[Tokyo = E-Daily Marketin Soyoung Park Reporter] “Does social value grow alongside a company’s growth? Or is there a structure in which growth is only possible by compromising social value?”

This is the most important question regarding impact investing, according to Yuriko Kibo, Chair of the Finance Track within the Regional and Practice Subcommittee of the Impact Consortium. In a recent meeting with E-Daily in Tokyo, Chair Kibo stated, “Social impact and business growth potential should not be evaluated separately,” adding, “We must verify whether social impact expands alongside business growth.”

The Impact Consortium is a public-private partnership platform with the Financial Services Agency and the Ministry of Economy, Trade and Industry of Japan serving as its secretariat. It was launched in 2023 to enable various stakeholders—including investors, financial institutions, corporations, and local governments—to discuss impact investment practices and measurement methodologies, as well as to engage with domestic and international networks.

‘Social Value’ Should Not Be Separated but Evaluated Alongside Business Performance

As Japan elevates the impact economy to a key investment agenda, the size of the related market is growing rapidly. Chair Ki Bo cited changes in social and environmental issues as the backdrop for this trend. She explained that climate change, an aging population, the weakening of regional economies, rising medical costs, and energy security are beginning to have a direct impact on corporate management and investment returns. The KIBO chairman stated, “If society and the environment weaken, companies cannot achieve long-term growth,” adding, “We must simultaneously work to solve social problems and create economic value.”

He assessed that the discussion in the Japanese market is shifting from “Should we engage in impact investing?” to “How can we properly implement impact investing?” He also noted that the criteria for evaluating startups are broadening. In addition to the factors traditionally prioritized in venture capital—such as technology, market size, competitive advantage, management team, growth potential, and exit prospects—investors are now also examining whose problems the company is solving, what social and environmental changes occur as the business grows, and how negative impacts are managed.

In this regard, he emphasized, “Social value should not be treated as a separate evaluation item alongside financial assessment,” adding, “We must verify whether the business’s growth also leads to an expansion of its impact.” He also added, “Impact measurement and management (IMM) is not merely a process of collecting data for reporting purposes,” explaining that “it is a process of continuously reviewing existing assumptions and utilizing the results in management decision-making and in discussions with investors and lenders.”

Focus on Deep Tech… Blended Finance Is Key

The KIBO Chairman stated, “If infrastructure and underlying technologies become widely adopted, they have the potential to be utilized across various industries, regions, and countries, creating a massive impact,” adding, “Given the scale and urgency of the issues at hand, we have reached a point where a transformation of the entire industrial and social system is needed, going beyond individual products or services.”

However, he explained that it is difficult to secure sufficient support from private capital alone, which typically demands a return on investment within a short timeframe. This is because it takes time to commercialize innovative technologies and apply them to society. Furthermore, technological and regulatory risks coexist with uncertainties regarding market formation. Therefore, he expressed the view that “blended finance”—in which public research funding, policy-based finance, venture capital (VC), financial institutions, and institutional investors collaborate according to their respective risk tolerance levels and roles—is crucial.

He also shared his thoughts on Korea-Japan cooperation. He suggested that cooperation between the two countries should go beyond simple investment or business introductions to include joint research, proof of concept (PoC), joint investment, and efforts to facilitate market entry and business growth. He identified climate and energy, healthcare, healthy aging, infrastructure, food and agriculture, and foundational technologies as key areas for cooperation.

“It is more effective to select two or three specific technologies or regional issues and execute the entire process—from joint research to joint investment and market entry—as a single project,” he said. “I believe that creating concrete success stories will lay the foundation for a long-term Korea-Japan impact investment ecosystem.”