in FY2020)

Fixed amount to be paid by the 6 cities(to be paid in ﬁscal 2018)

Minimum amount paid

by Hiroshima Prefecture

Maximum amount to be paid
by Hiroshima Prefecture
JPY 18.414 million

Amount paid by the 6 cities JPY 3.88 million
Success indicators*

Maximum amount paid

by Hiroshima Prefecture*Success indicators are "number of colorectal screenings" and "number of specialist exams"

To provide a breakdown of the above total, the impact investments in the project comes out toroughly JPY 15.96 million, of which JPY 12.08 million comes from investment-type crowdfunding withreturns of roughly JPY 1.07 million, and loans of approximately JPY 3.88 million. The remainingbalance will be covered by the service provider, which shares in the risk alongside the ﬁnanciers.

（4）Highlights① Utilize crowdfunding to provide an SIB investment opportunity to a wide number of individual
investors
SIBs are structured on the premise that a business solves for a social issue and that an appropriate
success measurement device is in place. While it is often said that SIBs are attractive for individual❺
Case Studies

investors with high social awareness, in the past there were no opportunities for individual investors
in the general public to allocate their investments to social impact because of the complicatedﬁnancing schemes or brokerage fees involved.
In this case, Music Securities utilized their impact investment platform Securite to provide aninvestment type crowdfunding opportunity to individual investors in the general public.42
To draw in individual investors, much care was placed on giving potential investors thoroughinformation regarding the signiﬁcance of and the mechanisms of SIBs, as well as establishing a seniorand subordinate debt structure. The fund certainly pursues social impact, but to guarantee a certain
degree of economic return, SIIF assumed the position as the most subordinate debtor. The party
which assumed the highest risk was the service provider, who did not fundraise for the project, butinvested their own funds, constructing the project in a way that oﬀers the highest incentive for the
project to succeed. This serves to minimize risk on the part of the individual investor andcounterbalance the diﬀerence in access to information, and such factors may have contributed to its
success in fundraising from individual investors.

42

Securite (2019) “SIB for the promotion of colon cancer screening in Hiroshima Prefecture” https://www.securite.jp/fund/detail/4831

② A prefecture-wide collaboration model SIB comprised of the prefectural government and six local
governments
Typically, SIB implementation requires a certain level of intermediary costs regardless of the businessscope, due to the fundraising and success measurement activities required. Thus, project scope tends
to be large to absorb such costs, making SIBs inaccessible to municipalities that are sparsely
populated and only require small scale projects. In addition, as the demand from individual investors
for impact investment opportunities rises, it is important for the projects to be greater in scale toachieve greater impact and attract more individual investors. This case derived a wide-region
collaboration model, speciﬁcally to address the issue of project scale. The aforementioned
intermediary costs as well as shared costs and tasks among the municipalities could be condensed foreﬃciency, enabling the SIB to be implemented in regions with a population limited to tens of
thousands of residents, suggesting the potential scalability of these projects. However, due to the

Hachioji City and Kobe City in 2017.
Regardless, standardizing the models (such as business, evaluation and ﬁnancial models) within a
speciﬁc area of business made the wide-region collaboration possible and succeeded in illustrating
the potential to achieve scale.

③ Demonstrated that an SIB from one region could be applied to another region, in a horizontal
expansion
This project referenced the increases in colon cancer screening rates, and rates of people who
underwent follow-up exams within the SIB by Hachioji City to create the pertinent models (including
but not limited to business, evaluation and ﬁnancial models). Though some portions were revised(e.g., changing the number of success indicators from three to two), much of the reference model wasapplicable, such as the business model and impact on the public budget, serving to demonstrate that
the SIB case from one region could be expanded to a diﬀerent region.

cancer screening project in this SIB suggests there is potential to apply the prevention of severe
diabetic nephropathy program to other regions across the nation, as well as other future projects.

（5）Key takeaways
Below are the key takeaways from this case that are presented for the furtherance of SIBs.

