Japanese corporations are rolling out corporate venture impact funds to comply with upcoming sustainability reporting requirements for their operations in Europe.
Impact investments reached 5.9 trillion yen ($37.2 billion) in 2022, up four-fold from the previous year. Most deals by Japanese investors are in debt and public equity.
That could soon change.
Starting next year, Europe’s Sustainability Reporting Standards on company social and environmental impacts will apply to any firm with a subsidiary in an EU country.
Japanese automaker Suzuki, which has a subsidiary in Hungary, launched a corporate venture fund focused on social impact in India. The car maker has a significant corporate presence in India and recently announced plans to manufacture a new electric vehicle there. The focus of its Next Bharat Venture Fund will be investments in agriculture, mobility, supply chain solutions and financial inclusion, with an emphasis on boosting rural and informal sector incomes.
Emerging market impact
Corporations dominate Japan’s venture ecosystem. At the height of the market in 2022, Japanese startups inked fewer than 1,000 deals for a total of just 500 billion yen ($3.1 billion). Corporate venture funds invested in half of the deals (US-based investors also invested in half of Japanese deals).
Japan’s CVC are increasingly showing up in international impact deals, especially in emerging markets. Electronics company Fujitsu’s venture arm inked its first impact deal earlier this year, in Gojo & Company, a Japan-based microfinance company that serves borrowers in Southeast Asia, India and Tajikistan. Japanese investors are also showing increased interest in Africa’s startup scene, in part to counter-balance to China’s economic presence.
