Guidance for
Impact Companies
on Disclosure and Engagementin Capital Markets
Version 1

PUBLISHER
Impact IPO Working Group, The Japan National Advisory Board,
The Global Steering Group for Impact Investment（GSG Japan NAB）

SECRETARIATGSG Japan NAB/ Impact Economy Lab,
Japan Social Innovation and Investment Foundation (SIIF)

PUBLICATION DATE：May 2024

GSG Japan NAB
Guidance for Impact Companies

Index1. Background3

2. Objective

5

3. Intended Users and Usage of the Guidance

51) Intended users
2) Usage of the Guidance
3) Planned future of the Guidance
4. Underlying Principles of the Guidance

91) Enterprise value2) Positive feedback loop and four steps to speed up the loop
5. Four Steps to Accelerate a Positive Feedback Loop

11

Step 1: Strategy development

12

Step 2: Business Plan and KPI Development

17

Step 3: Incorporation into the Management Decision-Making Process

19

Step 4: Information Disclosure/ Engagement

21

Specific disclosure items
Timing and primary documents and other media for disclosure
How to consider data assurance
Points to keep in mind concerning liability risk
Recommended practices for dialogue
GovernanceAppendices30

32

1. Six Capitals Identified by the IIRC

33

2. Reference36

2.1. Disclosures of the Theory of Change, logical framework, and value creation model

36

2.2. Disclosures of trends in the social/environmental issues

42

2.3. Disclosures of growth strategies (including expansion of the TAM)

47

2.4. Disclosures of quantitative information that underlies the sources of the company’scompetitive advantages
2.5. Disclosures of risk management policies

54
59

1

2.6. Disclosures of overall pictures of stakeholders and policy on governance61

2.7. Disclosures of information at the time of an IPO

64

3. Relationship between Recommended Disclosure Items and Documents

66

In issuing this guidance70

Impact IPO Working Group Committee Members List

72

2

Guidance for Impact Companies on Disclosure andDialogue in Capital Markets

Creating a sustainable society is an enormous challenge across the globe. In Japan, social andenvironmental issues, such as decarbonization, disaster management, and an aging population withdeclining birth rates, are rapidly growing in significance.
To resolve these issues, businesses need to implement new technologies and innovate their businessmodels 1 . There is an urgent need to support and foster companies that are engaged in such
implementation and innovation, especially those that achieve business growth while placing socialand environmental impact at the core of their business2.
“Impact companies” refers to companies that intend to generate positive, measurable social andenvironmental impact through their products and services while achieving business growth3. These
companies take a wide range of financing approaches. Some do not raise external capital, some only
take loans to achieve growth, and others list themselves on the capital markets to raise funds.
Listed impact companies enjoy certain benefits as long as their enterprise values are accurately
assessed by investors in the capital markets. These advantages include an increase in theirfundraising capacity, higher name recognition, stronger management structure, greater public trust,and higher morale built through incentives given to board members and employees, among others.
Therefore, impact companies’ listing and sustainable growth promote rapid progress in impact
creation, which is one way that the power of capital markets may accelerate the resolution of socialand environmental issues.
The above benefits can be enjoyed if capital markets, especially investors, accurately assess theimpact companies’ medium- to long-term growth potential taking into account a certain amount oftime until the businesses are established as well as risks such as uncertainty, and play a role inenhancing enterprise value through engagement. Hence, it is important for the capital markets to1“Report by the Working Group on Impact Investment,” The Financial Services Agency, 2023

2

“The Basic Policy on Economic and Fiscal Management and Reform 2023” also states that it is essential to invest

more in companies that have taken on the challenge of resolving social issues and to provide more support to NPOs
and other organizations who work for the same purpose.
3“The Concept Paper for IPOs of Impact-driven Companies,” The Japan National Advisory Board, the Global SteeringGroup for Impact Investment (GSG Japan NAB), 20223

fulfill their expected role.4
While going public offers benefits, impact companies must take on new pressures andresponsibilities, including pressures to keep their business growing after listing, manage increased
administrative costs, meet disclosure obligations with accountability, and engage with investors.
The following challenges are unique to impact companies that seek to leverage capital markets toincrease their enterprise value:⚫

After going public, coupled with increased stock liquidity, companies face investors withmore diverse views and strategies.

⚫

Some investors are beginning to develop perspectives and tools to appropriately assess theimpact created by an impact company and use the information for their investment
decisions and engagement. However, the effectiveness of those perspectives and tools has
not yet been fully verified or widely recognized.

⚫

With several varieties of disclosure guidance available, impact companies need to identify
which information they should disclose to have a constructive dialogue with investors.

⚫

Since the development of impact measurement and management to date has mainly
focused on investors, there is only a limited amount of guidance for impact companies on
how to incorporate impact on specific social and environmental issues into their pre-topost-IPO business management process.

To address these challenges faced by impact companies at and after listing, it is important to provide
guidance that promotes a common understanding and constructive dialogue between thesecompanies and capital market participants, primarily investors.
With this background, the Guidance for Impact Companies on Disclosure and Dialogue in CapitalMarkets (the “Guidance”) was developed by the Impact IPO Working Group (the “Working Group”),
organized by the Global Steering Group for Impact Investment Japan National Advisory Board (GSG
Japan NAB). The Working Group was launched based on research conducted by the GSG Japan NAB,

4“Draft Basic Guidelines on Impact Investment,” published by the Financial Services Agency in 2023 (included in thereport shown in Footnote 1), defines the role of investors in “Element 4 (innovation/transformation/acceleration):
Support novelty that could accelerate transformations in markets and customers.” It says, “Identify and support thenovelty and advantages of investee companies and businesses that could create or accelerate changes in the market
and customers so that investees could generate tangible social or environmental impact as well as financial return”
and “Conduct dialogue with investees in a manner that could harness investees’ novelty and potential to develop andcultivate and gain support from the market.”4

published as “The Concept Paper for IPOs of Impact-driven Companies“ and by the Japan Social
Innovation and Investment Foundation (SIIF), published as “Basic Survey for the Realization and
Dissemination of Impact IPOs.” In the Working Group, representatives of a wider range ofstakeholders (e.g., companies, public and private equity investors, securities firms, and otherexperts) engaged in discussions to update some of the previous research’s conclusions and develop
the Guidance that will contribute to the concrete practices of planning-to-be-listed and listed impact
company, and of capital market participants, including investors.

The objective of this guidance is to foster a common understanding and constructive dialogue
between impact company and capital market participants, primarily investors, throughinformation disclosure, etc., so that impact companies can create impact while realizing continuous
enterprise value growth throughout the process before, at, and after an IPO.
Through this Guidance, we hope that impact companies will gain greater recognition from investors,
attract the necessary funding, and achieve greater impact and business growth based on common
understanding and constructive dialogue. Consequently, we hope that capital market participants
will increase their intentionality to create impact, and the power of capital markets will accelerate
the resolution of social and environmental issues.