① Measures to achieve scale
Aside from vertically-integrated, wide-region collaborations of prefectural and local governments asseen in this case, there are many potential measures to achieve scale. Some examples arehorizontally-integrated wide-region partnerships; multi-year implementation projects; projects
implemented by municipalities with larger populations or by central ministries; implementation for
infrastructure or facilities or related areas; and working with ﬂexible budget structures that disregard
existing budget systems. Overseas, there are projects in the scope of several hundred million toseveral billion yen which apply one or more of the measures named above, and similar discussions are
now taking place in Japan.

❺
Case Studies

The 1,741 local municipalities around the country easily share many common social issues. The colon

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

small population of each participating region, the actual project scale was similar to the SIBs of43

Figure 40

Measures to achieve scale

Type

Wide
regionProjectscope

44

Measure for achieving scale

CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

1

Vertically-integrated
wide-region collaboration
project

Collaboration among the government oﬃces ofHiroshima Prefecture and six local municipalities

2

Horizontally-integrated
wide-region collaboration
project

Collaboration among Cities A, B and C

3Multi-year implementation
project

A 3-year project from 2019 to 2021 (not includingtime required for evaluation)

4

Larger municipalities orcentral ministries-led
projects

Measures for the Prevention of Repeated Oﬀencesby the Ministry of Justice5

Implementation to
infrastructure or facilities

Management and construction of disasterprevention facilities and cultural facilities

6

Implementation toexisting businesses

Existing businesses or projects rather thanestablishment of new ones

Flexible budget structure

Budgets structured not around budget or businessprecedents, but on future impact implementation
will have on government budgets

Field

Program

Example7

Achieving scale is important to draw in more individual investors who are seeking
investment opportunities that address social issues. However, in the more advanced global
impact investing market, the current challenge is creation of bigger impact. Even in the
United States, where 19 pay-for-success (PFS) projects have been implemented totalingsome billions of yens in size, such PFS projects account for merely 1% of the overallbudget, 43 and legislation is now underway to support outcomes-based ﬁnancing for thecreation of greater impact.

❺
Case Studies

The SIB model combines “pay-for-success contracts between government and service
providers” and “outcome ﬁnancing,” signiﬁcant in its potential to achieve greater social
impact in shorter term. Though SIBs are still new in Japan, in cases where they are likely tobe the most appropriate approach, implementers should pursue the creation of greater
positive social impact by considering the kinds of measures noted here and achieve greater
project scale.

43

CONGRESS.GOV (2017) “S.963 - Social Impact Partnerships to Pay for Results Act” (SIIPRA)❻ Insights from the Current Social Impact Investment Market
As explained in this chapter, the Japanese impact investing market grew 4.8 times in size
compared to 2017 in terms of investments. Beyond investment balance, the ﬁndings alsosuggest that a portion of the hidden potential investors as identiﬁed in the 2017 ﬁndings,
have become aware of impact investing.
What often arose during interviews during this survey was the challenge in evaluating
impact investments. There were several cases in which impact was considered at the time ofinvestment, but not enough to qualify as an impact investment case. Factors for this varied
from problems in structuring the investment screening process to a lack of knowhow withregards to social impact evaluation, but the common issue faced was the lack of informationsuch intel.
On the other hand, here are some unique measurement methods being implemented bycurrent impact investors.

Figure 41

Creative evaluation methods① Studying the cases of advanced overseas impact investors② Applying the SDGs
③ Assisting the evaluation process as a part of hands-on support to investees④ Setting up an advisory board comprised of outside pundits⑤ Business alliance with a leading impact investing organization⑥ Collaborations with outside experts to obtain feedback from third-party certiﬁers

45
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET

which exempliﬁed best practices, whether through case studies or occasions to come across❻help impact investing take root and further expand in Japan.

