Beyond The Impact Branding or Washing
ISSUE 6 | Examining Impact Washing Through the Lens of the Next Generation
As interns at SIIFIC, we approach impact investing with fresh eyes and academic curiosity. From the United Kingdom and the United States, our perspectives are shaped by our relative educational backgrounds in Economics and Sociology and Business Economics, respectively. While we are early in our professional careers, this opportunity has granted us a unique position to question established impact investing norms and identify possible trends in the Japanese wellness and health sector. The following newsletter stems from our observations as interns entering the Japanese impact investing space, where we distinguish the integrity and accountability between genuine impact creation and impact-washing companies.
🌟 Article Highlights
Constructing a robust definition of “Impact Washing”
Distinguishing “Impact First” versus “Finance First” marketing from venture capital firms
Why does impact washing occur?
Investigating the changing awareness of impact washing through Google Trends
The Growth and Challenges of Impact Investing in Japan
The Japanese impact investing venture capital market is expanding, as the FY2024 impact Assets Under Management (AUM) in Japan increased by 150% to 17,301.6 billion yen. This statistic accounts for the 59 organizations that responded and met the requirements of the 2024 Impact Investing Survey 1. However, there is a concerning “impact” information and accountability gap, where only 53% of the firms selected the response:
“We regularly publish impact reports, and we communicate information that our stakeholders need to know in an easy-to-understand format without excess or omission”2.
It is important to state that of the responding institutions, only 2% of impact AUM is represented by private equity in Japan3. Nonetheless, this lack of transparency does perpetuate “impact washing” as a threat to the integrity of the more advanced venture capital firms that align with “an investment activity intended to generate a positive, measurable social and/or environmental change or effect alongside financial returns”4. The mislabeling of “impact” has emerged with the evolving language before the investment strategy became formalized in 2007 by the Rockefeller Foundation5. This article intends to minimize confusion surrounding “impact washing” by evaluating different definitions in conversation with the current venture capital market environment.
What Is Impact Washing?
"Impact washing" lacks a universal and consistent definition. The term is used abstractly within the impact investing community, but remains largely unknown to the general public. Harvard Business School Online defines it as "when the fund managers or bond issuers falsely claim an investment's positive impact on the environment or society"6. As mentioned later in the article, the etymology of ”impact washing” derives from "greenwashing". The phrase coincided with the emergence of impact investing as an investment strategy in the late 2000s and early 2010s.
The issue being targeted or “washed” is crucial to consider, as Taka Nakamura, Founder and CEO of taliki, Inc., highlighted in her inspirational impact washing article, asking “what are the issues you are targeting = Is it the most urgent social and environmental issues facing the world? Are the target beneficiaries people who are at risk?”7. In an attempt to define “impact,” we need to consider what counts as an urgent social issue among competing societal problems. The “impact” should not be a “box-ticking” facade, but instead, it should be authentic and target deeper, structural change.
Dissecting The Term
To accurately identify impact washing, we can break it down into its components—"impact" and "washing"—which have more consistent definitions.
→ Impact Washing = Impact + Washing
🎯 Impact
There are different descriptions of impact used by the leading organizations in venture capital on a spectrum of specificity to broadness. Better Society Capital defines impact as, “in the venture context, Impact is about a startup’s mission or intent on achieving a specific social or environmental outcome, predominantly through their core products or services”8. Impact Frontiers broadly defines impact as “a change in an outcome caused by an organization,” and “an impact can be positive or negative, intended or unintended”9. The outcome is referred to as “the level of well-being experienced by an individual or group of people, or the condition of the natural environment”10. When weighing if “negative impact” is possible, “this means investors have to be mindful of their actions, and actively manage impact to reduce negative impacts and increase positive impact,” according to the Impact VC Playbook and GIIN11.
🧼 -Washing
“Used with adjectives and nouns to form nouns that refer to the behavior of an organization, etc., that tries to make people believe that it is helping or protecting someone or something, when really it is not doing this or is doing something harmful”12.
Examples include greenwashing (environmental claims), pink washing (LGBTQ+ causes and breast cancer awareness), or blue washing (social and economic impact).
What Came First? The Finance or Impact?
To further complicate the language, funds claim to be “Impact First” or “Finance First.” SIIFIC considers both objectives equally.
🤝“Impact First”
An “Impact First” organization is characterized by “plac[ing] investments in funds, companies or charities that are mission aligned” and it “may require a positive financial return” or “some, but not all finance is returned”13. To make impact an integral principle for every business, organizations adopt the OPIM (Operating Principles for Impact Management) framework and the Theory of Change model to transition to the next stage of investing. The challenge of impact investing is the lack of efficiency in startup operations and the inability of larger funds to offer individualised attention to firms with a high risk of failure. While startups may offer potential for societal change, they often lack the experience and scale that established companies possess. However, the larger companies don’t have the same incentive to solve the ethical issues, as they prioritize their existing profitable practices and insulated reputation. The solution is to create a co-creation team from each investor so that not all eggs are put in one basket, and also create an efficient enough business to make structural change14. For instance, JANPIA (Japan Network for Public Interest Activities) claims to be an “Impact First” fund and to “supply funds to high-risk areas where it is difficult for general financial institutions to invest, businesses with low returns, or startups that challenge new methods without a track record”15.