1) Intended users⚫ Impact companies differ in factors such as the scale of the social and environmental

issues they work to resolve, business stage, and aspirations for future growth. Basedon the challenges and the objective stated in the previous section, this Guidance isintended for impact companies with the following three intentions as well as forinvestors and other capital market participants.

⚫ Impact companies◼

This Guidance is for impact companies (listed or unlisted) that are pursuing all
three intentions and seek to achieve sustainable growth through the synergies
among the intentions: “creating impact,” “generating earnings,” and “using thecapital markets to continuously enhance enterprise value through constructive
dialogue with investors.”5◼

For more information on the relationships among the three intentions, pleaserefer to the “Positive Feedback Loop” discussed later.

(i) Creating impact⚫ For this Guidance’s target impact companies, creating impact is at thecore of their business. These companies define the impact they intend tocreate by including solutions to social and environmental issues in their
mission, purpose, and articles of incorporation, etc., as their primarybusiness objective.
⚫ Based on the concept of impact measurement and management (IMM),

these companies set impact indicators as important benchmarks formaking management decisions, regularly measure and assess whether
impact is being created as planned, and establish a system forallocating management resources and formulating and reviewing
management strategies based on the results.
* Impact measurement and management (IMM) refers to a daily process of seeking
to increase positive impact and reduce negative impact through business
improvement and decision-making based on the measurement results. Since IMM
has mainly been developed from the perspective of impact investors5, it is notnecessarily a well-established concept for companies’ business management.

(ii) Generating earnings⚫ These target companies intend to develop a business model that enables

them to make the impact defined in their mission, purposes, and articles
of incorporation through their business activities. The companies seek toachieve continuous business growth by initiating a virtuous cycle ofimpact and earnings (note that the “earnings” in this context include
medium- to long-term earnings factored into business strategies andplans, rather than those that are projected with certainty).

(iii) Using the capital markets to continuously enhance enterprise value
through constructive dialogue with investors

5

An example of an IMM guidebook for investors in Japan is The Guidebook for Impact Measurement & Management(IMM for impact investing in listed and unlisted shares), published by GSG Japan NAB (2021).

6

⚫ Through their listing, these companies seek to continuously enhancetheir impact and enterprise value through a constructive dialogue withinvestors, aiming to attract funds not only from those who actively invest
in impact companies but also a wide range of investors.

◼

The above definition applies only to impact companies that aim to or havealready gone public. Impact companies that do not plan to list themselves on
the stock market may have different business policies or strategies.

⚫ Investors and other capital market participants◼

The Guidance is intended to help not only investors who are active in investingin impact companies, but also other stakeholders in the capital markets,
including a wide range of investors, securities firms, and stock exchanges. By
referring to the Guidance, stakeholders can proactively deepen theirunderstanding of how these companies’ impact creation and impact-oriented
business management can affect their enterprise value and have a constructive
dialogue with companies towards greater enterprise value.

2) Usage of the Guidance⚫

This Guidance has been written as a reference for impact companies and capital market
participants detailing the four steps to accelerate the “positive feedback loop (describedlater).” These four steps span from impact companies’ strategy development to
information disclosure/ engagement throughout the pre- to post-IPO process.6 Impact
companies and stakeholders in capital markets can consult this Guidance as they moveahead with their undertakings. We advise that disclosure based on this guidance be clearlystated in disclosure and other documents. Going public while a company continues to workon these four steps is called an “impact IPO.”7 If a company has carried out an “impact

6

As described in Chapter 5, these four steps represent the recommended approach for understanding the concept of

IMM and applying the idea to a company’s business management.
7

GSG Japan NAB and SIIF have been engaging in studies and discussions in order to resolve issues that impact

companies face when they go public. The report by SIIF on the Basic Survey for the Realization and Dissemination of
Impact IPOs describes an impact IPO as follows:“(i) An IPO conducted by a company that intends to create a positive impact while the business demonstrates that itproperly engages in impact measurement and management (IMM). Also, (ii) The commitment to raising enterprisevalue by briefing stakeholders in the company on the status of the impact-making efforts and IMM to attract funds

7

IPO” based on this Guidance, we advise the company to clearly state that fact in adisclosed document.
⚫

The Guidance was developed by the Impact IPO Working Group organized by GSG JapanNAB and is not legally binding. The disclosure elements stated in Step 4 are also subject
to various existing rules and regulations and are intended to supplement existing rules,
principles, and guidance, including the listing rules.

⚫

Currently it is essential to facilitate the emergence of as many exemplary initiatives as
possible. Thus, the Guidance is not designed as a reference to certify or rate impact
companies.

3) Planned future of the Guidance⚫

The Working Group plans to release the first version of the Guidance after soliciting
opinions from a wider range of interested parties by cooperating with related organizations.
At the same time, the Working Group will also accept opinions about remaining topics fromthe Working Group meetings, including how to introduce the Guidance in stages. Then, we
will promote the Guidance as a reference for impact companies and capital market
participants. Once we have enough examples of practices based on the Guidance andfeedback on the Guidance from users, we hope we can update the Guidance.

from impact-oriented fund suppliers when the business goes public so that the company will continue to pursue theimpact and IMM.”
The definition of “impact IPO” this Guidance presents is an updated and fleshed-out version of the above tentative
definition given by SIIF. The above tentative definition of "impact IPO" by SIIF focused more on the time of listing. In
contrast, the working group argued that in light of the original objective of impact companies to realize sustainablecorporate value enhancement while creating impact even after listing, it is important to focus on ongoing efforts
before and after listing, rather than only at the time of listing. The working group also discussed the importance ofpromoting understanding and dialogue among market participants, not limited to impact investors, given the diversityof investors in the listed market, while the previous SIIF’s tentative definition focused on fundraising from impact
investors. It was discussed that it is important to promote understanding and dialogue among market participantsthat are not limited to impact investors. Based on the above discussion, the definition of "impact IPO" provided in the
Guidance is an update of the previous tentative definition.

