The 7th meeting of the " Impact Investing Roundtable" was held online on Friday, September 3, to deepen the understanding of impact investing among the leaders involved in the financial market and government administrations, and to discuss the significance and challenges of addressing social issues through impact investing in Japan and abroad.
In the 7th meeting, the participants reviewed the first phase of the Roundtable, which has been held for about one year and three months, and discussed the achievements and the challenges going forward. The participants also shared information on domestic and international trends in impact investing and discussed what should be main theme and topics of the second phase of this roundtable.
After the opening remark was delivered by Mr. Satoshi Ikeda, the Vice Chairman of the Roundtable and the Chief Sustainable Finance Officer of Financial Services Agency (FSA) of Japan, Mr. Masaaki Amma, Executive Advisor of Social Innovation and Investment Foundation (SIIF), reported on the main revisions made to the draft paper titled "Achievements of Phase I and Challenges going forward", for which comments were called for in advance from the Roundtable members. The members agreed to the revisions and confirmed the contents of the revised paper.
Next, Mr. Katsuji Imata, President of Social Impact Management Initiative (SIMI), explained the latest trends of Impact Measurement and Management (IMM) in Japan and abroad. He also introduced the outcome of the IMM Working Group established under the GSG-NAB Japan, as a private sector movement in Japan. In addition, he explained about new progress in widening IMM and its implementation overseas. Specifically, he introduced the increasing number of signatories to the OPIM (Operating Principles for Impact Management), the COMPASS method announced by the Global Impact Investing Network (GIIN), trends related to impact certification, mainstreaming of impact in sustainability disclosure, integration into accounting standards, and the establishment of various training programs. In response to a question from a roundtable member, he also explained the trend of increasing emphasis on IMM and disclosure around impact from the perspective of preventing impact washing and impact integrity.
Next, Mr. Masataka Uo, the founder and CEO of the Japan Fundraising Association (JFRA) and Vice Chair of the GSG-NAB, shared information on the establishment of the Impact Taskforce. The UK government, which was the chair of the G8 summit in 2013, proposed the establishment of a taskforce at that time, which later led to the establishment of the GSG and the national advisory boards of each country. I In the recent summit in 2021, after a cycle of chairmanship, the UK government, as part of the UK’s G7 2021 presidency, established an independent Impact Taskforce (ITF) to come up with solutions for a sustainable and inclusive recovery from the COVID-19 crisis and promote impact-driven economies and societies in the long term. The taskforce will be attended by a wider range of business, government and social sector leaders from around the world than the previous Task Force. The task force will discuss the impact transparency, integrity, and trust, and examine methods of fundraising and mobilizing private capital to expand impact investment. He also introduced the participating members from Japan.
Next, Mr. Ryosuke Imai, Deputy Director for Environmental Finance, Environment and Economy Division, Minister’s Secretariat, Ministry of the Environment, gave an overview of the Ministry's promotion policies of impact finance. In addition to explaining the meaning of impact finance as defined by the Ministry of the Environment, Mr. Imai also introduced the results of the “ESG Finance High Level Panel”, the activities of the "Positive Impact Finance Task Force" and the "ESG Regional Finance Task Force" established under the High Level Panel. He also shared the scheme of “Green Finance Model Projects”, newly introduced that this year. The Ministry is now calling for applications for this model projects of impact finance in addition to sustainability-linked loans and sustainability-linked bonds. Participants asked about the role of impact finance in achieving net-zero, and Mr. Imai responded that it is necessary to proceed with each of the two targets, the 46% reduction target for 2030 and the net-zero target for 2050, as the type of investment and the time frame are different between them. In particular, to achieve the 2030 target, he stated that the challenge is how to scale up small-scale investment into large-scale investment projects.
Then, Ms. Aiko Kozaki, Assistant Director of the Sustainable Finance Promotion Office, Policy Planning Division, Policy Planning Bureau, Financial Services Agency (FSA), gave an explanation of the FSA's initiatives related to impact investment. Ms. Kozaki introduced the importance of promoting and practicing impact finance, which was mentioned in the “Report by the Expert Panel on Sustainable Finance". She also stated that further study is needed to establish IMM methods, and that discussions should be deepened for each asset class, and that it is important to create a positive cycle between corporate disclosure and impact investing. She proposed three expectations for the next phase of the roundtable: (1) to deepen discussions for each asset class, including debt financing, (2) to share examples of positive cycles between corporate disclosure and impact investing, and (3) to deepen discussions on climate change and impact investing.
After the presentations by the above speakers, Mr. Eiichiro Adachi, Vice Chairman of The Japan Research Institute shared the trend of ISO 14030 (Environmental Performance Assessment). The ISO 14030 series consists of 4 standards: (1) Green bonds, (2) Green loans, (3) Taxonomy, and (4) Verification; and (1), (2), and (4) are scheduled to be issued in September this year. He explained that (1) and (2) are the requirements for issuance, and (4) specifies requirements for verification to prevent green bonds and loans from washing.
Lastly, Ms. Yuka Ogasawara, Impact Officer of SIIF, shared the operational plan for the next phase of the roundtable. In the second phase, best practices in impact investing will continue to be shared and discussed, and it is planned to establish two working groups under the umbrella of the roundtable, one for IMM on equity financing and the other for IMM on debt financing. The changes from the first phase include: the frequency of the meeting will be changed from once every two months to once every three months; the participation of observers will be unlimited; two working groups will be established; and the member financial institutions will be called for participation in the operational secretariat which SIIF has been responsible for during the first phase. The secretariat will take the lead in setting the themes, selecting case studies, communicating with speakers, and setting discussion agendas.
The roundtable members raised a variety of opinions on what they would like to discuss in the next phase. For example, it was suggested that since significant progress had been made in improving the quality of impact investing through the first phase of this roundtable, it is necessary to sift discussions focus on individual investment to portfolio level, such as how to create impact across the entire portfolio. In addition, the importance of a holistic perspective was pointed out, such as how the impact created by investment is positioned in the overall sustainability map. It was also pointed out that it is necessary to consider how to incorporate the concept of impact investment into the overall sustainability policy of the organization. In addition, there was an opinion that it is necessary to strategically promote impact investing, including the dissemination of information, because the needs of Japanese asset owners and individual investors for impact investing are lower than those of overseas investors.
The meeting was attended by 32 roundtable members from the financial market, business, and industry sectors, and about 100 observers participated including related ministries and others.
The second phase of this roundtable is scheduled to start in early 2022.