Using Impact
Metrics to Promote
パーパス起点の対話を促進する
Dialogue～企業と投資家によるサステイナブ
with Purpose as Starting Point“インパクト指標”を活用し、ルな資本主義の実践～

Action for Sustainable Capitalism by Companies and Investors

June 14, 2022

Keidanren

Summary
June 14, 2022
KeidanrenIntroduction: Background
Evolution

ESG

Sustainable
investment

Society 5.0 SDGs
Sustainable
innovation

Sustainablegoals• In March 2020, in the joint research project entitled “The Evolution of ESG Investment, Realization of Society 5.0, andAchievement of SDGs,” Keidanren, the University of Tokyo and the Government Pension Investment Fund (GPIF)
suggested that the solution of social issues and realization of new economic growth can both be achieved bycompanies and investors initiating cutting-edge innovations and investing in them from a long-term perspective.
• In its policy proposal “Promoting Constructive Dialogue between Companies and Investors” (September 2020),
Keidanren pointed out the importance of dialogue between companies and investors with purpose as the starting
point toward the above.
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Current States: Current Dialogue between Companies and Investors
Information as premise of dialogue
PurposeLong-term goals
Long-term strategy
Business andinnovations

Desired dialogue on sustainability
Companies
Expect dialogue on long-term goals and strategy and soforth. In particular, hope for recognition of efforts tosolve social issues through business and innovations.

Investors
Expect dialogue on the setting of key performanceindicators (KPIs) to probe the feasibility of long-termgoals and business strategy put forth by companies.

• Dialogue between companies and investors on sustainability is premised on disclosure based on long-term goals andbusiness strategy with purpose as the starting point. In this process, companies expect dialogue that focuses more on
long-term goals and business strategy and so forth.
• Investors pay attention to information on corporate efforts from four perspectives: materiality, potential, feasibility,
and measurability. Therefore, they expect discussions on the setting of KPIs, etc. and process toward setting suchtargets.

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Issue: Gap in Dialogue on Sustainability
Dialogue based on traditional
KPIs of ESG investment

Purpose

Corporate
value

Present

FutureSG

Results andcurrent estimates

Gap

Dialogue using traditional ESG KPIs

Long-term businessstrategy(value-creation stories)

Long-term
goals

Purpose

Traditional KPIs of ESG investmente.g., occupational accident rate, ratio of outside directors

Companies•

Investors

Unlikely to lead to dialogue that contributes tobusiness model transformation

With traditional KPIs of ESG investment, it is hard to show relation to purpose, long-term strategy, etc. This may makeit difficult to hold the dialogue both sides expect—that is, dialogue that contributes to business model transformation
with purpose as the starting point.

3How to Solve: Dialogue Using Impact Metrics
What are impact metrics?

Definition:
Metrics showing the social and environmental changes and effects produced by business** Source: GSG-NAB Japan

Sample metrics:• Healthy life expectancy• Access to medical services (provided toremote islands, etc.)• Medical cost reduction• Number of sick people• Number of people who improved theirlifestyle• Number of people needing nursing care

• Number of disaster casualties• Number of crimes• Dispersion rate of business outlets• Number of residents• Internet coverage• Resources efficiency• Impact metrics are defined as “metrics showing the social and environmental changes and effects produced bybusiness operations and activities.”• What is important is how to achieve these metrics through the company’s business model.
4Actualization

Advantage of Impact Metrics: Realization of Purpose
PurposeGood health for all

Impact Metrics

Healthy life expectancy

Impact Metrics

Number of sick people(more society-wide)(more immediate, easier to handle)• The advantage of impact metrics is that they are benchmarks for the actualization of companies’ purpose.
• For example, if a company is to actualize its purpose of “good health for all” that reflects SDG 3 from the standpoint of
impact metrics, prolonging healthy life expectancy becomes a possible goal. Companies just can move one step aheadin actualization and set more immediate metrics for their own business operations.
• In addition, although a company cannot directly contribute to prolonging healthy life expectancy, utilizing impact
metrics such as the number of sick people will make it easier to handle society-wide impact metrics.
5Nature of Impact Metrics: Common Language with Stakeholders
Materiality: Metrics regarding social issues with major impact on corporate value
Examples: Climate change → GHG emissions reduction rate; healthcare → traffic accident reduction rate

Potential: Metrics regarding future competitiveness of operations and innovations

Examples:• Better autonomous driving technology better contributes to traffic accident reduction, so greater market opportunities can be expected.
• Better hydrogen power generation technology better contributes to GHG emissions reduction, so greater market opportunities can be expected.