Figure 42

Measures and expectations moving forward① Institutionalization for impact investing promotion② Leadership by top management③ Eﬀective response to growth in social demand④ Development of skilled experts to measure impact

Insights from the Current Social Impact Investment Market

The surveys, interviews and case studies pointed to the following measures that could① Institutionalization for impact investing promotion
In t er m s o f na ti o n al an d r e g i o n al g o v e rn m e n t re g u l at i o n s , s o m e p o s s i b l e mea su res
include mandating the allocation of a set portion of investment lending to social impact,
or aggressively implementing impact investing in public investments. Also relating to ④,
the development of skilled labor to measure impact, establishing standard methods ofimpact investing could eﬀectively bring down execution costs, and lead to the
popularization of impact investing. Global players such as IMP are currently beginning to
explore standardization and observing such developments closely could provide further
insight on the matter.

46
CHAPTER 2 THE JAPANESE IMPACT INVESTING MARKET❻② Leadership by top management
The fact that social and environmental impact creation tends to manifest in the
mid-long term and only top management can make the decision to wait for impact
to manifest may be why there is a sense that awareness and understanding fromthe head of an organization is necessary. Furthermore, the case study indicatesthat to pursue social impact within an organization, consensus among the staﬀ
responsible for executing the project(s) is critical, which can only be achievedt hr o ugh c o m m i t m e n t at t h e t o p l e v e l s o f an o rg an i z at i o n .

③ Eﬀective respond to growth in social demand
Regarding stakeholder interest and engagement, apart from institutional investors suchas pensions and insurance companies, individual investors may also serve to applypressure on contractors to measure impact. As for concrete ways to indicate interest, an
institution which hands out awards to successful impact investing cases could be
eﬀective. During interviews conducted in this survey, many fund management

Insights from the Current Social Impact Investment Market

companies voiced they were considering taking on impact investing more signiﬁcantly,
because they saw a clear growth in demand for impact investing from asset owners.
Thus, it is believed that interest and engagement from stakeholders is on the incline.

④ Development of skilled experts to measure impact
As knowledge regarding impact measurement is not yet widespread, activities leading todissemination and furthering awareness are needed. Once there are more capable
individuals who can deliver concrete and hands-on investigations, evaluations andreporting, this will likely lead to a more investor-friendly foundation for impact
investing.

CH APTER 3

EXPANDING THE JAPANESE IMPACT INVESTING SECTORThis chapter looks at themes in the Japanese impact investing market which have notyet gained momentum but which could soon become a major inﬂuential factor inmarket expansion. Here, they are explored in conjunction with impact investing.

No.

ThemesOverview

1

Impact investingandImpact measurement

A study of the importance of impact measurement andthe various measurement methods used overseas

2

Impact investingandThe SDGs

A study of the conceivable inﬂuence the SDGs have on impact
investing as a common language for investors and enterprises

3

Impact investingandAdvanced technology

An introduction to the characteristics of blockchain technology,
and a study of its inﬂuence on impact investing47

impact investing to be the practice of investing with the intent to achieve impact andexecuted in a way that enables some method of impact measurement. The importance of❶“intent” likely needs little explanation. Without a requirement of intent to achieve

Impact Investing and Impact Measurement

List of themes

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

Figure 43❶ Impact Investing and Impact Measurement ‒The importance of impact visualization
Ambiguity remains in the deﬁnition of the term social impact investing. A contributing
factor to this is the variety of ways investors perceive impact. There are broadly three
approaches to social impact: how impact is perceived before and after an investment;
whether there is intent to achieve social impact; and whether the social impact can bemeasured. 4 4 This report takes all three approaches into strong consideration deﬁning

impact, investments with other various purposes could be included into social impact
investing. The reason measurement is highly valued is because intent without
measurement carries the risk of “impact washing” or the practice of adopting the label
for appearanceʼs sake. Thus, to preserve the ﬁdelity of the practice, actual social impact
achieved must be ascertained. Because of these merits, globally, measurement has
become increasingly important alongside intent. Moreover, social impact management isalso on the rise, in which a business aims to lessen negative social impact and increase
positive impact. Likewise, impact management is also growing in signiﬁcance in terms ofimpact investing, not to mention that some consider impact management a prerequisite
for valid social impact evaluation.

