Government Pension Investment Fund (GPIF)—the world’s largest pension fund—signing the United Nations Principles for Responsible Investment (PRI). These milestones, coupled with the formation of the GSG Impact and early investments in Green Bonds, Social Bonds, and pilot pay-for-success Social Impact Bonds, set the stage for sustainable finance in Japan. The definitions of sustainable finance, Impact Finance, and the Impact Economy used in Oxford executive education programs include a broad spectrum of asset classes. For example, the Sustainable Finance tools can be seen below in Figure B. Leveraging and creatively blending these diverse sources of capital will be essential to bridging the multi-trillion-dollar funding gap for the UN Sustainable Development Goals (SDGs) and achieving systemic change. Figure B: Sustainable Finance Tools
Sustainable Lending
ESG Investment (= Sustainable Investment)
(E.g.) Sustainable Loan
Environmental/Social policy
1. Negative screening 2. Positive screening 3. International norm screening 4. ESG integration 5. Sustainable theme investment 6. Impact investment 7. Engagement/Exercise of votes
Sustainable Bond (= ESG Bond)
(E.g.) Green bond, Social bond
Others (E.g.) Blended finance, crowdfunding,
impact investment, performance-based outsourcing contract
During interviews, the specific definition of the Impact Economy varied among participants. Those in finance tended to include sustainable finance and ESG within their definitions, while representatives from the nonprofit and philanthropic sectors often focused on impact investing. Some viewed ESG as a negative screening process rather than a proactive investment strategy. When asked to assess the position of impact investing within mainstream finance, as seen in Figure C, most interviewees placed it in the ‘Pilot’ or ‘Innovate’ stages, indicating it has progressed, but has not yet fully integrated. In contrast, ESG and sustainable finance were seen as further along, reaching the “Mainstream” quadrant, particularly within global banks.
20
Ten Years in the Making
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