Feasibility: Metrics for companies’ contribution to stakeholders through outcomes of business andinnovations

Note: Process and method of such efforts unrestricted

Measurability: Impact metrics per se are quantitative metrics• Impact metrics, by nature, are metrics for the materiality, potential, feasibility, and measurability expected byinvestors. Therefore, they could serve as a strong communication tool in dialogue with investors and otherstakeholders• This is also expected to be useful in dialogue with global NGOs and other stakeholders on corporate efforts.
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What Is Aimed to Achieve: Common Language with Stakeholders
What is aimed to achievethrough dialogue using
impact metrics
Corporate

Future society/Purpose
Dialogue
Actualization

value

Impact metrics

Present
Results andcurrent estimates

Long-term strategy

Financial metrics(e.g., number of sickpeople, number ofproviders)

Innovative businessmodels and innovations(e.g., drug development using
artificial intelligence, dronedelivery)Investors

FutureLong-term goals
Financial goals(e.g., net sales)

Impact metrics

Companies(e.g., 100 billion yen in market
opportunities

Impact goals(e.g., 100-year healthy
life expectancy,
zero sick people)

Purpose(e.g., good health for all)Marketopportunities
for sustainabilitye.g., healthcare market (for prolonging
healthy life expectancy)

By building the above process,

Clarify innovative business model and realize acceleration of investment in innovation• This report proposes dialogue using impact metrics toward constructive dialogue aiming at a sustainable society.
7Issues in Practice of Impact Metrics• The table below shows issues toward the practice of dialogue using impact metrics.

Issues
1. Identification of impact•Which impact metrics should be set

2. Presentation of impact metrics

Examples of solutions
1. Set impact metrics based on materiality
2. Set impact metrics after gathering all the data the company can possibly obtain
3. Set impact metrics through company-investor dialogue•How to explain impact metrics•How to present link between impact
metrics and financial value•Use logic model as reference•Cite lost opportunities using SROI analysis*•How accurate should setting andmeasurement be in impact metrics•Identify methods suitable for the purpose and subject before conducting measurement.
Investors will evaluate this effort and process. Using rating agencies, third party
certification bodies, etc. is also conceivable in the future.

3. Measurement of impact

4. Issues in dialogue•How to enable cross-sectional
collaboration in dialogue•How to reduce the burden of disclosure•How to deal with negative impact•How to fill the gap between companies
and investors regarding impact metrics•Impact metrics and governance(director compensation, etc.)•Raise consciousness and create mechanism for cross-sectional collaboration•Build common data platform•Taking negative impact into consideration is important•Hold dialogue after both sides recognized their gap•Use the Trust Companies Association of Japan’s “Ito report: ESG version” (in Japanese)
as reference* SROI (Social Return on Investment) analysis mainly calculates lost opportunities (risks) based on counterfactual assumptions.

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Utilizing Impact Metrics: Keidanren Sample Impact Metrics
Qualitative
information
Purpose andvisionValue-creation
stories

Business andinnovations

Long-term impact goals (mid- to long-term KPIs)
High
productivity(goal)

100-year healthy
life expectancy(goal)

Zero basic
infrastructure
disruption (goal)

Impact (actual/expected value)•Number
provided•Number of sickpeople•Productivity•Deaths andinjuries fromtraffic accidents•Operational
efficiency•Number ofdisastercasualties

Keidanren Sample
Impact Metrics•Number ofcyberattacks
prevented
etc.