44

Höchstädter, A.K. & Scheck, B. J Bus Ethics (2015)

A major trend is the Impact Management Project (“IMP”), a global network of investors which
promotes impact measurement and impact management. The IMP is a network which “brings
together leading global organizations in an initiative to provide coherent and end-to-end ʻrules of
the roadʼ for impact management and measurement.”45 It began around 2016 in the UK, and now
brings together more than 2,000 organizations worldwide. In September 2018, the IMP started a
new partnership with the UNDP, the International Finance Corporation (IFC), the Organisation for
Economic Co-operation and Development (OECD), PRI and other leading global organizations. This
network was established among increasing demand from investors and enterprises alike for
information on impact measurement and management. Such knowhow and methods are mostly
fragmented according to region and individual cases, and the IMP is now seeking to build a global
consensus and create standards. If stakeholders across the value chain can understand and report48

on their performance using a ʻgenerally acceptedʼ approach, it will be easier to work together to

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

achieve common goals like the SDGs, facilitate the ﬂow of more capital into the space, and prevent
any attempts at ʻimpact-washingʼ.

Figure 44

Categories of impact investing46

Investorʼs contribution

1

2

3

❶

Signal that impact
matters

Signal that impact
matters + Engage
actively

Signal that impact
matters + Grow

new/undersupplied
capital markets

Impact Investing and Impact Measurement

Signal that impact

4

matters + Engage

actively + Grow
new/undersupplied
capital markets
Signal that impact

5

6

matters + Grow

new/undersupplied
capital markets +Provide ﬂexible capital
Signal that impact
matters + Engage

actively + Grow
new/undersupplied

capital markets +Provide ﬂexible capital

45
46

IMPACT GENERATED BY INVESTEES (ASSETS, BUSINESSES)
Act to avoid harm

Benefit stakeholders

Contribute to solutions

E.g. Ethical bondfund

E.g. Positively-screened/best-in-class ESG fundE.g. Soverign-backed bonds(secondary market) funding vaccine
delivery to underserved people orrenewable energy projects

E.g.
Positively-screened/b
E.g. Shareholder
activist fundE.g. Anchor

investment in anegatively-scree
ned real estate
fund in afrontier market

Investment
archetype notwidely observed

Investment
archetype notwidely observed

Investment
archetype notwidely observed

est-in-class ESG fundusing deep
shareholder
engagement toimprove performance
E.g.

Positively-screened
infrastructure fund ina frontier market

E.g. Public or private equity fundselecting and engaging withbusinesses that have a signiﬁcanteﬀect on education and health forunderserved people

E.g. Bond fund anchoring primaryissuances by businesses that have asigniﬁcant eﬀect on environmental
sustainability, access to clean waterand sanitation

E.g. Private equity fund making
Investment archetypenot widely observed

anchor investments in businesses
that have a signiﬁcant eﬀect on
income and unemployment forunderserved people

Investment archetypenot widely observed

E.g. Below-market charity bonds, oran unsecured debt fund focused on
busineses that have a signiﬁcanteﬀect on employment forunderserved people

E.g. Patient VC fund providign
Investment archetypenot widely observed

anchor investment and active
engagement to businesses that havea signiﬁcant eﬀect on energy accessfor underserved people

IMP impactmanagementproject.com (Accessed on January 1, 2019)
IMP https://impactmanagementproject.com/impact-management/how-investors-manage-impact/ (Accessed on January 1, 2019)

The IMP further classiﬁes impact goals (x-axis, three levels) and strategies investors use tocontribute to the impact goals (y-axis, six levels), categorizing them into 18 diﬀerent impact
classes. These impact classes are not intended as a replacement for progress towards ʻglobally
acceptedʼ measures that could enable the impact of individual investments to be compared.
Instead, impact classes oﬀer an immediate and complementary solution for diﬀerentiating the typeof impact that investments have, even when very diﬀerent measurement approaches are used.
Example cases of each of the 18 impact classes can be viewed on the IMP homepage.47
The methods of impact measurement and management are currently unstandardized, and the
majority of existing impact investment cases in Japan have not been executed with social impact
management in mind. However, from the standpoint of solving social issues and beneﬁciaries ofthe projects, impact management should be required for the pursuit of maximum social impact.
Though there are no limitations on the methodology to impact management, there do exist a few

