South Korea Government has deceided to provide intensive assistance to Impact Investing
- Adapted from [커버스토리] ‘임팩트 투자 원년’…올해 4000억원 투자 대기중
The South Korea Government and the private sectors have formed a large social venture fund, Korean Social Value Fund, to invest in impact investing. It is expected that impact investing will take root in South Korea’s financial markets in 2018.
Impact investment is a new trend in financial markets
The global financial markets have come to know the term “Impact Investing” since 2007. In 2013, Davos Forum defined “impact investing” as an investment method that seeks both financial return and social value simultaneously. Until now, impact investing becomes an eye candy to more and more financial experts. They have begun to focus on “social impact” for sustainable investment when making investment decisions.
It sounds like an ideal story, but there are already plenty of successful impact investment cases around the world. The Accuman Fund, a non-profit organization in the U.S., has been investing in social companies that produce cheap water, food and medicine in underdeveloped countries such as India and Pakistan since its establishment in 2001.
Global investment banks such as Goldman Sachs and JP Morgan are already running an organization exclusively for impact investments and actively expanding their impact investments in investment portfolios.
According to the “2017 Impact Investment Report” by Global Impact Investment Network (GIIN), the amount of impact investments currently operating in global markets reaches USD$144 billion. Of these investments, USD$ 29.9 billion was invested in 2017 alone. Impact investments are already becoming a trend in global financial markets.
Impact investment in South Korea
On the other hand, impact investments in South Korea are still starting to take place. According to a report released by the Korea Development Bank (KDB) Economic Research Institute last year, the size of the South Korea impact investment market is around 54 billion won as of the end of 2015.
Impact Financial Promotion Committee was established in South Korea on May 23, 2017, aiming to help resolve socio-economic gaps and conflicts in the country. When selecting future investment targets, the committee plans to actively consider social issues that are most urgent in Korea. In particular, investment is given priority in solving housing problems, and the basic ingredients of human life, such as food, clothing, and shelter.
Creation of 300-billion won Korean Social Value Fund
The South Korea Government has also stepped up its efforts to encourage investment in social enterprises. Moon Jae-in, the president of South Korea, promised to boost ‘social and economic revitalization’(사회적 경제 활성화) during his presidential campaign.
As a first step, the South Korea Government confirmed and announced “measures to activate social impact finance” at a parliamentary inspection and coordination meeting on February 8, 2018 chaired by the prime minister, Lee Nak-yeon. The core of the plan is the creation of a Korean Social Value Fund worth 300 billion won over the next five years. To ensure the independence of the Social Value Fund, the participation and investment of the government was limited to the scope of private funds. It is planning to provide incentives such as tax incentives to encourage voluntary donations from private sectors.
The government plans to set up a privately led “fund drive” aimed at establishing a social value fund around the second half of this year. Funding will be provided to middle support agencies, the middle support agencies will then invest the money into social enterprises and social impact projects.
In addition, the government and public funds to spread impact financial services have been greatly expanded. The government plans to expand the guarantees of social and economic companies from the Credit Guarantee Fund and the regional Credit Guarantee Foundation to 55 billion won this year, and establish a separate social and economic company account for Shinbo that can guarantee 500 billion won by 2022.