• Keidanren collated sample metrics based on various international metrics (e.g., SDGs, Global Impact Investing
Network’s IRIS+, and World Economic Forum’s Stakeholder Capitalism Metrics) and Keidanren’s innovation casestudies to promote dialogue using impact metrics.
• Keidanren Sample Impact Metrics consist of cross-sectional and issue-based metrics. The former is metrics used as
reference for impact across issues regardless of type of social issue, while the latter is for reference on individual
issues. This report presents a total of 84 sample cross-sectional and issue-based metrics (resilience and healthcare).
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Keidanren
SampleImpactMetrics:
Cross-sectional(1) Financial metrics
Metrics
Ratio of products and services contributing to solving social issues(1) in total net sales (%)

Ratio of new products (launched in the past 3 years) in profit margin (%)
Total R&D investment amount (yen, $)Total social investment amount (yen, $)Note: Amount of investment in “S” of ESG. To be complied with CECP’s Valuation Guide.

(2) General metrics

Metrics
Number of products and services provided (per person)
Number of products and services used (per person)
Annual or monthly membership (per year or per month)
Number of jobs createdInternal evaluation and certification
External evaluation and certification
Number of website access (pageviews)(3) Metrics relating to smartification

Metrics
Productivity: Net sales(2) ÷ (Work hours × Number of workers)
Operational efficiency: Cost ÷ (Work hours × Number of workers)
Time saving (days, hours, minutes, seconds)
Energy efficiency: Net sales ÷ Energy input
Resources efficiency: Net sales ÷ Raw materials input

Notes:
1. There is no strict definition. However, an example of internal certification is Sumitomo Chemical’s Sumika Sustainable Solutions.
2. In some cases, production volume is used instead of net sales.

Major related metrics
Stakeholder Capitalism Metrics(Social value generated (%))
Stakeholder Capitalism Metrics(Vitality Index (%))
Stakeholder Capitalism Metrics
Stakeholder Capitalism Metrics(Total Social Investment ($))
Related metrics
Keidanren’s “Innovation for SDGs”
Keidanren’s “Innovation for SDGs”
Keidanren’s “Innovation for SDGs”
SDG Target 8.3, UN Sustainable
Development Solutions Network
Keidanren’s “Innovation for SDGs”
Keidanren’s “Innovation for SDGs”

Major related metrics
SDG Target 8.2
Keidanren’s “Innovation for SDGs”
Keidanren’s “Innovation for SDGs”
Keidanren’s “Innovation for SDGs”
SDG Target 8.4

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Keidanren Sample Impact Metrics: Resilience
Resilience KPIs to realize Society 5.0

Net zeroGHG
emissions

Zero
crime

Zero disasterdamageResilient economic activities
Dispersion rate of supplying companies andcountries (%)
Dispersion rate of business outlets (%)
Zero disaster damage
Number of disaster casualties
Physical damage from disasters (yen)Disaster data providers (persons)Zero crime
Number of crimes
Amount of physical damage from crimes (yen)Zero cybercrime
Number of data leakage
Number of cyberattacks prevented
Average system down time (hours)
Average power outage per customer (hours)
Number of security personnel

Zerocybercrime

Zero basic
infrastructure
disruption

Zero basic infrastructure disruption
Restoration time (days, hours)
Increased life span of basic infrastructure (years)
Average power outage per customer (hours)
Sustainable urbanization
Number of residents
Metrics on disaster resilience
Number of barrier-free construction projects
Sustainable transportation systems
Number of transportation system users
Satisfaction with public transportation (Gallup)
Traffic congestion rate
Public transportation disruption (days, hours)
Digital infrastructure promotion
Internet coverage (%)
Mobile broadband subscribers (per 100 persons)Total IoT channels
Digital infrastructure disruption (days, hours)

Zero traffic Zero waste ofresourcescongestion
GHG emissions reduction
Amount of renewable energy produced
Amount of renewable energy used
Amount of GHG reduction
Amount of contribution to GHG reduction
Environment-related metrics
Metrics on quality of air
Resources efficiency (%)
Amount of waste disposal (tons)
Resources recycle rate (%)