💰“Finance First”
A “Finance First” venture capital firm looks for investments that have positive financial return as well as desired environmental, economic, or social impact”16. As a result, the financial instruments and impact measurements may be “uniform” to “reduce the cost of running the fund,” so they can deliver returns at the level of comparable investment funds17. “Finance First” can symbolize prioritizing profit, as potential companies have to meet strict criteria: a clear impact mandate, institutional quality, and target market-rate returns. This approach allows investors to measure real, scalable impact without sacrificing financial performance. While we use the term "Finance First," the impact is integrated within a financially disciplined, institutional-grade investment model. A good example of an organization using these principles is Phenix Capital, which has a well-assessed due diligence process and extensive data on finance-first impact funds for potential investors to refer to 18.
🧽 Why Not Come Clean?
“Impact washing" occurs because measuring the "impact" of an investment is anchored to subjective experiences, biased stakeholders, and dynamic forces (changing environments, social issues, system-level problems, etc.). The external effects vibrate beyond the spreadsheet, spilling into the lives of communities, families, and the deep roots of systemic inequality. This complexity means that some venture capital funds claim to be making "impact" investments, but have insufficient frameworks, expertise, internal regulation, and resources to meet the evolving criteria.
💰 Marketing Motivations
Some firms strategically adopt impact language as a tactical choice to diversify their portfolio and attract new investors under false or exaggerated pretenses.
📝 Inadequate Measurement Frameworks
Many instances of impact washing result from inadequate frameworks and expertise in this relatively new sector in Japan. Signatory venture capital firms may apply the 9 Principles of OPIM differently:
Principle 1: Define strategic impact objective(s), consistent with the investment strategy.
Principle 2: Manage strategic impact on a portfolio basis.
→ For instance, most firms adopt the logic models in contrast to the unique SIIFIC system mapping with the startup founders. Read more here.
Principle 3: Establish the Manager’s contribution to the achievement of impact.
Principle 4: Assess the expected impact of each investment, based on a systemic approach.
Principle 5: Assess, address, monitor, and manage potential negative impacts of each investment.
Principle 6: Monitor the progress of each investment in achieving impact against expectations and respond appropriately.
Principle 7: Conduct exits considering the effect on sustained impact.
Principle 8: Review, document, and improve decisions and processes based on the achievement of impact and lessons learned.
Principle 9: Publicly disclose alignment with the Impact Principles and provide regular independent verification of alignment.
→ This principle relates to the FY2024 Impact Investing Survey findings by SIIF and GSG Impact JAPAN National Partner, referenced in this article.
🌍 Confusion with ESG Integration
As the sector has expanded globally, impact investing has become conflated with ESG (Environmental, Social and Governance) integration, which is distinguished as a framework rather than impact investing, which represents the investment strategy.
👥 Nature of The Fund
In funds with fewer institutional investors and more community-based investors, in areas like education, more public, concessionary, or foundations, meeting the OPIM criteria may be impossible. In contrast, a fund like SIIFIC has institutional investors who want a market-rate return; hence, the impact evaluation is highly rigorous.
→ This highlights the importance of both investment outcomes and purpose.
The challenge for many stakeholders is understanding how impact investors differentiate between "outcome measurement” and "intentionality." When making high-risk decisions, investors face a balancing act: how much should they rely on founders' good intentions for both financial and social aspects of the business, versus requiring detailed outcome measurements? The latter can provide more accountability but risks creating bureaucracy within the company.
♻️ Greenwashing
Greenwashing is defined as “the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical"19. It could be regarded as a more relatable term to consumers with broader applications. Impact washing is often confused with greenwashing because both involve misleading claims about positive effects, but greenwashing specifically focuses on environmental benefits, while impact washing encompasses a wider range of social and environmental outcomes. This confusion is exacerbated when companies make vague claims that blur the distinction between environmental and broader impact commitments to communities.
Awareness of the Terminology
The international awareness of "impact washing" is increasing over time, which could lead to more informed decision-making by stakeholders. Figure 2 shows the popularity of "what is impact washing," "impact washing," and "impact wash" worldwide Google web searches from 2009-2025. It demonstrates a global increase in general interest in the term, implying growing literacy and usage of the phrase.
The increasing Google searches on "impact washing" represent just the beginning of a broader awakening. As impact investing continues to mature in the global financial ecosystem, we can expect heightened scrutiny and more creative ideas in different sectors of business, potentially including wellness and health. The integrity of genuine impact investments will crystallize and evolve as new frameworks and regulations form. Industry leaders and startups play critical roles in setting the boundaries for impact creation. Our ultimate goal is to create an environment where impact claims are consistently backed by measurable and meaningful outcomes rather than remaining in a merely visionary world.