81) Enterprise value⚫

It is vital for an impact company to enhance its evaluation by capital markets so that it canutilize its enhanced value to increase its impact. Hence, this Guidance defines enterprisevalue as stated below:----⚫ “Enterprise value” in the Guidance refers to market capitalization (MarketCap),representing the value given in capital markets.
⚫ This enterprise value refers not only to the market capitalization at the time of an IPO
but also to the prospect of the business’s continuous growth. General finance theory
defines market capitalization as shareholder value. Generally, shareholder value plus
debt, which is creditor value, is defined as enterprise value. However, for clarity, this
Guidance refers to market capitalization as enterprise value.
-----⚫ Market capitalization is affected considerably by the present value of cash flow calculatedby dividing future cash flow by capital costs. This means that an impact company needs
to clearly present to investors how its business model and growth strategy will affectits future cash flow and capital costs.
* Non-financial information (about sustainability), in addition to financial information, is becoming
increasingly valuable as a factor in predicting future cash flow and capital costs. Apart from disclosure
standards that have been evolving, studies have been conducted to identify how non-financial informationinfluences enterprise value.

2) Positive feedback loop and four steps to speed up the loop⚫

By disclosing information to investors and engaging in constructive dialogue based on abusiness model and growth strategy designed to create impact and generate earnings,
impact companies can utilize capital markets to further enhance their management capital(described as “6 capitals” in the figure below based on the International Integrated
Reporting Council’s (IIRC)8 value creation process) and to make upfront investments.

⚫

Taking this step enables the company to raise its enterprise value and enhances thecapital market’s evaluation of the company, which in turn will generate more impact and8(International Integrated Reporting Framework (Japanese translation), IIRC)

9earnings, creating a cycle of continuous growth. This cycle is called a “positive feedbackloop” in this Guidance.
⚫

The cycle may vary in form and timeline. In some cases, enterprise value rises after an
impact is created and earnings are generated. In other cases, before impact and earnings
are realized, enterprise value rises when the company’s positioning or other factors leadthe market to acknowledge the achievability of impact and earnings. Then, thisacknowledgment serves as a foothold that allows the business to make further impact andearnings.

⚫

The next chapter presents the four steps that impact companies are advised to take toaccelerate this positive feedback loop spanning the process from strategy development to
information disclosure.

10⚫

This chapter presents the steps that impact companies are advised to take to accelerate apositive feedback loop. These steps span the process from strategy development to
information disclosure. They explain how the concept of IMM can be best understood andapplied to a company’s business management.

⚫

Given the purpose of this guidance, we omitted content that is common to all listedcompanies and included considerations for the four basic steps from strategy formulation to
information disclosure based on the unique characteristics of impact companies.

⚫

The four steps are a PDCA cycle, and the model is intended to be improved through repeatedhypothesis testing in an iterative process before and after listing, through discussions within
the company and dialogues with investors. The four step model does not require 100%
perfection in the initial stage.

11

⚫

Usually, a company develops its business model and growth strategy based on its analysis ofmarket conditions, the competitive environment, customer needs, etc.

⚫

Impact companies characteristically view the need to resolve social and environmental
issues as a business opportunity and design their businesses primarily to create an impact.

⚫

Therefore, impact companies should consider designing their strategies from theperspective of impact creation in addition to that of earnings generation.

Establishing management philosophy (e.g., purpose, mission, articles of incorporation)⚫

In developing strategies, the impact that the company intends to create should be expressedin its management philosophy, including purpose, mission, and articles of incorporation.

Strategy development⚫

Based on the expressed management philosophy, the company should consider exploring
what its business should look like from the perspectives of both impact and earnings.

⚫

In this process, the company should consider designing its overall business by applying theconcept of the International Integrated Reporting Framework’s six capitals in addition to12

Impact Frontiers' “Five Dimensions of Impact,”9 which are “What, Who, Contribution (Why),
How Much, and Risk.”⚫

When developing a business model and growth strategy based on the ideas explored above,the company can use a logical framework, Theory of Change, and the frameworks shown inReferences 1 and 2 below. The company can develop coherent narratives that describe therelationship between impact creation and earnings generation.

⚫

In this process, the company should also consider utilizing the feedback received throughdialogue with investors and other stakeholders.

<Reference 1>⚫

To develop a growth strategy, an impact company should use existing tools, such as Theory of
Change and a logical framework, to clarify the relationship between the company’s businessand impact.
(Center for Theory of Change)(See Appendices for Theory of Change, logical frameworks, and value creation models
presented by companies.)

9

Five Dimensions of Impact | Impact Frontiers

According to the Social Impact Management Initiative (SIMI), “output” refers to “direct outcomes of activities in which
an organization or a project engages, including products and services”; “outcome” to “changes and benefits brought
about by the output of a business or a project”; and “impact” to “social and environmental outcomes, short- or longterm, achieved by the business or activities.”

13

<Reference 2>⚫

An impact company should consider referring to IIRC’s six capitals when it discusses thesources of its value creation (i.e., its strengths as an organization). Using the six capitals
framework helps a company make a more comprehensive list of its value-creation sources.
(International Integrated Reporting Framework (Japanese translation))

Description in IIRC Guidelines10

Six Capitals

Financial

The pool of funds is:capital-Examples of Strengths Specific to
Impact Companies⚫

Better access to stable capital

Available to an organization for use infrom impact-driven and long-term

the production of goods or theinvestors

provision of services.
-

Obtained through financing (e.g.,borrowing, selling equity, or receiving
grants) or generated throughoperations or investments.

Manufactured Manufactured physical objects (ascapital⚫

Advantages related to supply

distinct from natural physical objects)

chains and production facilities

that are available to an organization for(For example, if a company

use in the production of goods or thedevelops facilities orprovision of services, including:infrastructure designed to-

Buildings

manufacture its regular products-

Equipment

in a greener way, the-Infrastructure (such as roads, ports,

manufactured capital for thebridges, and waste and water

development can be a competitive

treatment plants).

advantage.)

Manufactured capital is often created byother organizations, but includes assets
manufactured by the reportingorganization for sale or when they areretained for its own use.
Intellectual

Organizational, knowledge-based

capitalintangibles, including:

10⚫

Each company’s unique
technologies, know-how, and“International Integrated Reporting Framework,” January 2021. The Japanese text has been provided by thesecretariat that translated the guidelines, referring to the International Integrated Reporting Framework (Japanesetranslation). (The translation is not word-for-word.) See Appendices for the original text.

14-Intellectual property, such as patents,
copyrights, software, rights and-experience⚫

R&D capabilities and bodies, etc.

licenses(For example, if a company can“Organizational capital” such as tacit

develop unique and innovativeknowledge, systems, procedures andtechnologies designed toprotocols.

dramatically reduce
environmental burdens andenhance the impact it creates,
these abilities serve as a barrier
to competitors’ entry into themarket, thereby creating acompetitive advantage.)

Human

People’s competencies, capabilities andcapitalexperience, and their motivations torecruitment, talent development,

innovate, including their:

diverse and versatile talent,-

employee engagement, etc.

