The impact investing market overview

Market Size in Japan

Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.
The latest report published by the GIIN estimates the current global impact investing market at USD 404 billion (as of June 2020).

The impact investing market is also growing in Japan. Accordingly the research done by GSG-NAB Japan, the investment balance of impact investing has grown from around 71.8 billion JPY in 2018 to around 1320.4 billion JPY in 2021.*Note 1 One of the factors behind this growth is the entry into the impact investing market by asset management firms, insurance companies, and financial institutions as organizations newly engaging in impact investing.

Total estimated impact investing balance in Japan

	2016	2017	2018	2019	2020	2021
Total cumulative investment balance	JPY 33.7 billion	JPY 718 billion	JPY 344 billion	JPY 317.9 billion	JPY 512.6 billion	JPY 1320.4 billion
Number of organizations who responded to the questionnaire	21	24	20	16	26	31

(Source) Japan Social Innovation and Investment Foundation/
Japan National Advisory Board, The Global Steering Group for Impact Investment (2021)

＊Note 1 GSG-NAB Japan conducts an annual survey to capture the size of the impact investing market in Japan. This article was created with reference to the survey. Please see “The Current State and Challenges of Impact Investing in Japan FY2021 Survey (Published on March 31, 2022)” for further details.
We sent out survey forms to the target institutions and tabulated the results after confirming the responses collected qualified as impact investing. Please note that the amount is not exhaustive as it is an aggregate of the results of the questionnaire to which responses were obtained.

Cases of impact investing have been diversified.
For example, as of 2019, about 20 projects of Social Impact Bond (SIB)*Note 2 and Pay For Success (PFS)*Note 3 have been developed in Japan, with the cumulative investment amount reaching about JPY 900 million. The investor base is also expanding, including the entry into the impact investing market by major financial institutions.

Current status of entry into SIB in Japan

Source)Social Innovation and Impact Foundation Annual Report 2019

＊Note 2 Social Impact Bond (SIB) refers to a Pay For Success with external finance from private sectors.

＊Note 3 Pay For Success (PFS) refers to a type of outsourcing contract for government services to private sectors in which the final payment amount of commission is determined in conjunction with the results of the project, based on predetermined performance indicators.

Developing an Environment Supporting the Growth of Impact Investing Market

The following five trends should be noted for the development of the impact investing market in Japan.

Proactive initiatives by the Japanese government
Accelerating growth in ESG investment
Changes in domestic organizations
Development of Social Impact Measurement
Development of efforts to utilize dormant bank accounts

Over the past few years, international organizations including International Finance Corporation (IFC) and United Nations Development Programme (UNDP) have also actively worked on impact investing.
Also, within the G20 countries, expectations are running high for impact investing in the international society, including acceleration of discussions toward the promotion of innovative financing mechanism. In the G20 Osaka Summit held in June 2019, reference was made in the Prime Minister’s speech to Japan’s active initiatives in the promotion of impact investing.

G20 Osaka Summit Speech of the Prime Minister Shinzo Abe in Session 3 “Addressing Inequalities, Inclusive and Sustainable World” (held on June 29, 2019)

“Science, Technology, and Innovation (STI) are crucial for realizing SDGs. Japan will widely share the basic concept for the development of the STI for SDGs Roadmap, newly agreed upon at the G20. In addition, Japan will lead the international discussion by examining ways to employ diversified and innovative financing schemes including social impact investing and utilizing dormant bank accounts for financing necessary to address global issues.”

Since Japanese impact investing market is still at growth stage, proactive actions by the public and private sectors, and catching up with the international trends are essential for the impact investing market to further expand and mature.

＊ Please see “Proposal for the Expansion of Impact Investing 2019: Executive Summary” for further details.

About Impact Investing in Japan
Market Overview