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Example of Use of Resilience Metrics
Technology

Qualitative Direct impact
effectImpact (1)Time saving
Comfortablemobility

Autonomous
driving

Collaboratio
n withtransportsystems
Efficient fueluseElectric
vehicles, fuelcell vehicles

Nextgeneration
powersources

Productivity
Number of elderlyusers
Traffic congestion
rate
Deaths andinjuries fromtraffic accidents
Resources
efficiency
Amount ofcontribution to
GHG reduction

Social impact
Impact (2)Impact (3)…

Smartification

Economic growth

Improved elderly
accessNumber ofresidents

Sustainable transportsystems(SDG Target 11.2)
Sustainable urbanization(SDG Target 11.3)
Prolonging healthy life
expectancy
Climate change

Keidanren Sample Impact Metrics• For example, autonomous driving technology leads to collaboration with transportation systems, and its direct effectis reflected in the impact metrics on traffic congestion rate.
• In addition, it also indirectly affects such other impact metrics as improved elderly access and the number of urban
residents. Ultimately, it will contribute to sustainable transportation systems and urbanization.
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Keidanren Sample Impact Metrics: Healthcare
Healthcare KPIs to realize Society 5.0

100-yearhealthy life
expectancy

100% access to
medical care

Prolonging healthy life expectancy
Healthy life expectancy(1) and average life span
Number of deaths and injuries
Deaths and injuries from occupational accidents(= Lost time incident rate)
Deaths and injuries from traffic accidents
Deaths and injuries from illness
Deaths and injuries from toxic substances,
atmospheric and soil pollution, etc.
Number of sick people
Number of people prevented from contracting
diseases
Number of patients with chronic diseases
Number of people who improved their lifestyle
Ratio of sales of nutritional supplements in net
sales (%)
Improved recovery rate
Number of people needing nursing care
Average length of hospitalization (days)

Medicalcost
reduction

MaximumZerosubjective occupational
Zero traffic
happiness level accidents
accidents

Improved access to medical services(Domestic) Number of services provided to rural
areas, and remote islands and places(International) Number of services provided todeveloping countries
Subjective happiness
Subjective happiness level
Employee engagement index
Medical cost reduction
Amount of reduced medical cost (yen, $)Monetary impact of compensation paid byorganization for occupational accidents, etc.
(yen, $)
Employer share in medical cost (yen, $)Gap between healthy life expectancy and average
life span (years)
Elimination of demand-supply gap in nursing services
Number of available nursing care personnel
Nursing care facility occupancy rate (%)

Local job
creation

Improvements regarding occupational
accidents, safety, and health
Total recordable incident rate
(TRIR)
Lost time incident rate (LTIR)
Number of violations of safety andhealth rules
Amount of fines for such violations(yen)
Promotion of data-based healthcare
Illness detection rate (%)
Specificity (non-detection rate)(%)
Healthcare data (number of
persons, length of time)
Research and development
Progress of tests
Existence of test results
Acquisition of approval from publicbodiesNote: Healthy life expectancy is calculated differently in each country. The WHO and Japan’s Ministry of Health, Labour and Welfare (MHLW; in Japanese) also have their own methods.
The MHLW one is currently under review by its study group (in Japanese).

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Example of Use of Healthcare Metrics
Technology

Qualitative
effectImpact (1)Time saving

Telemedicine
services

Efficientprovisionof medical
services toremoteareas

Social impact

Direct impact

Productivity
Deaths and injuries
from illness
Number of services
provided to rural
areas, and remoteislands and places
Number of services
provided todeveloping countries

Impact (2)Impact (3)…

Smartification

Economic growth

Number of deaths
and injuries

Prolonging healthy life
expectancy

Improved accessto medical
services

Medical cost reduction
Number of residents

Keidanren Sample Impact Metrics• For example, telemedicine services lead to the efficient provision of medical services to remote areas, and its direct
effect is reflected in such metrics as the number of deaths and injuries from illness and the number of services
provided to rural areas, and remote islands and places.
• In addition, it is hoped that the resultant number of deaths and injuries from illness will bring about reduction of theoverall number of deaths and injuries and will also have an indirect impact on prolonging healthy life expectancy andreduction in the cost of medical care.

