Japan Issues Impact Investing Guidelines

Japan’s Financial Services Agency (FSA) has finalised new guidelines on impact investing, setting out four principles for market participants to refer to when structuring and financing investment projects that have social and environmental benefits. The four key principles of impact investment are: intentionality; additionality; identification, measurement and management of impact; and innovation, transformation and acceleration. Intentionality aims to clarify both the social or environmental impact and financial return intended to be realised through the investment, while additionality entails clearly explaining the additional impacts expected. The identification, measurement and management of impact entails determining impact and profitability in quantitative and qualitative terms, on an ongoing basis using an internationally established framework. The innovation, transformation and acceleration principle is comprised of engaging in dialogue with investee companies to assist them in creating or accelerating changes that could generate tangible social or environmental impact as well as financial returns. A draft version of the guidelines was proposed for consultation last year, as part of an effort to foster a common understanding of the basic concepts, processes and practices for impact investment. Separately, the FSA announced the launch of a new website for Japan’s new ‘Impact Consortium’, which was launched in November 2023 to provide a platform for communication regarding impact investment, and support businesses that can contribute to resolving environmental and social issues.

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