⚫

Alignment with and support for an

Advantages related toorganization’s governanceframework, risk management
approach, and ethical values-

Ability to understand, develop andimplement an organization’s strategy-

Loyalties and motivations for
improving goods and services,
including their ability to lead andmanage the organization andcollaborate.

Social and

The organizations and relations formed

relationshipwithin and between communities, groups

by working with diverse

capitalof stakeholders, and other networks, andstakeholders, including

the ability to share information tocustomers and beneficiaries,

enhance individual and collective well-stakeholders contributing to thebeing. Social and relationship capital

resolution of social and/or

includes:environmental issues, vendors,-

and local communities

Shared norms, and common values
and behaviors

-

⚫

⚫

Trust and relationships developed

Action and ability to widely share

Key stakeholder relationships, andinformation useful for not only

the trust and willingness to engage

the company, but also for otherthat an organization has developed

companies, public organizations,

15

-

-

and works to maintain with external

and research institutions

stakeholders(Examples of useful information

Intangibles associated with the brandinclude the realities of social andand reputation that an organization

environmental issues, outcomeshas developedthat could be produced when the

An organization’s social license toissues are resolved, andoperate.

knowledge and know-how built up
through the company’s efforts.
Actively sharing these types of
information can become valuablefor the industry or the community
as a whole. Consequently, suchinformation sharing can become acompetitive advantage by
expanding the total addressable
market (TAM) and by accelerating
the company’s business growth.)⚫

Brand value and reputation,
which are built throughconsistent action andcommunication based on thecompany’s purpose and mission

NaturalAll renewable and non-renewable

capitalenvironmental resources and processes

company’s business model (e.g.,that provide goods or services thatability to offer products andsupport the past, current, or futureservices that are as good as orprosperity of an organization, including:greater than its conventional-

Air, water, land, minerals and forests

ones in greener ways)-

Biodiversity and eco-system health.

⚫

⚫

Advantages brought by the

The effect of reducing CO2
emissions and other negativeenvironmental impacts throughthe company’s products andservices16

⚫

To implement the business model and growth strategy developed in Step 1, the impact
companies should consider how to allocate management capital, develop a business plan,and set key performance indicators (KPIs).

⚫

The impact companies should consider setting KPIs not only for earnings but also for
impact creation. The companies should give these indicators equal priority.

⚫

Also, in setting KPI targets, the impact companies are advised to backcast from their longterm impact goals, not as an extension of current business, thereby setting targets thatare as ambitious and attainable as possible based on benchmarks.

Designing KPIs⚫

Before designing KPIs, each company needs to define what social and/ or environmental
changes it aims to create in the short-, medium-, and long-term and communicate thisas a coherent story. As described in Guidance’s Step 1, the impact companies can develop
such objectives and stories in their growth strategy by using a framework such as a logicalframework or Theory of Change.

⚫

Based on their individual stories, the impact companies are encouraged to design indicatorsfrom both earnings and impact creation perspectives.

⚫

Specifically, as the figure below shows, the impact companies should consider breaking
down their impact goals into more manageable indicators while considering the following
three points:
1) Different levels of indicators◼

The indicators that measure progress toward impact goals often correspond toso-called macro data, and it can be difficult for a company to accurately gauge
its contribution to these numerical values (e.g., healthcare costs in Japan andCO2 emissions across Japan).

◼

Hence, based on the logical framework or Theory of Change created for thegrowth strategy, each company can design changes it aims to produce in stages
toward the impact goals, and then set indicators at the optimal level to measurethem.

2) Measurability and comparability◼

Since management indicators are supposed to be measured and managed on an
ongoing basis, indicators that are quantitative and measurable should be usedas much as possible.

◼

The impact companies may also set qualitative indicators for reasons such asdifficulty in obtaining quantitative data or usefulness in obtaining qualitative17

information for analyzing quantitative data, etc. The companies should also
consider having clear measurement and management methods for thequalitative indicators.
◼

In addition, it is desirable to use indicators that can be compared with othercompanies and with the company’s own chronological records, as much as
possible, by using the industry average and the benchmark data (e.g., thenational average and threshold), and by showing information in ratio.

◼

If the companies use any indicator published in academic papers or by thirdparty organizations, they should indicate the sources to enhance reliability.

3) Interconnectedness of impact creation and earnings generation◼

The impact companies should try to clearly describe how KPIs for impact
creation and those for earnings generation are interconnected.

◼

There may be various relationships, including the ones below. Whatever the
relationship is, the companies should consider how to clearly explain why theindicators are key to the company’s medium- to long-term business.
⚫

The impact-related KPIs and earning-related indicators are fully
synchronized and proportionally related.

⚫

The two KPIs are independent and work against each other.

Setting KPI targets⚫

Impact companies characteristically create impact intentionally as the primary purpose of
their businesses rather than accidentally as a result of their business activities.

18

⚫

Therefore, when setting targets, companies should backcast from the long-term impact
goal, not as an extension of current business. The companies should try to set targets thatare as ambitious and attainable as possible based on benchmarks.

⚫

It is vital to clearly present how much the company aims to accomplish in the short,medium, and long terms based on the timeline toward achieving the impact goals. This will
facilitate the company’s business growth as well as prevent any expectation gap between
the company and investors.

<Reference 3: Impact metrics>⚫

“Using Impact Metrics to Promote Dialogue with Purpose as Starting Point,” Keidanren(Japan Business Federation)

⚫

IRIS+

⚫

“Trends in Environmental Impact Assessment,” The Ministry of the Environment⚫

Project Frame⚫

5 dimensions⚫

“Emerging Climate Technology Framework,” CDP⚫

Impact companies are characterized by the fact that their management is committed tobuilding relationships with not only shareholders but also diverse stakeholders, and tosolving social and environmental issues.

⚫

Hence, these companies should consider routine discussion of impact creation as animportant management issue, regularly monitor their KPIs, and incorporate the results
into their decision-making process.

⚫

In addition, the companies are encouraged to have a process or team to routinely operate
the PDCA cycle in order to ensure the regular monitoring of KPIs and their incorporation into
the decision-making process.

⚫

The table below shows key considerations and recommended practices for ensuring
management’s commitment to impact creation and incorporating that into a decision-making
process.

Key Considerations for Incorporation
into the Management Decision-

Recommended practices

making Process
Management’s Incorporation into key⚫

Impact creation is clearly defined as the primary19

commitment

management

management philosophy in mission, purpose, andphilosophy

articles of incorporation, etc.

Incorporation into key⚫

management

Impact indicators are viewed as key management
indicators.

indicators
Incorporation into⚫

incentives

As with other management-related performanceindicators, there is a system designed to incentivize
management to produce outcomes and to makecontributions toward intended impact (e.g.,monetary incentives linked to progress toward theimpact the company aims to create).