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Conclusion: Excerpts from the Executive Summary• Keidanren aims at practicing sustainable capitalism through the realization of Society 5.0.
• Toward this end, it is important to deepen understanding between companies and investors through dialogue onsustainability with purpose as the starting point, in order to foster business model transformation, and accelerate
investment in these efforts.
• While company-investor dialogue has moved ahead, a gap is still present in sustainability dialogue.
• One reason for this gap is that the traditional KPIs of ESG investment do not fully measure such factors as creationof market opportunities for sustainability. It is necessary to have metrics that go beyond the traditional KPIs of
ESG investment.
• Therefore, this report focuses on impact metrics that show the social and environmental effects produced bybusiness operations and activities.
• Along with impact metrics, companies presenting their business models and disseminating the narrative of theirbusiness and innovations with purpose as the starting point can lead to the explanation of creation of market
opportunities for sustainability and so forth and the realization of constructive dialogue.
• Impact metrics enable companies to demonstrate to various stakeholders the significance of their efforts. As such,they can serve as common language with stakeholders in sustainable capitalism.
• Based on the above, this report discusses the importance and advantage of impact metrics, along with concrete
examples of how they are used, and presents sample impact metrics to address issues in practice and promotedialogue.
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Reference: Members Involved in This Report
Committee on Financial and Capital Markets

Chair: Jun Ohta (President and Group CEO, Sumitomo Mitsui Financial
Group, Inc.)
Chair: Takashi Hibino (Chairman of the Board, Daiwa Securities Group Inc.)
Chair: Eiji Hayashida (Senior Advisor, JFE Holdings, Inc.)
Constructive Dialogue Taskforce

Chair: Miyuki Zeniya (Dai-ichi Life Holdings, Inc.)
Astellas Pharma Inc.
Asset Management One Co., Ltd.
Human Resources Governance Leaders Co., Ltd.
ANA Holdings Inc.
ENEOS Holdings, Inc.
Kubota Corporation
KDDI Corporation
Goldman Sachs Asset Management Co., Ltd.
JPMorgan Asset Management (Japan) Limited
Sumitomo Chemical Co., Ltd.
Z Holdings Corporation
Seven & i Holdings Co., Ltd.
Sony Group Corporation
Sompo Holdings, Inc.
Taisei Corporation
Daiwa Securities Group Inc.
Daiwa House Industry Co., Ltd.
Tokio Marine Holdings, Inc.
Tokyo Electric Power Company Holdings, Inc.

Toray Industries, Inc.
Nippon Steel Corporation
Nippon Life Insurance Company
Nomura Asset Management Co., Ltd.
Hitachi, Ltd.
Fujitsu Limited
BlackRock Japan Co., Ltd.
Bloomberg L.P.
Benesse Holdings, Inc.
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui DS Asset Management Company, Limited
Mitsui & Co., Ltd.
Mitsui Fudosan Co., Ltd.
Mitsubishi Heavy Industries, Ltd.
Mitsubishi Corporation
Mitsubishi Electric Corporation
MUFG Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Mercari, Inc.

Preparatory study meeting andsix TF meetings
October 28, 2021
Preparatory study meeting
Lecture by Prof. Koji Nomura, Keio University
November 30, 2021
First TF meeting
Lecture by Bloomberg
February 3, 2022
Second TF meeting
Case studies presented by KDDI and Dai-ichi Life
February 28, 2022
Third TF meeting
Case studies presented by Daiwa House Industry
and Goldman Sachs Asset Management
March 25, 2022
Fourth TF meeting
Case studies presented by JPMorgan AssetManagement
April 25, 2022
Fifth TF meeting(Intensive discussion)
May 23, 2022
Sixth TF meeting
Lecture by Eiichiro Adachi, Senior Counselor,
Japan Research Institute16