Do Good or Feel Good? The economics of impact investing

Investors have put trillions of dollars into sustainable and impact products. In Japan alone, assets labeled “impact” reached ¥17.3 trillion in fiscal 2024. Most of these products promise market returns and a better world at the same time, and this masterclass asks whether an investor can deliver both. Buying shares in a company with a high ESG score does not change what the company does. Selling the shares of a heavy polluter can even leave it polluting more. An investment does good only if it is additional, meaning the outcome would not have happened without it. When money is all the investor brings, that additionality costs returns, and someone has to bear the cost.

The session then turns to Japan. GPIF, the world’s largest pension fund, has added impact to its sustainability policy while committing to market-average returns, and the government is pushing it toward private markets. Japanese private equity…