Incorporation

Information provision<Progress measured using impact metrics>

into decision-

essential for decision-⚫

makingmaking

The company regularly collects, analyzes, andassesses data based on impact indicators.

processMoreover, the assessment results of the impact
indicators are reflected in the company’s strategy
review and in decisions made on management
resource allocation.
<Risks/Opportunities>⚫

The company regularly monitors and assesses not
only the intended positive impact, but also
unintended negative impact that it has on society
and on its business.

⚫

The company regularly monitors and evaluates theglobal trends and regulatory status of social andenvironmental issues it aims to solve. Based onsuch analysis, the company evaluates the potential
for new business opportunities (markets) andgreater impact creation.

<Stakeholders’ opinions>⚫

The company identifies stakeholders involved in
the social and environmental issues it aims toresolve. It periodically creates opportunities tointerview these stakeholders for their opinions. It
also treats these opinions as input information for
decision-making.

20

Established PDCA⚫

systemThe company has a system or operational structure
designed to support PDCA (Plan-Do-Check-Act)
that connects the efforts to regularly monitor andanalyze progress against KPI targets to the
management decision-making process.

⚫

To facilitate a meaningful dialogue with investors and other capital market participants,
impact companies should consider disclosing information from the following two
perspectives used in enterprise value assessment while also emphasizing their uniquecharacteristics as impact companies.
◼

Profitability and growth potential◼

Probability of continuous growth* The probability of continuous growth refers to the chance of an impact company
generating earnings and growth.

⚫

The table below shows the characteristics unique to impact companies and the elementsthat should be considered disclosing based on those characteristics.
◼

Please note that there are currently no fixed rules or regulations specifically for
impact companies’ disclosure. Thus, each company should determine its own best
way to disclose the elements listed below.

◼

Please also refer to some of the Japanese and overseas companies' disclosure
methods compiled in the Appendix.

Characteristics Unique to Impact
companies (+): Potential factor in positive
Angle

reputation●

Recommended Disclosure Element(-): Potential factor in negative
reputation

Profitability(+) The scale and severity of(i) Trends in social/environmental

and growthsocial/environmental issues that theissues to be addressed (including thepotential

company is addressing can be a factor

scale of TAM)

supporting market size and growthpotential.
(+) New markets may be created by(ii) Growth strategy (including

21

leveraging innovative technologies andpotential expansion of the TAM)

business models that have the potential
to generate impact and earnings.
(-) It may take a certain amount of time
to develop innovative technologies andbusiness models that can generateearnings and impact.
Probability(+) By stating its intention to create(iii) Quantitative information thatofimpact in its mission and purpose, theillustrates the source of thecontinuouscompany may be able to establish acompany’s competitive advantages

growthsource of matchless competitive
advantages.
(-) The status of the(iv) Risk/Opportunity managementsocial/environmental issue that thepolicycompany aims to resolve may depend
considerably on the national/local
government’s regulatory moves; or if thecompany creates negative impact
instead of intended positive impact, it
may affect the company’s businessgrowth.
(+) (-) The company’s management(v) Overall picture of stakeholders andneeds to consider the value that it can

the company’s policy on governanceprovide to diverse stakeholders,
including listed-equity investors seeking
short-term returns rather than impact.

Specific disclosure items

Recommended

Specific disclosure items

Disclosure Element(i) Trends in⚫

What is the scale of the social/environmental issues to besocial/environmental

addressed? (e.g., area, time horizon, targeted industry segments,

issues to beetc.)

addressed (including⚫

How serious are the social/environmental issues to be addressed?

22the scale of TAM)

What efforts are being made in the public and private sectors toand intended impact

solve them globally?
⚫

What kind of impact do you intend to create by solving the targetedsocial and environmental issues? (Specifically, describe the impact
you intend to create based on the “Five Dimensions of Impact”
examined in STEP 1 Strategy Development)(ii) Growth strategy⚫

(including potential
expansion of the

To move toward the ultimate impact goals, what short- and mediumto-long-term impact (i.e., outcome) does the business aim to create?

⚫

TAM)

What short- and medium-to-long-term impact KPIs have been set,and how much progress has been measured to date? Also, how dothese KPIs correlate with financial KPIs?

⚫

What actions does the company specifically plan to take to create
short- and medium-to-long-term outcomes?

⚫

How likely is an unprecedented market to be created, and how much
can the TAM be expanded?

(iii) Quantitative⚫

In terms of the six capitals (financial, manufactured, intellectual,

information thathuman, social and relationship, and natural capitals), what elements

illustrates the source

are the sources of the company’s competitive advantages? Whatof the company’s

evidence supports that those elements are indeed the company’scompetitive

strengths?

advantages⚫

What positive effects does the company think the sources of its
competitive advantages could have on its financial value? * See<Reference 4> below.

⚫

How does the impact created by the company affect its six capitals(the sources of competitive advantages) and contribute to earnings
generation and business growth? (Use as much quantitative data as
possible to illustrate the correlations.)(iv) Risk/Opportunity ⚫ What are the negative impacts that may occur in the process ofmanagement policy

expanding the positive impact the company intends to create?
⚫

How does the company plan to acknowledge and manage thosenegative impacts as risks?

⚫

How does the company regularly monitor trends in thesocial/environmental issues it aims to resolve and assess risks andopportunities in a systematic way?

(v) Overall picture of
stakeholders and the⚫

What is the company’s understanding of stakeholders involved in thesocial/environmental issues the business aims to resolve? What23

company’s policy onvalues can the company provide to these stakeholders?

governance⚫

How does the company incorporate impact creation into its
management decision-making process as well as its decisionmaking body? * See Step 3 and the “Governance” section.

<Reference 4>⚫

Various research institutes and companies analyze the effects that the sources of acompany’s competitive advantages have on financial value, including impact-weighted
accounting. However, at present, there is no universal logic or model in capital markets.

⚫

That said, the documents and corporate reports listed below that have been published todate provide clues about how a company’s strengths and the impact created by thebusiness help raise medium-to-long-term enterprise value.

⚫

Hence, when preparing for information disclosure, dialogue with investors, and strategic
resource allocation, each company is encouraged to refer to reports on the latest studies,including those listed below, as well as progressive examples provided by other companies.
⚫

Projects/Efforts by research institutes and other organizations◼

“The Current Situation and Outlook for Impact-Weighted Accounts,” Financial
Research Center (FSA Institute)⚫

The report presents studies and analyses that focus on impactweighted accounts for measuring and valuing impacts using monetaryvaluation techniques.

◼

“EBITDA of ESG,” Carlyle⚫

The literature presents what effects corporate ESG activities have on
finances.

