Japan urged to tap dormant bank accounts to promote 'impact investment'

TOKYO (Reuters) - Japan should tap unclaimed money from dormant bank accounts to promote investment for social good, Ronald Cohen, a pioneering venture capitalist who chairs the Global Steering Group for Impact Investment (GSG), said.

The concept of impact investment has gathered momentum globally, Cohen said, as cash-strapped governments look for money from the private sector to tackle issues such as child welfare and caring for the elderly in an ageing society.

“We expect $4.5 billion to flow over five years, some of which will be invested,” Cohen told Reuters in an interview. GSG was launched in 2013 by G8 leaders with the aim of promoting social impact investment globally.

“Deploying these dormant accounts is a strategic opportunity to create an equal system in Japan, which helps us to achieve social improvements more effectively.”

The Japanese sum would be three times the amount released in Britain over five years, he added. No other countries were releasing unclaimed assets.

The number of global impact investing funds created before 2004 totaled 31 - by 2016 that had risen to 420, according to ImpactBase, a website that lists impact investments.

Laws covering Japanese utilization of dormant account funds for social causes were enacted in December 2016 and will come into effect by mid-2018.

As a result, up to $700 million annually will be channeled to the private sector in the form of grants, loans and equity for the purpose of tackling social issues, according to a Japanese committee of GSG.

“The question in Japan is whether the government wants to use this as a tool for creating an effective new sector to provide both profit and purpose. If the government is keen to do that, I think it will derive very significant benefits,” Cohen said.

The impact investing market in Japan was estimated at $718 million in 2017, more than double the 2016 figure of $337 million, with sectors such as health and medical care attracting the most investment, according to the Japan committee of GSG.

GSG forecast the global impact investing market to grow to$307 billion in 2020 from $138 billion in 2015.

The group is lobbying G20 economies to put the issue of impact investing on the agenda when their leaders meet in Argentina this year, officials said.