process, that is, plan, measure, analyze, report and apply, this study focuses on two points, 1)planning, in other words what outcomes and indicators are established and 2) reporting andapplication, or how the results will be disclosed and applied.
Regarding the ﬁrst point, planning is most critical in social impact management. Before
establishing outcomes and indicators, the “who” and “what” must be considered. The “who” as in
who determines the outcomes and indicators, could be investors, service operators, third party
organizations, or a discussion among some combination of these parties. As for the “what,” this isoften inﬂuenced by who the determining party is and decided in one of a few ways: without aspeciﬁc reason; through separately created logic models or other theories; 48 and by selecting
standardized indicators.49 Furthermore, there are two types of potential indicators, subjective andobjective. Examples of the former are happiness or secureness, and for the latter, numbers that areconsistent regardless of the evaluator, such as number of hospitals or blood pressure values.
Which indicators are selected varies according to the investorsʼ mindset, type of investment or typeof impact pursued. Where the risk lies in this variation is when an organization establishes outcome
expectations and indicators without applying theories, understanding grounds for validities, or any
knowledge of impact measurement. One major downside to such occurrence is the risk of “impact

there are no standardized outcomes or indicators in place, the ideal approach is for various
stakeholders, especially the investors and service providers, to discuss what the intended goals are,apply universal terms such as theory models in the decision process, and select indicators withhigh validity. Another possible method is to utilize new technologies, such as blockchain, toprevent the falsiﬁcation of data.50 Also interesting to consider is Acumenʼs Lean Data™ approach.
Lean Data™ is a low-priced measurement method that collects data from the end user via
telecommunications tools such as SMS and telephones, speciﬁcally focusing on the poor. Throughthis approach, pitfalls such as solely extracting desirable data from surveys or “cream-skimming”
survey respondents for future performance measurements can be avoided. Moreover, when theparticipants lack insight into impact measurement, seeking advice from experts is preferable fromthe perspective of solving for social issues as well as the beneﬁciaries.

48

47 IMP https://impactmanagementproject.com/impact-class-catalogue/ (Accessed on January 1, 2019)
Logic models are hypothesized descriptions of the chain of causes and eﬀects, from input to output to outcome.
The model can refer to both a diagram and the method itself.
49 Some examples include IRIS and GIIRS
50 See Chapter 3 “Impact Investing and Advanced Technology ‒ what blockchain has to oﬀer” for more❶
Impact Investing and Impact Measurement

washing,” where only preferential parameters are extracted for impact measurement. So long as

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

key consideration points. Of the four steps generally observed in the social impact evaluation49

As to the second point of reporting and application, to disseminate impact investing
while avoiding confusion, and for investors and enterprises to work together toachieve positive social impact, they must use somewhat standardized evaluation andreporting methods. Under current circumstances where standards are lacking, directconversations with multiple stakeholders and highly transparent reporting arenecessary.
Most importantly, investors should share the beneﬁciariesʼ viewpoint, have an
investment philosophy, and strive for non-superﬁcial impact creation. It is also
c r it ic a l f o r inve s t o r s t o b e aw ar e o f t h e r i s k s o f i m p ac t w as h i n g o r i n e ﬃc i en t u se offunds, apply measurement tools such as insights and technology, and gather highly

50
CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR❶

valid and transparent data. What is desired is the proliferation of impact investment
which practices impact measurement and impact management.

Impact Investing and Impact Measurement❷ Impact Investing and the SDGs ‒A common language for ﬁnanciers and recipients
The Sustainable Development Goals (SDGs) are a collection of global goals for the year 2030, set
unanimously in September 2015 by the United Nations General Assembly. Aiming for inclusive
and sustainable economic growth that does not come at the cost of social and environmental
wellbeing, it can be said that both the SDGs and impact investing share the common vision of asafer, healthier and more resilient future for all living beings, in the present and future.

Figure 45

The SDGs

51

gained a worldwide consensus, creating the potential for them to foster communication between

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

the “ﬁnanciers” (the investors) and the “recipients” (the enterprises) as a common language❷

between the two parties as it paints a vivid picture of what the world should look like in 2030.

