Surveying Korea’s Impact Ecosystem

Korea’s growth initially depended on a low wage, educated and disciplined labor force to produce goods for exports from its predominantly agricultural state possessing few natural resources. When the state prioritized economic development with a combination of state planning and entrepreneurship, South Korea had set forth on a trajectory into a prosperous, industrial society.

A combined effort of state and entrepreneurs later became family-owned conglomerates, capital-intensive in manufacturing, construction, and steel industries. The conglomerates today including Samsung, POSCO, LG, and others became the foundation for the social innovation and IT entrants.

The government followed suit to ascertain its policy framework. The Social Enterprise Promotion Act (SEPA), which became effective in 2017, resulted in the establishment of the Korea Social Enterprise Promotion Agency (KoSEA), a state-run incubator for SEs. It followed suit with the establishment of the Korean Social Investment Fund (KSIF), a social consulting organization which promotes sustainability amongst businesses, the Seoul Social Economy Support Centre, as well as a range of SME financing products and preferential access to public procurement bidding.27

Areas of investments are thus defined by the social and local needs identified by the government. Social enterprises are defined as those that perform business activities of producing and selling products and services while pursuing such social purposes as providing vulnerable social groups with social services or jobs to improve the quality of life of the local residents.

Korean governments have made efforts to mobilize participation of the private sector and civil society in furthering social development. However, actual contribution of business and financial communities has been slow compared to other advanced countries.

In Korea, social investment has an impact-first orientation than as mechanisms for financial returns. Ventures that became interested in investing in social enterprises with social and financial returns came about with leading enterprise ecosystem with incubators and accelerators. Venture groups like D3 Jubilee and Crevisse Partners built awareness around impact investment opportunities by accelerating the operations, equity investing, and building capacities for shared learning. Social venture acceleration and incubation are also done by other institutions like MYSC, HGI, and SK Happiness Foundation.28 These incubators act as intermediaries for social entrepreneurs to build operations and secure external partnerships.

These incubators act as intermediaries for social entrepreneurs to build operations and secure external partnerships. Sopoong, which was launched by the founder of Daum, is an impact investing venture group. It invested in SoCar, a car-sharing company based in Seoul. SoCar obtained public parking spaces with the government support and then it obtained funding from the Seoul Social Investment Fund. And subsequently, the business secured funding from private investors Bain Capital and SK Group to exit.[9]

South Korea is one of the most business-friendly environments to foster entrepreneurship. There exists sufficient government support with incubation, procurement, funding, policies, and incubation expertise with government grants on public-private partnership investments, such as green finance, SIBs, and other investment mechanisms. However, despite the many approaches and investment opportunities, impact investing is still not as active in South Korea. There is a limited impact investment opportunities in public and real estate markets that would have competitive financial returns with impact. There is also general skepticism that impact investment could have high returns. The domestic laws also are not conducive for a more flexible impact investment approaches. For instance, nonprofits cannot keep more than five percent of its own equities.

Here are the recommendations for each stated industry.


The idea of social innovation is considered as derived from the political left. This is due to the forefront advocate of social innovation was from Park Wonsoon, the Mayor of Seoul City.[10]

Social innovation is seen as a partisan. The main point of criticism is that a social innovation budget will be used to support many activists and practitioners, mainly from the civil society. Civil society organizations are seen as more progressive and often in opposition to those with conservative perspectives.

The word “social” is misunderstood, as traditionally, South Korea has been a government and corporation driven society. When the Korean government’s social innovation task force first talked about social economy, they found that the general public were uncomfortable with the word ‘social’ and asked “if it meant socialist.”[11]  

The most effective way to address these challenges is to create a public consensus and influence policy. By pursuing a blended finance model or large government-led funds, they can spread awareness of social investment opportunities and also pursue a mechanism where it shares risk with the other stakeholders.

From the government arm, it needs to lay the groundwork for the agenda to be embraced and embedded across the funders – institutional and venture capital. The momentum needs to also be balanced with political commitment, alignment with local cities, and the existing infrastructure to allow for the legal framework for impact investors and social innovators to flourish. 