⚫

While it focuses mostly on ESG activities, part of the document
discusses impact creation.

◼

“Visualization of Continuous Growth and Quantification of Impact Implied in
Stock Prices,” Nomura Group⚫

The report discusses the creation of a standardized catalog of outcome
metrics using generative AI and the estimated value of an impact
implied in stock prices.

⚫

Projects/Efforts by companies◼

Eisai’s report on the visualization of non-financial capital⚫

The report presents calculated social impacts which Eisai creates andthe company’s quantified enterprise value that does not show in net
sales or profits.

◼

SAP Japan’s examples of sustainable management practices⚫

The featured articles present visual representations of correlations
between social, environmental, and financial metrics and how each24

affects others.
Timing and primary documents and other media for disclosure⚫

The media and information content that can be disclosed differ considerably before andafter listing. The table below presents best practices for disclosing information in eachphase.

Primary documents and other media fordisclosure
Documents,

Timing of

Suggestions about

disclosure

Disclosure documents

information disclosure

specifically for the phaseetc. forvoluntary
disclosure inany phase

Before an⚫

Disclose suggested

⚫ The

IPO

items to the extent

company’s(run-up topossible, refine thewebsitepreparation

content, etc. of the⚫ Impact reportfor an IPO)

company’s website⚫ Sustainability

while promoting

reportunderstanding through⚫ Integrated

meetings with investors.
Time of an⚫

Documents for an initialreport, etc.
⚫

Securities Report for Initial

IPO (fromlisting must be prepared

Listing Application (Part I)

the period

following the current

Initial listing application documentofrules and regulations.

for review*preparation ⚫ To avoid risk, companies ⚫ Securities Registration
for and thenormally disclose their

Statement

date ofbusiness performances

Document providing Local FinanceIPO)

based only on their

Bureaus with information about* The period

actual results and notcompanies that engage in financeofon forecasts. Therefore,(e.g., offerings and sales)

preparation

it is important for

typically

impact companies toDocument that underwritingrefers to thefind ways tosecurities firms use to solicit

period whendemonstrate theirinvestors

there aregrowth potential⚫

⚫

* Restrictions
may beimposed on
which
information todisclose when
the company
goes public.

Prospectus

Roadshow materials

25restrictions

underpinned byon disclosuresocial/environmental

information (disclosed on the

documents

issues.

initial offering date)(e.g., the⚫

For example, it is⚫

⚫

Notice about year-end closing

Matters regarding Businessperiod whenpossible to include

Plans and Growth Potential

the company

target values for(only when a company is listed

works on its

indicators that are noton the Growth Market;

Securities

directly related todisclosed on the initial offering

Report (Partbusiness performance.

date)

I).

Thus, an impact⚫

⚫

Corporate Governance Reportcompany may consider* Make sure that the first three aredeveloping an equity

consistent with one another as you

story that conveys its

prepare them. These documents

growth potential byform the basis for roadshow

using objective numbers

materials.

and qualitative*Since Part I (Securities Report) is a

information related tomedium for reviews, not disclosure,

impact.

careful consideration is required with

When using impact-

securities companies (including

related numbers to

exchanges) as to how much todemonstrate potential

disclose in Part I (Securities Report)

TAM, impact companies

and other documents.

should use publicly* See the Japan Exchange Groupavailable numbers(JPX) website for documentsfrom third-party

required for the initial listingorganizations, etc.,

application.

rather than developing
numbers and logics ontheir own.
⚫

Regarding targets,
results and otherquantitative informationthat support the sourcesof the companies’
competitiveness,
impact companies
should make efforts to
help investors
understand the26meaning andimportance behindthose numbers.
After anIPO⚫

Impact companies⚫

should keep exploring
how best to disclose

reports⚫

information toaccelerate the “positive

Medium-term managementplan⚫

feedback loop” while
engaging in dialogue

Quarterly reports, securities

Financial results briefing
documents⚫

Matters regarding Businessthat will contribute toPlans and Growth Potential

their medium- to long-(only when a company is listed

term growth.

on the Tokyo Stock Exchange
Growth Market), etc.

How to consider data assurance⚫

Given that impact-related data may be used for investment decisions, it is vital to ensure
the data reliability.

⚫

To ensure reliability, each company should consider third-party assurance of impact-related
data in voluntary disclosure as necessary, weighing costs and benefits.

⚫

On the other hand, sustainability information disclosure and third-party assurance instatutory disclosure are increasingly considered internationally. Although there is notnecessarily a well-established definition of sustainability information, the International
Sustainability Standards Board (ISSB), for example, requires each entity to “disclose
information about all sustainability-related risks and opportunities that could reasonably be
expected to affect the entity’s cash flows, its access to finance or cost of capital over the
short, medium or long term,” and the “information” stated here likely includes many types ofimpact-related data. Data assurance in statutory disclosure will need to be consideredin line with such future developments.

Points to keep in mind concerning liability risk⚫

If a securities registration statement or prospectus contains a false statement, etc., thecompany will be subject to liability for damages, etc. under the Financial Instruments andExchange Law. In addition, other voluntary disclosures are also subject to general tort

27

liability, etc. Therefore, careful consideration should be given to the disclosure ofquantitative forward-looking information.
⚫

The “Guideline for the Disclosure of Corporate Affairs, etc.,” states that a company is not
immediately liable for a false statement, etc., if it provides specific explanations of material
future matters that should be disclosed in its securities registration statement to the extent
that such explanations are generally considered reasonable. When an impact company
discloses quantitative information on the impact it hopes to create in the future, or when it
discloses the scalability of its TAM, it often finds there is a lack of appropriate externaldata, such as data on the current market size. How to ensure the objectivity and rationalityof such data is an important issue for an impact company.

⚫

In addition, there is a risk that the longer the period, the greater the uncertainty regarding
the likelihood of achieving those future goals.

⚫

Therefore, each impact company should consider its disclosure based on its situation,referring to the "Guideline for the Disclosure of Corporate Affairs, etc." and other guidelines.

Recommended practices for dialogue(1) Dialogue to prevent mismatch between impact companies and investors⚫

In capital markets, there are various types of investors depending on the type ofbusiness, investment policy, and ideology◼

Types of business: insurance companies, pension funds, mutual aid
associations, banks, investment advisory firms, hedge funds, etc.

◼

Investment period: short, medium, and long term◼

Risk/return: High-risk/high-return, middle-risk/middle-return, low-risk/lowreturn◼

Investment policies: ESG investment, impact investment, thematicinvestment, etc.

⚫

Therefore, it is advised for impact companies to understand investors’ investment
policies and their views on investment periods through the following questions andbuild optimal relationships with investors based on the company's growth phase andfundraising situation at that time.
◼

Sample questions⚫

What are your requirements for the companies that you actively seek
to invest in?

