Contributing to Sustainability Through Business

The essence of our business is strongly aligned with the concept of ESG investment. We incorporate ESG factors throughout the investment process, from the identification of promising companies that aim to resolve social issues, to the provision of post-investment growth support, all the way through to investment exit. We enhance our competitiveness and corporate value by contributing to sustainability through the growth of our portfolio companies.

We are working to realize a sustainable society not only by assessing our own impact but also by actively participating in the management of our portfolio companies through investment, ensuring that they contribute positively to sustainability.

Ambitious entrepreneurs who aim to solve social issues are launching one startup after another. Expectations are high for venture capital and private equity investments to support this growth, and their roles and responsibilities are becoming increasingly important.

Since its founding, we have been discovering, investing in, and supporting promising companies with growth potential and many of our portfolio companies have been listed. Now, what is expected of unlisted investment management companies is not only economic returns. We believe that it is our social responsibility to contribute to the realization of a sustainable society through the medium- to long-term growth of portfolio companies.

In order to further promote our ESG investment initiatives, we have formulated an ESG investment policy. We will fulfill our social responsibility and our fiduciary duty to fund investors by formulating this ESG Investment Policy, incorporating ESG-related perspectives into the entire decision-making process of investment, and promoting dialogue and cooperation with portfolio companies, etc.

1. Purpose

Under our Purpose of "fueling perpetual growth; investing in bold visions," JAFCO's mission is to "commit to new business creation and jointly shape the future." Our mission is to create a sustainable society by investing in the bold visions of entrepreneurs and managers and disseminating new technologies and services that are needed in the world. In addition to the essence of JAFCO's businesses, which is the process of the identification of promising companies that aim to solve social issues, post-investment growth support, and exit, we aim to contribute to the development of the startup ecosystem through efforts to develop the market, thereby circulating society and the economy. We will strive to fulfill our social responsibility and fiduciary duty by incorporating an environmental, social, and governance (ESG) perspective into each investment process, from the identification of promising companies to investment exit, and by pursuing the medium- to long-term enhancement of the corporate value of portfolio companies.

2. Scope

This policy applies to the overall investment activities of funds managed by JAFCO. However, in portfolio companies where we have limited influence, we will apply the policy to the extent possible.

3. ESG perspective

JAFCO will primarily consider the following ESG-factors in the decision-making process at all investment stages.

• Environment: Climate change, biodiversity conservation, energy efficiency improvement, effective use of resources, etc.
• Society: Respect for human rights, compliance with labor standards, employee health and safety, etc.
• Governance: Compliance, transparency, elimination of anti-social forces, etc.

4. Reporting

JAFCO will require portfolio companies to disclose appropriate ESG-related information and will report the status of activities and progress to fund investors as necessary.

5. Collaboration

By implementing this policy, JAFCO will contribute to the penetration and promotion of ESG-related investments in the venture capital and private-equity industries.

6. Dialogue

In JAFCO, we regularly conduct sustainability checks to identify ESG-related risks of portfolio companies and promote appropriate initiatives. Through communication with management, we encourage them to take action to reduce risks and create corporate value.

7. Revision or abolition

This policy may be changed by resolution of the Investment Committee with the approval of the Board of Directors.

Date of Establishment: June 11, 2025

We have adopted the Principles for Responsible Investment (PRI) and became a signatory organization on July 11, 2025.

In assessing the business potential of a potential portfolio company, which is the first step in our investment activities, risks and social needs from the perspectives of ESG and the SDGs are important factors to consider. Based on these assessments, we discuss issues including the achievement of sustainable growth with the management of the company and decide whether to proceed with the investment. After executing the investment, we monitor the progress of the company’s efforts through sustainability audits every six months and discuss strategies to address any issues identified from a sustainability perspective during our portfolio meetings.

Once sustainability challenges have been identified through such efforts, we provide growth support to the portfolio company. While placing the highest priority on the launch of its business, we also make sure to develop its administrative structure. Furthermore, we support the establishment of sales, development, and management structures, including the hiring of human resources appropriate for the portfolio company’s growth stage. Through these efforts, we contribute to the realization of sustainability by cultivating companies that will have significant social impacts going forward.

Evaluation of business potential and social needs

• Many startup investment candidates have intrinsic value, such as excellent business ideas, strong CEOs, etc., but often lack resources and internal controls. Based on a premise of addressing such issues with CEOs after investment, we make bold investments in startups with a focus on business potential, social needs and other positive aspects.

Negative screening and investment consideration in terms of ESG and SDGs

• In the process of identifying investment candidates and due diligence, we check candidates' compliance management status, relationships with customers and employees, and administrative structure. We also conduct analysis in terms of links between candidates' businesses and 17 SDGs.
• If negative factors are found during the due diligence process in light of ESG, SDGs and social norms, we decline investment in accordance with our investment discipline.

Support for building governance structures

• The importance of governance continues to grow as seed/early-stage startups have increased to account for the majority of our portfolio companies. To raise the social status of the portfolio companies, it is necessary to build corporate/administrative structures according to their growth stage.
• To allow startups to implement sales management and proper money management with limited human resources, we provide various cloud service installation support and suggestions on designing internal controls.

Support for HR recruitment and building corporate structure

• Formation of a management team consisting of competent CxOs is vital for the business expansion of startups. Since obtaining a license for free employment placement business in 2018, we have been offering proactive recruitment support for portfolio companies. During the business expansion phase, we also support the companies in building a corporate structure by establishing an organizational chart, company regulations, and decision-making authority.

Promotion of partnerships with large companies

• We have long been leveraging our network of limited partners and other large companies to boost the growth of our portfolio companies. Collaboration between big businesses and startups has become increasingly active due also to the government-backed promotion of open innovation.
• We hold seminars and participate in new business development programs to give back our venture capital know-how proactively to large companies. By offering our expertise in VC evaluation methods, investment conditions, capital policy, etc., we contribute to shaping an ecosystem that allows venture capital firms, big companies, and startups to complement each other.

Implementation of sustainability checks

• We regularly conduct activities that identify ESG risks in portfolio companies and promote appropriate initiatives (sustainability checks).

• For a portfolio company to realize its founding vision and make a social impact, it is necessary to create a business base that allows for smooth growth after our exit from the company. We are constantly discussing with the management teams of our portfolio companies about their future path beyond IPO or M&A. Upon IPO, we will sell our shareholdings in a manner that would have a minimum effect on the stock price, or transfer the shares to high-performing institutional investors that are expected to support the companies as a stable shareholder.
• We have invested in over 4,000 unlisted companies to date and supported their growth. Among these include companies whose business activities align with SDGs, or which have become big names in Japan following an IPO and are proactively addressing SDGs to fulfill their social responsibilities. We will continue with our contribution to the achievement of SDGs through our investment activity.

We believe that all JAFCO portfolio companies contribute to sustainability through their businesses. In identifying promising candidates, we consider whether their businesses have social significance and whether they can contribute to resolving social issues, as we believe achieving such social significance contributes to a sustainable society.