Introducing the Co-Authors:
This article was written by the first summer interns at SIIFIC after two weeks of being exposed to venture capital industry.
Lily Thomas:
I am a rising senior at Amherst College, majoring in Economics with a passion for Sociology and Architecture. I have been fascinated by the inconsistent language and irregular word use in venture capital meetings, reports, and other stakeholder interactions. From meeting observations, I noticed “impact washing” frequently being referenced in conversation with systemic issues, such as inequality. I immediately wanted to investigate its meaning, especially as before this exposure, “impact” felt so subjective and qualitative in my Economics studies. This has made me question how we can “solve” inequality through impact investment strategies if we do not have a universal understanding of “impact.”? I hope to continue this exploration of “impact washing,” as we learn more about the industry, impact measurement strategies, and meet different stakeholders.
On a personal note, I enjoy playing squash, researching Behavioral Economics and neuromarketing, curating music playlists, collecting postcards, drinking coffee, and going on long dog walks with my jackapoo in the British countryside.
Kai Rosenbaum:
Hello, I am a rising junior at the University of California, San Diego, majoring in Business Economics. As someone who is half Japanese, I've visited Japan and Tokyo before, but this is my first time working as an intern in Japan. I wanted to join SIIFIC because of my interest in finance and desire to learn about due diligence processes, analyzing sales figures, production metrics, and overall business operations. Though this is my first experience with an impact venture capital firm, I am committed to supporting the team however I can. What sets SIIFIC apart is its focus on investing in companies that create genuine impact. This has sparked my interest in investigating companies that potentially "impact wash" and understanding why they avoid accountability. On a more personal note, I played for UC Santa Cruz's club soccer team before transferring, and I have a mixed terrier dog named Popo.
We hope you've enjoyed exploring the nuances of "impact washing" with us. We encourage you to read our other newsletters, which delve deeper into the investments SIIFIC has made using our impact assessment strategies. Stay tuned for future newsletters and updates from SIIFIC.
GSG Impact JAPAN National Partner, "Current State and Challenges of Impact Investing in Japan FY2024 Survey," Mar. 31, 2025. [Online]. Available: https://impactinvestment.jp/user/media/resources-pdf/gsg-2024_en.pdf.
Ibid, p.28.
Ibid, p.22.
Global Impact Investing Network (GIIN), "What you need to know about impact investing," Jan. 24, 2025. [Online]. Available: https://thegiin.org/publication/post/about-impact-investing/#what-is-impact-investing, p. 4.
R. Bugg-Levine and J. Emerson, “Impact investing: Transforming how we make money while making a difference,” Innovations: Technology, Governance, Globalization, vol. 6, no. 3, pp. 9–18, 2011.
Harvard Business School Online, "What Is Impact Washing?," Harvard Business School Online Blog, August. 4, 2022. [Online]. Available: https://online.hbs.edu/blog/post/what-is-impact-washing
T. Nakamura, "インパクトを再考する-ウォッシュによる弊害とは何なのか," note, Jul. 16, 2024. [Online]. Available: https://note.com/kissmetk/n/nee5ec64b9b81
J. Lenhard, "Impact and ESG in venture capital: Getting the basics right and pushing forward," Better Society Capital, May 30, 2022. [Online]. Available: https://bettersocietycapital.com/latest/impact-and-esg-in-venture-capital-getting-the-basics-right-and-pushing-forward/
Impact Frontiers, "Five Dimensions of Impact," Impact Frontiers, 2025. [Online]. Available: https://impactfrontiers.org/norms/five-dimensions-of-impact/
Ibid.
Impact VC, "What is impact and how is it created," Impact VC Playbook, 2025. [Online]. Available: https://impactvc.gitbook.io/vcplaybook/impact-fundamentals/what-is-impact-and-how-is-it-created
Cambridge Dictionary, "washing," Cambridge University Press, 2025. [Online]. Available: https://dictionary.cambridge.org/us/dictionary/english/washing
Centre for Social Impact and Ākina Foundation, Impact Investment: Part One – An Introduction to Impact Investing, 2015. [Online]. Available: https://www.impactinvestingnetwork.nz/resources, p.8.
Investment Note, JANPIA, Jul. 16, 2024. [Online]. Available: https://investment-note.janpia.or.jp/n/nfb3247683ad5
Ibid.
Centre for Social Impact and Ākina Foundation, Impact Investment: Part One – An Introduction to Impact Investing, 2015. [Online]. Available: https://www.impactinvestingnetwork.nz/resources, p.8.
Ibid.
"Impact Funds Database," Phenix Capital Group. https://phenixcapitalgroup.com/impact-funds-database (accessed Jul. 01, 2025).
Australian Human Rights Institute, UNSW Sydney, "Explainer: What Is Greenwashing and Bluewashing?," Australian Human Rights Institute, 2023. [Online]. Available: https://www.humanrights.unsw.edu.au/research/commentary/explainer-what-is-greenwashing-bluewashing
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