⚫

If you are an impact investor, what kind of impact do you expect tocreate through your investment?

28

⚫

What is your average investment period?

⚫

What criteria do you use to monitor your portfolio companies?

(2) Dialogue to promote understanding of an impact company’s long-term growth potential andprobability⚫

Investors who currently do not explicitly practice impact investing will probably not ask
many questions or conduct dialogues on impact itself.

⚫

On the other hand, a company’s growth potential and probability are important
perspectives when investors assess a company. Thus, impact companies cancommunicate with investors from these perspectives to help investors have a deeper
understanding of the company.
<Perspectives on Growth Potential＞⚫

Impact companies should consider presenting their intended impact andtheir vision of a world without the social and environmental issues they wish
to solve not only as their purpose or mission statement but also as aworldview, along with information that is as concrete and quantitative as
possible.

⚫

This is because a more concrete description of the worldview can be useful
information for investors to infer the economic impact that the impact
company could have on the market.

⚫

For example, if a company offers a solution that contributes todecarbonization, it should consider not only providing information on how
much CO2 reduction can be expected in the world with the solution
compared to the current world without the solution but also on who will
benefit and how their lifestyles will change. It will be beneficial if companies
can show what kind of new infrastructure they are utilizing to pursue andbenefit from their economic activities.

<Perspectives on Growth Probability＞⚫

Impact companies can explain what their Key Success Factors (KSFs) are increating the intended impact through their business model while generatingsynergies with revenues. Then, impact companies can engage in a dialogue
regarding the following points.

⚫

KSFs for achieving the company's mission and purpose (from a long-term
perspective)⚫

Why are they KSFs?

⚫

When and how will each KSF be addressed?

29

⚫

To what extent are the KSFs currently being realized and how are
they planned to be addressed in the future?

⚫

What capital can be leveraged to implement the KSFs and what
capital should be strengthened (in terms of the six capitals)?

⚫

This will help investors not only to have a clearer understanding of an
impact company’s business model and challenges to scale up, but also to domodeling and provide advice on making necessary changes at the right time.

(3) Dialogue to accelerate the positive feedback loop and unlock further potential⚫

To further increase corporate value while utilizing the capital market, it is useful for
impact companies to discuss more strategic resource allocation based on the
results of IMM, not only internally but also with investors.

⚫

Therefore, impact companies should consider actively engaging in dialogue withinvestors, presenting information on their IMM practices and results, anddiscussing which of the six capitals should be strategically maintained andstrengthened, as well as necessary business and finance strategies.

⚫

As indicated in (2) above, the more concrete the company's worldview regarding
the impact it intends to create, the more useful this discussion on strategic
resource allocation will be.

<Reference 5>⚫

“Using Impact Metrics to Promote Dialogue with Purpose as Starting Point,” Keidanren(Japan Business Federation)⚫

“Guidance for Integrated Corporate Disclosure and Company-Investor Dialogue forCollaborative Value Creation 2.0,” The Ministry of Economy, Trade and Industry⚫

“Report by the Working Group on Impact Investment,” The Financial Services Agency⚫

Corporate Governance Code “Guidelines for Investor and Company Engagement,” The
Financial Services Agency⚫

Impact companies should consider making management decisions, including appropriate
risk-taking, with an aim to achieve sustainable business growth by developing synergy
between impact creation and earnings generation.

⚫

For this reason, as part of governance in a broad sense, impact companies should consider
the following when designing decision-making bodies and fostering organizational climate.

30

Major Angle Used

Recommended practices

for GovernanceDecision-making<Board of directors>

bodies⚫

As with conventional corporate governance, the board of directors,
which is both a decision-making and supervisory body, is regularly
informed of progress related to impact creation as a critical goal. The
Board also discusses how to proceed.

<Enhancing the board’s decision-making quality>⚫

To improve the quality of discussion of the company's impact creation
strategy as well as the revenue generation strategy, the board of
directors is considering the establishment of a sustainability
committee, an impact committee, or an advisory board, etc.

<Composition>⚫

The skills and expertise required of leaders who comprise the board of
directors are well defined based on the social and environmental
issues the company aims to resolve. The board is structured to satisfy
these requirements.

⚫

The board is designed to obtain input from external advisors andexperts with expertise relevant to the impact the company intends tocreate.

⚫

The members are selected not only to incorporate various
stakeholders’ values but also to ensure diversity in gender andnationality, among others.

Corporate culture⚫

The values and management policies geared towards impact creationand earnings generation are a dominant force not only in the
management team but also among all employees of the company,
serving as their guiding principles.

⚫

As a company that aims to solve social and environmental issues
using its innovative technologies and business model, the company isconsidering ways to promote an organizational culture of integrity withhighly ethical standards while taking appropriate risks.

<Reference 6>⚫

“Japan’s Corporate Governance Code,” JPX⚫

“Practical Handbook for ESG Disclosure,” JPX

31

Appendices1. Six Capitals Identified by the IIRC

33

2. Reference36

2.1. Disclosures of the Theory of Change, logical framework, and value creation model

36

2.2. Disclosures of trends in the social/environmental issues

42

2.3. Disclosures of growth strategies (including expansion of the TAM)

47

2.4. Disclosures of quantitative information that underlies the sources of the company’scompetitive advantages

54

2.5. Disclosures of risk management policies

59

2.6. Disclosures of overall pictures of stakeholders and policy on governance61

2.7. Disclosures of information at the time of an IPO

64

3. Relationship between Recommended Disclosure Items and Documents

66

In issuing this guidance70

Impact IPO Working Group Committee Members List

72

32

Definition by IRRC (English)11

Six Capitals
財務資本The pool of funds that is:

Financial capital⚫

⚫

Available to an organization foruse in the production of goods or⚫

Definition by IRRC (Japanese)12
組織が製品を生産し、サービスを提供する際に利用可能な資金⚫

借入、株式、 寄付などの資金調達

the provision of services

によって獲得される、又は事業活Obtained through financing, such

動若しくは投資によって生み出さ

as debt, equity or grants, or

れた資金

generated through operations orinvestments.

製造資本

Manufactured physical objects (as製品の生産又はサービス提供に当たっ

Manufactured

distinct from natural physical objects)て組織が利用できる製造物（自然物とcapitalthat are available to anは区別される。
） 、例えば、

organization for use in the production⚫

建物of goods or the provision of services,⚫

設備

including:⚫

インフラ（道路、港湾、橋梁、廃⚫

Buildings⚫

Equipment⚫

Infrastructure (such as roads,て創造されるが、報告組織が販売

ports, bridges, and waste and

目的で製造する場合や自ら使用すwater treatment plants).