Impact Investing and the SDGs

The SDGs are a collection of 17 clearly deﬁned goals and 169 targets to be achieved by 2030. Not
only does the overall vision resonate with the impact investing space, but the SDGs have also

The SDGs have steadily begun to take root among enterprises, as witnessed in the SDGs
awareness survey 51 results in the chart below. The number of respondents who replied that theSDGs are “resonating with upper management” has grown from 20% in 2015, to 28% in 2016, and
36% in 2017, and will likely continue its upward trajectory. Similarly, regarding how far companies
are in strategically incorporating the SDGs, the rate of those who selected Step 1 “Understanding
the SDGs” declined (54% in 2016 to 43% in 2017), and in turn, the rates of those who selected
Step 2 “Deﬁning priorities of social issues” and Step 3 “Setting goals” rose, from 22% to 28%, and
11% to 13%, respectively. In this manner, the SDGs are gradually becoming a shared “common
language” among enterprises that show awareness towards a sustainable future.

51

Institute for Global Environmental Strategies (IGES) and the Global Compact Network Japan (GCNJ) (2018)“SDGs and Business for the Future ‒ Actions by Private Companies in Japan”

Figure 46 The SDGs awareness survey
Rate of companies that responded the SDGs are “well known by top management”
2016
2017
2018
0

10

20

30

40％

State of Progress on the SDG Compass（ n=99［2016］,163［2017］）

52
CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR❷

Understanding the SDGs

Step 1Deﬁning priorities

Step 2

Setting goals

Step 3Integrating into management

Step 4

Reporting and Communicating

Step 5

22

4
0

9
8

11
13

28

2016
2017

8
10

54

43

20

30

40

50

60％

Source: K-three, based on reports by IGES/GCNJ

However, for the SDGs to truly make the world a more sustainable place, the language still needs tobe better understood and applied. As of now, the colorful logos of the 17 goals have taken on a life of
their own, but quite often the goals are simply tacked on to existing activities or businesses, creating
two issues.
First, the original English title of the SDGs is “Transforming our world: the 2030 Agenda for
Sustainable Development.” From this, we understand that without transformation, there cannot be asustainable world. Tacking on the goals to existing activities or businesses will not bring aboutchange, and in no way contribute to the SDGs.
In addition, simply stating, “this activity contributes to Goal X” does not bring the world closer toachieving the goals, but rather risks the opposite eﬀect of taking the world backwards by causing
negative impact, such as furthering the wealth gap. For example, if a company was to focus solely on
Goal X and publicize the results achieved through related activities, and yet in reality, they caused
unintended negative impact in a diﬀerent social or environmental aspect, did the company
contribute to a more sustainable growth and wellbeing of the world? Should investing in such anenterprise be considered “impact investing”?

Impact Investing and the SDGs

The 17 goals and 169 targets uniquely identiﬁed under the SDGs are speciﬁc, clear andcomprehensive of all social and environmental issues. The issues are intertwined, not easily separable,
and several of them are not generally advocated for. In other words, if an activity is made to impact
Goal X, it could also be aﬀecting the other goals, including goals that have largely gone unnoticed
thus far. It could be argued that only by approaching the SDGsʼ goals and targets with a 360-degreeview on the impact a business has on all social and environmental issues, transforming oneself toachieve greater positive impact while also minimizing negative impact, can one state that they arecontributing to the SDGs.
As a shared common language between investors and enterprises envisioning a sustainable world,
the SDGs have the potential to further promote impact investing. As in the case of SDG Impact, theSDGs are being applied to foster investing in achieving the SDGs in other parts of the world. If
investors look closely at the way the SDGs are used as a language to ﬁnd, select and aid enterprisesthat create true social impact, they might bring the world closer to becoming a sustainable place.

❸ Impact investing and Advanced Technology ‒The potentiality of blockchain
An introduction to what characterizes blockchain technology, and a study of its inﬂuenceon impact investing

Blockchain technology, hailed as one of the greatest inventions since the Internet, isslowly being utilized in the impact space. Blockchain is a shared-network database,whereupon an exchange of values can occur.

