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Field builders lead impact investing forward in Japan

February 7, 2024

On boardgames and subway cars, in music videos and trendy shops, affixed to lapel pins and tote bags; the colorful Sustainable Development Goal (SDG) logo is popping up everywhere in Japan, the New York Times reports. The popularity of the SDGs is evident, with approximately 90% of Japanese people being familiar with the idea, and around 40% of Japanese businesses expressing commitment to working towards these goals, as indicated by surveys. Which makes sense, as Japan faces particular challenges with the health and wellness of its aging population (SDG 3) and with gender equality (SDG 5).

This broad enthusiasm for the SDGs and recognition of the unique challenges Japan faces is increasingly reflected in the Japanese impact investing community, which is starting to allocate much-needed capital to the people and projects that promise solutions to the world’s most pressing social and environmental issues.

Japan’s impact investing market witnessed a 17x growth rate between 2018 and 2021. Though institutional investors have driven the expansion of the market, the Japanese government and other impact field builders are actively working to mature the local ecosystem. Field builders have been active in establishing norms of impact management by adapting international standards to the local context, providing tools and resources, conducting research, and generally promoting impact investing in Japan. In fact, Japan’s financial regulator, the Financial Services Agency, recently launched the Impact Consortium, a multi-stakeholder initiative aimed at promoting impact investing in the country.

These field building efforts are crucial, as Japanese impact investment stakeholders cite a lack of cohesion in impact measurement and management practices as one of the most significant challenges to market growth. To this end, BlueMark has embarked on a strategic partnership with the Social Impact Management Initiative in Japan (SIMI) to assist in the execution of third-party verifications of impact management practices in Japan.

Katsuji Imata, SIMI’s President, shares “by blending SIMI’s in-depth knowledge of the local market with BlueMark’s deep expertise of impact measurement and management, we are moving the needle forward in building out a cohesive and well-informed Japanese impact investing practice.”

Through engagements with clients and partners, BlueMark has successfully deepened its understanding of the impact investing ecosystem in Japan. In late 2023, BlueMark verified GLIN Impact Capital (GLIN), a Japanese impact asset manager, against the Operating Principles for Impact Management (OPIM). Founded in 2020, GLIN was established with a mission, “to build a more sustainable capitalism.” GLIN is a pioneer in Japan’s impact investing ecosystem, investing in growth-stage unlisted companies in Japan. GLIN’s ambitions extend far beyond the impact and financial performance of its own portfolio. The firm also aims to help prove the viability of impact investing in Japan through its own success.

GLIN’s leaderships’ goals informed their decision to engage with BlueMark, as the firm’s executives believed independent verification could help them compare their impact management practices to peers’ and learn ways to improve their processes to meet internationally recognized standards. BlueMark’s engagement identified areas for further improvement and also noted several interesting practices GLIN incorporates in its investment and impact management processes.

The firm’s strategic intent reflects its dual commitment to addressing Japanese social challenges and building the Japanese impact investing field. GLIN’s investments align with eight social challenges in Japan, including declining birth rate, women’s social advancement, and mental health. Equally central to the firm’s strategic intent are their efforts to broaden and deepen the impact investing market in Japan through field building activities.

GLIN is beginning its impact journey with impact weighted accounting, a cutting edge practice in the impact management and measurement world. Additionally, the firm demonstrated a thorough and thoughtful approach to planning and carrying out its investor contribution, leveraging Impact Frontiers’ Investor Contribution framework. GLIN assesses its expected investor contribution across three phases of the investment cycle––pre-investment, during ownership, and post-exit—and periodically evaluates its own progress towards those intended contributions.

Finally, GLIN’s sustainable exit strategy focuses on so-called “Impact IPOs”, a nascent concept in Japan where private companies list their shares publicly while retaining their prior impact performance and practices, considering that IPOs are the most common way VCs successfully exit investments in Japan.

GLIN also demonstrates its field building leadership externally through various means. The firm hosts webinars, contributed to the Financial Services Agency’s guidelines on impact investing norms, and sits on the Impact IPO working group, hosted by the Global Steering Group for Impact Investment Japan, working to establish norms and best practices around impact investing.

Masato Nakamura, a founding partner at GLIN, serves as a committee member of the Japan Impact Driven Financing Initiative (IDFI), and Masahiro Hara, another founding partner at GLIN, serves as co-chair of the VC Working Group at IDFI. Masato and Masahiro invite impact investing practitioners and leaders from around the world to participate in webinars for IDFI’s 70+ Japanese financial institutions since its inception, contributing to building out the impact investing ecosystem in Japan.

In the words of Masato Nakamura, a founding partner at GLIN, BlueMark’s verification has proved valuable in the firm’s continued efforts to lead impact investing forward in Japan: “Working with BlueMark allowed us to reflect on our impact measurement and management processes and identify opportunities for refinement and innovation so that we can continue to position ourselves as leaders in the Japanese market – all of which would not have been possible without engaging a third-party verifier such as BlueMark.”

It’s time for the international impact investing community to take note of the potential of the Japanese market. A new generation of leaders, like those at GLIN, SIMI, and other organizations, have helped plant the seeds of an impact boom in Japan. As BlueMark’s experience working with GLIN and SIMI shows, marrying international standards with local contexts and initiatives can spur new cycles of innovation.