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BlackRock is setting up a social impact fund. But why Japan?
US asset manager BlackRock is setting up a new social impact fund and has decided to base it in Japan. It will be first fund of its kind in the country.
An appetite for social impact funds has been steadily on the rise since the global financial crisis. Investors are seeing the value in seeking long term returns in investments that are based on both social and monetary returns.
Many also realize that adopting ESG (environmental, social and governance) standards does not only keep some investors happy, but can also drive value.
In Asia much of this investment activity has, rather unsurprisingly, been focused on emerging economies that stand to benefit the most from ethical investing. Think of microfinance in India, or in agriculture in Indonesia. So it is interesting that BlackRock has decided to set something up in Japan.
The so-called Big Impact fund will be offered to retail investors from September 30, reports the Asian Nikkei Review, and BlackRock will use a range of criteria to select 200-800 issues from 3,700 companies in developed economies.
When you look at two of the fund’s target industries, pharmaceuticals and energy, the rationale for Japan comes clearer. The country's ageing population, and its ongoing struggle with energy security - born out its unstable dependence on nuclear energy - means the country’s is driving innovation and growth in industries that hold several environmental and social benefits.
But its not just that. Corporate Japan's progress on governance and social responsibility is also big factor for BlackRock. The new corporate governance code adopted by the Tokyo Stock Exchange in June aims to strengthen management through outside director appointments and urges companies to be more pro-active towards ESG value.
It's early days, but BlackRock is not alone. Private Equity firm KKR has also eyed ESG opportunities in Japan. This year is inducted its recent healthcare acquisition Panasonic Healthcare Holdings in its Green Portfolio Program (GPP), an operational improvement platform that uses ESG benchmarks for KKR’s portfolio management activities.
Photo: Mr Hicks46