Giving Compass' Take:

• Fund managers in Japan explain how social investment funds can be a successful way to leverage capital to generate both financial and social gains. 

• What are the similarities and differences between impact investing models in the U.S. and Japan?

• Read more about the young but growing trend toward impact investing in Asia. 

When Kamakura Investment Management Co., Ltd., launched its flagship mutual fund Yui 2101, the asset management firm’s president, Yasuyuki Kamata, was told by many people in the industry, “Social investment is such a naive idea, you cannot make any profit.” Eight years later, Yui 2101, which leverages private capital to earn financial and social returns, boasts an asset under management (AUM) of 38.6 billion yen ($340 million) from more than 19,000 investors as of the end of November 2018.

Yui means “connect” in Japanese. Yet behind this simple name is the founders’ message of uniting all people who share the same vision of realizing a sustainable society. Kamata started the firm with three partners in 2008. Along with a financial return, Kamakura Investment Management funds seeks investment opportunities in both traditional companies that have a proven track record and social ventures that are typically ignored by investors.

Kamakura also acts as an ecosystem by finding ways that companies it invests in can team up to solve Japan’s social problems. For example, Tsumura, a leading pharmaceutical manufacturer of traditional Chinese medicine, invested about 300 million yen ($2.7 million) in 2018 into My Farm, a social enterprise that uses abandoned farmlands to support local farmers.

Kamakura’s fund manager at the time said that he had connected the two companies after identifying areas of opportunities for the two to collaborate: “Companies we invest in share common values and a desire to create something good for a better society.” Along with his colleagues at Kamakura, the fund manager believed that collaboration between large corporations and venture businesses could mutually benefit both firms while also doing good for society. However, such partnerships often fall apart because of a mismatch in production volume required by the large corporation and the production capability of small venture firms.

 

 

As interest from investors continues to increase, organizations like Kamakura and SIIF aim to help social enterprises capitalize on the opportunities. “Development in social enterprises is lagging behind the increased interest from investors,” Sugeno says. “SIIF would like to nurture the demand side to connect social ventures with investors and create a cycle of funds flow throughout the country.”

Read the full article about social investment funds in Japan by  Noriko Akiyama (Translated by Ken Ito & Oliver Carrington) at Stanford Social Innovation Review