Figure 47

Conventional database systems and shared network database systems

Data must be saved andexchanged in a central location

Data is not reliant on a central locationand is shared on the entire network

Node

Database

One of the greatest achievements of blockchain is the establishment of trust in the digital
realm, which is comprised of the following three elements, according to a report by the
Stanford Graduate School of Business “Blockchain for Social Impact: Beyond the Hype.” 52

Using digital signatures, in which each user is given a set of two digital codes, a private
key and a public key.

② Ownership ‒ who owns what
Cryptographic prevents data manipulation. This allows blockchains to create tamper-proof
records, leading to protection of ownership.

③ Veriﬁcation ‒ whatʼs true ‒ without the expensive middleman
Blockchain uses what is called a distributed consensus, whereby transactions can be veriﬁed
without an intermediary. This is the key reason blockchains can lead to lower costs.

52 Galen D., Brand N., Boucherle L., Davis R., Do N., El-Baz B., …, Lee J (2018)“Blockchain for Social Impact: Moving Beyond the Hype”, Stanford Graduate School of Business❸
Impact investing and Advanced Technology① Identiﬁcation ‒ whoʼs who

53
CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

Centralized database

Decentralized network database(shared network database)The report further points to the technology behind blockchain and the environment oftrust it creates enables three major things: “transparency,” because users can viewtransaction history in real time; “immutability,” as past data cannot be altered withoutalerting the network; and “reduced counterparty risk,” thanks to the system which isbased on a decentralized consensus.
Moreover, through blockchain technology, tokens can be issued and exchanged. Tokens,issued by blockchain companies, can be given (monetary) value through various
methods. 53 The advent of tokens has made it possible to conduct the previously-diﬃculttask of assigning value to things or experiences, as well as the exchange of such values,
creating new markets. 54

54

It is due to these attributes that blockchain has the potential to drastically inﬂuence

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

impact investing. Impact investing involves instances of investing in developing
countries, where there may be vulnerable regulations systems or low-trust
environments. At times, there is also severe obscurity or a lack of information, making
risk management extremely challenging. The transparency and immutability ofblockchains serve to address such needs for access to reliable data or information.
Blockchains can be applied to impact evaluation, which is a key component of impact
investing that relates directly to the return on an investment. The signiﬁcance isnoteworthy for impact measurement data to be deemed reliable and devoid oftampering risk, potentially at a low cost. ixo Foundation, based in Switzerland, createsblockchains to provide access to a decentralized impact exchange. Social projects
a dh er ing to pre c o n d i t i o n s c a n b e s u b m i t t e d o n t h i s e x c h a n g e . T h e c o n d i ti ons hel pidentify enterprises with the right capabilities to provide the services, and if theevaluation agents (human or non) ﬁnd that a project created impact, 55 then a token isissued as an impact asset. Impact assets are added to the global impact ledger,
standardized and publicly disclosed.56 In this way, a standardized set of immutable
trustworthy data can be accumulated, potentially at a lower cost than without❸

blockchain use. By making data on social impact visible and available, ixo Foundation

Impact investing and Advanced Technology

foresees the optimized ﬂow of impact projects, research and investments. 57

Initial Coin Oﬀerings (ICO) is one type of funding using cryptocurrencies whereby enterprises issue tokens.
Heuberger R. & Puhl I. (2018) “5 ways blockchain can transform the world of impact investing. World Economic Forum”
55 Evaluators can be not only person but also IoT or machine depending on the project.
56 Franz C. (2017) “Introduction to the ixo Protocol”
57 ixo Foundation (2018) “The Blockchain for IMPACT: technical white paper version 3.0”
53
54

Figure 48

ixo Foudation protocol

Optimization of enterprises,
ﬁnanciers, evaluators

Execution of social enterpriseStandardization by
ixo Foundation
Creation of impact

Generation of impact tokens

55

million transferable smart contract units and distributed them among investors. Investors

