Policy Advocacy

Policy proposal on venture philanthropy and social impact investment

On April 27th, JANE submitted a policy proposal to promote venture philanthropy and social impact investment to Minister in charge of Economic Revitalization, Minister of State for Regional Revitalization and Regulatory Reform, and Minister of State for Gender Equality and Measures for Declining Birthrate
【Summary of our proposal】
1. Title
Promoting Venture Philanthropy and Social Impact Investment
2. Summary
①Funding for public interest work in Japan tends to be made on a short term, ad hoc basis. More financial and management support should be provided to help the mid- to long-term growth of social businesses in the forms of venture philanthropy and social impact investment*. This will promote the role of enterprises in addressing social problems.
 * Short-term public interest investment in Japan amounts to more than 700 billion yen, while the size of funding for venture philanthropy stands at 300 million yen and  social impact investment at just over 30 billion yen.
 * Venture philanthropy: an approach to accelerate the tackling of social issues where organizations such as public interest incorporated foundations provide middle- to long-term finance and management support to non-profits and social enterprises.
 * Social impact investment: investment with the expectation of mid- to long-term social, as well as economic, return
②The proposal puts forward the following suggestions
 ・Lack of clarity about how venture philanthropy projects can be certified as ”business for public interest purposes” under the current public interest corporation system, as venture philanthropy does not readily fit the existing criteria categories
  ⇒ Specify criteria points relevant to the nature of venture philanthropy
 ・Hard to secure long-term and flexible finance as public interest organizations are required to abide by the principle that the income must not exceed the appropriate expenses required for their public benefit projects
  ⇒ Shift from ex-ante regulation to ex-post approach
 ・Lack of people capable of providing management mentoring in venture philanthropy field; and lack of donors with sufficient knowledge about the mechanism of venture philanthropy
  ⇒ Awareness raising on the methods and effects of venture philanthropy
 ・Restrictions on financing methods depending on the type of recipient’s corporate status
  Certification of public benefit business should also be open to for-profit companies generating high social impact
  ⇒ Rules should be revised so that organizations can receive financing through a variety of channels regardless of their corporate status
 ・Insufficient gathering and provision of information about the social impact generated by funding recipients; insufficient provision of finance to organizations in need
  ⇒ Appropriate assessment and evaluation of social impact and information gathering on evaluation results
    Dissemination of relevant information to provider of funds
③Cross departmental cooperation in government is necessary to implement changes envisaged by the present proposal
④If the venture philanthropy market in Japan can expand to the size equivalent to that of the US or Europe, the expected effects would include:
 ・Venture philanthropy will grow by 73 billion JPY per year
 ・Social impact investment will grow by 392 billion JPY per year
 ・Social business will grow by 8.7 trillion JYP per year