Asset Management Funds

A well-constructed impact portfolio is globally diversified with multiple asset class and sub‐asset class allocations. The primary difference between an impact portfolio and a traditional portfolio involves the investment philosophy and process of the underlying managers and funds the portfolio invests with; asset managers that are integrating environmental, social and governance (“ESG”) criteria into their investment process and are transparently monitoring the impact of their efforts are preferred when constructing an impact portfolio. Furthermore, although portfolio risks and returns are compared against traditional benchmarks, impact metrics are also tracked.

However, challenges persist for social innovation sectors to participate in the global economy in South Korea, as there is simply a lack of public equity listed companies with competitive financial and impact returns.

In the United States, asset management solutions pursue a blended finance model with social goals integrated into the investment process. Adoption of corporate shared values, sustainable development goals, and global agendas are still nascent in the Korean social venture scene. For large asset management institutions in Korea without blended social objectives, there is a niche to invest in risk or growth capital for social enterprises. An impact-based portfolio could invest in market‐rate and/or below‐market‐rate investments, depending on the investor’s risk‐ return profile and impact intent.

Across geographies, sectors, or stages of market or company development, over-investment in impact practices may create a drag on financial returns. Whether this drag is an acceptable “tradeoff” for the level of impact return and/or level of evidence of impact is a choice each investor will need to make. It may be possible to surmise that certain investments with particular impact goals and standards for impact evidence are likely to have a wider range of potential deviations from “market-rate” returns.

Impact Enterprises

In South Korea, the idea of social innovation focuses on citizens leading the ideation, planning as well as implementation of projects. One of the existing obstacles is that there is simply a lack of social enterprises capitalizing on financial returns or have strong operational resilience. Korean institutional frameworks separate strictly the planning and implementation stage when funding social enterprises. Impact enterprises should be diligent to carve out a unique competitive differentiation in their respective markets to ensure sustainable financial viability. Similarly, they should be diligent to seek out collaboration opportunities to achieve the benefits that derive from size and scale.

For these social enterprises, they should proactively measure the social and environmental objectives as directly tied to the business model. Therefore, the measurement of these indicators may be no different from measurement of the business indicators. In addition, reporting of the impact and financial metrics will help to drive further accountability and transparency among organizations.

These organizations can also enroll in approval processes that help promote sector accountability and transparency. B Corp that evaluates the social and environmental impact of companies and funds and assigns them a score based on certain criteria. GIIRS measures the social and environmental impact of funds and companies and provides comparable and verified metrics and ratings. These ratings in such approval processes can help legitimize social enterprises and further its global potential applications.

A common language around social metrics and standards allows stakeholders to communicate more effectively, benchmark and compare investments, and evaluate social and environmental performance. Comparable metrics like using SDGs allow investors to employ different strategies on the social bottom line, and thus are important for mainstreaming impact investing. Intermediaries can play a key role in advancing this common language. South Korea can maximize its competitive edge in technologies and entrepreneurship, have them adaptable for SDGs to extend its global reach.

The funders generally are left to government, a program introduced by institutional investors, nonprofits, and other accelerators than from its value-driven institutional asset management model.

What South Korean ecosystem currently lacks is a mechanism to import knowledge of overseas impact investing trends. With strategic partnerships with global fund managers, the incubated companies can extend their reach and learn from best practices. Multi-stakeholder partnerships and collaborations will become increasingly important in realizing these shared value opportunities.

[1] AVPN, Social Investment Lanscape in Asia – South Korea

[2] Inter-American Development Bank, 2016, Study of Social Entrepreneurship and Innovation Ecosystem in South East and East Asian Countries: Final Reflections

[3] 뉴스프리존, 부산시, ‘CCVC 코리아임팩트 펀드’ 195 조성,   

[4] Ibid.

[5] Global Innovation Exchange, KOICA,

[6] KOICA, Guideline for KOICA to Utilize Impact Investment and Blended Finance, 

[7] Ibid.

[8] 이철영, 임창규, 임팩트 투자, 투자의 미래,

[9] Ibid.

[10] Social Innovation Exchange, Conversation with the Social Innovation Task Force,

[11] Ibid.