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

are able to see their investment accounts and safely trade with other investors. After❸outcomes are measured, income per share is accurately calculated and investors can

Impact investing and Advanced Technology

Certiﬁcationof impact

Blockchains can make the entire process of impact investing smoother through lower
costs and faster speed. For instance, social impact bonds (SIBs) are diﬃcult to scale dueto their high costs, complex evaluations and ﬁnancial structures. However, suchchallenges to scale can be overcome by using smart contracts which are programmed onblockchains. Once impact evaluation or terms of payment are set on a smart contract andrun on a blockchain, that data cannot be manipulated. Furthermore, much of theconventionally required intermediary costs can be omitted with this process. While suchdiscussions take place, in South Korea, Pan-Impact Korea 58 successfully launched an SIB
whereby transactions are conducted via smart contracts. Pan-Impact Korea issued 1.11

easily check their income through a public, transparent database on the blockchain. 59 In
this way, by programming the SIB using smart contracts, Pan-Impact Korea attempts toovercome diﬃculties of SIBs in terms of liquidity and challenges to scale.

59

58 Pan-Impact Korea http://panimpact.kr/ﬁrst̲smart̲sib/ (Accessed on December 14, 2018)
Currency used is not cryptocurrency but conventional currencies, and the blockchain is used solely to manage the rights

Moreover, todayʼs impact investing is low in liquidity due to a lack of standardized
methods to accurately track progress, making it less appealing to investors due to thelack of a valid risk proﬁle. Blockchain has drastically changed this, as it has brought
about liquidity by enabling the generation and exchange of tokens. By solving the issuesof low liquidity and uncertain risk which have hindered investors from participating in
impact investing in the past, blockchain technology could make the market more
appealing to new investors. Impact tokens have become extremely popular in recent
years, and a portion of the issued tokens have been made available to the general publict h r o u g h I C O s . T h e I m p a c t T o k e n P r o j e c t ,60 t h r o u g h i t s I T K N t o k e n s , a i m s t o c a p t u r e
impact created and monetize the creation of social good. Of the issued tokens, a third56

are available through token sales, a third are used by the Impact Token Foundation to

CHAPTER 3 EXPANDING THE JAPANESE IMPACT INVESTING SECTOR

m o t iva t e pla y e r s t o j o i n t h e n e w e c o s y s t e m , an d a t h i r d ar e re tai n e d b y t h e Impa c t
Token Project.
Blockchain technology is not without its problems. The vast amount of energy required
to sustain the network, friction with existing regulations (namely related to privacy andsecurity), and the lack of standardized methods are some issues yet to be solved.
However, blockchain technology has unmistakably pointed to solutions for certain
challenges in impact investing. Through continued trial and error, there may be an
acceleration of blockchain use in impact investing and the proliferation of impact
tokens.

❸
Impact investing and Advanced Technology
60

IMPACT TOKEN PROJECT https://www.impacttokens.com/ (Accessed on December 10, 2018)

C onc l us i o n
The Japanese impact investing market continues to expand from a market size of
JPY 17 billion when it was ﬁrst measured in 2014, to roughly JPY 344 billion, anearly twentyfold increase in four years. Key trends observed in 2018 will likely
continue in 2019, such as the entry of new individual investors and venture
capital, as well as investments geared towards SDG-fulﬁllment by enterprises andi n v e s t o r s . I n a d d i t i o n , t h e s c h e d u l e d a c t i v a t i o n o f d o r m a n t f u n d s i n J a p a n 61 i s a l s oanticipated to promote the creation of an impact investing market ecosystem in
Ja pa n.

stakeholders to consider real positive impact creation for beneﬁciaries andexamine whether negative impact is eﬀectively being minimized, to grow both ins ize a nd t hr o ug h a n elev at i o n i n q u al i t y .

61Cabinet Oﬃce (2017) “Tentative Schedule for Utilization of Funds Related to Dormant Deposits After the Enactment of Act”

57
Conclusion

As the impact investing market continues to expand in Japan, the hope is forMarch 31, 2019
Global Social Impact Investment Steering Group (GSG) the National Advisory Board