Shinsei Bank Group’s Chunmei Huang and Sayaka Takatsuka on why investing in care is key to a healthy Japanese workforce

Shinsei Bank was the first Japanese Banking Group to launch an impact investing fund, and now has two funds focused on investments into businesses tackling the life challenges that are faced by the working population, including child-care, elder-care, healthcare, work-life balance and work-style innovations. We spoke to Chunmei Huang and Sayaka Takatsuka, Managing Director and Senior Director on the Impact Investment Team of Shinsei Corporate Investment Limited in the Shinsei Bank Group, about their approach and growing the Japanese impact investing ecosystem.

Where does gender surface in your investment process?

Without being explicit on gender, when we look into our portfolios, we find that we are actually quite in line with gender lens investing defined by GlIN (Global Impact Investing Network): investing in women-owned, women-led enterprises; investing in enterprises that promote workplace equity (in staffing, management, boardroom representation and along with their supply chains); or investing in enterprises that offer products or services that substantially improve the lives of women and girls. Although there is only 1 out of current 12 investments that is women founded/led, the funds address social problems that disproportionately affect the female working population, as traditionally the responsibility of childcare and elder care falls upon women in a typical Japanese household.

Furthermore, as Japan is suffering from declined birth rate and working population, how to leverage the capacity of women in Japanese working society is one of the key issues, and it is in line with the fund’s Theory of Change (ToC) to create a society with a “diverse way of work and life”. In addition, 50% of the first fund and 100% of the second fund’s investment committee members are women, which brings the women’s viewpoint into the investment decision making process. Women-led investment committees are quite a rare case in Japan.

How would you describe your strategy?

We aim to create a sustainable society by focusing on “working people”, investing into social venture companies in childcare, elder care and new work style-related businesses, contributing to SDGs 3, 4, 5 and 8. Furthermore, as impact investing funds funded by institutional investors, we are aiming to achieve both social returns and economic returns (targeted return around IRR 15-25%), meanwhile contributing to building up an ecosystem of impact investing in Japan.

What makes a care economy business investable for you?

Since Japan is an aging society with a decreasing labour population, a structure to help people keep on working while taking care of their children, elders and personal health is urgently needed. At the same time, care-related industries typically have such poor progress in digitisation that in 2018, when one of the investees conducted a survey of childcare facilities in Japan, approximately 70% of the questionnaires were collected by fax. Consequently, there is a large potential market demand in care economy for new solutions to improve efficiency at facility level and create new services. Furthermore, the quick growth of IT innovation accelerates such social implementation, making the care economy, especially smart care businesses, very attractive from an investment point of view.

We're more focused on the solution providers rather than facility owners and/or operators, i.e. those looking to improve efficiency or add new technology to the operation.

What metrics do you use to determine if a care economy business is effective, successful and fits into your ToC?

In deal sourcing, we focus on startups whose businesses have a positive correlation between economic and social return, and evaluate the investment rationale and risk from both economic and social perspectives. Our financial due diligence practice follows a similar path as we traditionally have done in our pure venture investment process. The process tries to analyse and understand the points, such as candidates’ management team capability, the uniqueness and innovation level of the business model and technology, the size of the target market, investment scheme and exit strategy, etc. As for the social return, we look carefully into the following four criteria utilising the Five Dimensions framework, 1) Intentionality, management teams’ commitment to social issues, 2) Materiality, the importance of the issue, potential for systemic change, consistency with the Fund’s ToC, 3) Additionality, the contribution from both the venture company and the investor to solve the issue, 4) Measurability, implement impact measurement & management (IMM) processes during the investment period to support the growth of the business and create positive impact.

So what do you think has changed in gender finance? Have you noticed any patterns or trends?

Yes, we have seen the growing awareness of Diversity, Equity and Inclusion (DE&I ) not only from investors, but also from investees in the past few years. From the investors’ perspective, a few ESG and/or impact funds, and funds led by women venture capitalists have emerged. We have even seen funds with a numerical goal for gender lens investing, e.g. ANRI, a venture company that announced a commitment to 20% of the fund into women-founded companies. From venture companies’ prospective, we’ve seen higher awareness and market expansion in femtech. The government is also very supportive of the sector’s growth, e.g. the Ministry of Economy Trade and Industry offers subsidy programs for femtech support service pilot projects.

What do you think is needed to unlock more gender lens capital in your region?

Women entrepreneurs in Japan are still facing various challenges, including lack of access to capital, communities, talent, successful role models, etc. According to the study of DE&I by Policy Open Lab of Financial Services Agency, although women entrepreneurs represent 34.2% (2017) of the total number of entrepreneurs, women entrepreneurs raised only 2% of the total amount raised by the top 50 fund raising companies (2019), and only 2% of newly listed companies (2021) are women-led companies. More access to gender lens capital, accelerator programs and communities are considered to be important. 

What other influencing roles are you playing, aside from direct investment?

As the first Japanese banking group impact investor, we think it is also our role to contribute to building the ecosystem of impact investment in Japan, especially amongst institutional investors. In addition to supporting investees’ business growth, we proactively approach and engage in dialogues with various stakeholders, including the fund investors, business partners, experts, government agencies, in order to share the funds’ initiatives and findings. Recently, we have been approached by many mainstream institutional investors in Japan reaching out for practical advice on how to design and begin an impact investment program, how to conduct the IMM process, how to find, educate and develop impact investment talents - which make us believe in the further future growth of impact investing in Japan.