るために保有する資産も含む。

棄物及び水処理工場など）⚫

製造資本は一般に他の組織によっ

Manufactured capital is often createdby other organizations, but includes
assets manufactured by the reportingorganization for sale or when they areretained for its own use.

知的資本

Organizational, knowledge-based

組織的な知識ベースの無形資産Intellectual capitalintangibles, including:⚫

⚫

特許、著作権、ソフトウェア、権Intellectual property, such as

利及びライセンスなどの知的財産

patents, copyrights, software,権

rights and licenses⚫

暗黙知、システム、手順及びプロ

11

Excerpted from the “International Integrated Reporting Framework” (January 2021)

12

Excerpted from the Japanese translation referred to in Footnote 1033

⚫

“Organizational capital” such as

トコルなどの「組織資本」

tacit knowledge, systems,
procedures and protocols.

人的資本

People’s competencies, capabilities

人々の能力、経験及びイノベーション

Human capitaland experience, and their motivations

への意欲、例えば、

to innovate, including their:⚫

⚫

Alignment with and support for

ク、リスク管理アプローチ及び倫

an organization’s governance

理的価値への同調と支持

framework, risk management⚫

approach, and ethical values⚫

⚫

組 織ガバナンス・フレームワー

Ability to understand, develop

組織の戦略を理解し、開発し、実
践する能力

⚫

プロセス、商品及びサービスを改

and implement an organization’s

善するために必要なロイヤリティ

strategy

及び意欲であり、先導し、管理

Loyalties and motivations for

し、協調するための能力を含む。

improving processes, goods andservices, including their ability tolead, manage and collaborate.

社会・関係資本The institutions and the relationships

個々のコミュニティ、ステークホルダ

Social andwithin and between communities,

ー・グループ、その他のネットワーク

relationship capitalgroups of stakeholders and other

間又はそれら内部の機関や関係、及びnetworks, and the ability to share

個別的・集合的幸福を高めるために情information to enhance individual and

報を共有する能力。社会・関係資本にcollective well-being.

は次を含む。

Social and relationship capital⚫

includes:⚫

⚫

Shared norms, and common

動⚫

主要なステークホルダーとの関係

values and behaviors

性、及び組織が外部のステークホ

Key stakeholder relationships,

ルダーとともに構築し、保持に努

and the trust and willingness to

める信頼及び対話の意思

engage that an organization has⚫

developed and strives to buildand protect with external⚫

共有された規範、共通の価値や行組織が構築したブランド及び評判に関連する無形資産⚫

組織が事業を営むことについてのstakeholders

社会的許諾（ソーシャル・ライセ

Intangibles associated with theンス）

brand and reputation that anorganization has developed⚫

An organization’s social license tooperate.

34

自然資本

All renewable and non-renewable

組織の過去、現在、将来の成功の基礎

Natural capitalenvironmental resources andとなる物・サービスを提供する全てのprocesses that provide goods or

再生可能及び再生不可能な環境資源及services that support the past, current

びプロセス。自然資本には次を含む。

or future prosperity of an organization.

⚫

空気、水、土地、鉱物及び森林

It includes:⚫

生物多様性、生態系の健全性⚫

Air, water, land, minerals andforests⚫

Biodiversity and eco-system
health.

35

This section includes disclosures that may help in implementing Step 4 of the Guidance’s main body,without limiting the scope to impact companies with the three intentions e that the Guidance
specifically targets. We believe that there are many other disclosures by various domestic and foreigncompanies that could be helpful. We hope that impact companies will refer to these and other helpful
disclosures to develop their own disclosure and dialogue practices based on the Guidance.

(i) CureApp (logical framework)(Source) CureApp website (current as of December 2023)

36

(ii) Gojo & Company (Theory of Change)(Source) Gojo & Company website (current as of December 2023)

37

(iii) Fermenstation (Theory of Change and logical framework)(Source) Fermenstation 2022 Impact Report38

(iv) On the Slope (Theory of Change)(Source) On the Slope Report 2021 - 202239

(v) Marui Group (logical framework)(Source) Marui Group Impact Book 2023

40

(vi) Tony‘s Chocolonely (value creation model)(Source) Tony‘s Chocolonely annual report 2021/2022

41

(i) Northvolt (global trends in the battery market toward decarbonization)(Source) Northvolt Sustainability and Annual report 2022

42

(ii) BensonHill (trends in the global food system)(Source) BensonHill ENVIRONMENTAL SOCIAL & GOVERNANCE REPORT 2022

43

(iii) Too Good To Go (global food waste and opportunities the problem presents to the company)(Source) Too good to go IMPACT REPORT 2022

44

(iv) Tesla (plans for the use of sustainable energy in the future)(Source) TESLA Master Plan Part 3 (2023)

45

(v) Regional Fish (outlook for global demand for protein foods and Japan’s aquaculture industry)(Source) Regional Fish website (current as of December 2023)

46

(i) H2 Green Steel (Quantification of the impact the company makes and plans for expansion)(Source) H2 Green Steel website (current as of December 2023)

47

(ii) Elephantech (expanding market; comparative advantages of the company’s products(Source) Elephantech website (current as of December 2023)

48

(iii) Oxford Nanopore (availability of technologies)(Source) Oxford Nanopore SUSTAINABILITY REPORT FY 2022(iv) Planet Labs (availability of technologies)(Source) Planet Labs 2023 Investor Day Presentation49

(v) Gojo & Company (framework that combines customer and business perspectives)(Source) Gojo & Company Impact Report July 202250

(vi) Recruit (impact creation-related goals and a detailed approach for reaching these goals)(Source) Recruit website (current as of December 2023)

51

(vii) Ame Kaze Taiyo (medium- to long-term visions and impact metrics)(Source) Ame Kaze Taiyo website (current as of December 2023)

52

(viii) KATITAS (External environment)(Source)KATITAS Co., Ltd. Integrated Report 2023

53

(i) Safaricom (four bases of the company’s culture and data connected to these bases)(Source) Safaricom ANNUAL REPORT AND FINANCIAL STATEMENTS 2023

54

(ii) Tesla (use of external data to disclose its high ratings by new graduates in engineering)(Source) Tesla Impact Report 2022

55

(iii) Teladoc (quantified critical details about the company’s mission)(Source) Teladoc 2022 Corporate Social Responsibility Report56

(iv) Eisai (quantified value of non-financial capital)(Source) Eisai Value Creation Report 2023

57

(v) Sekisui House（Value Creation Process and Management Resources）(Source) Sekisui House, Ltd. Value Report 2023

58

(i) Safaricom (impact on stakeholders and acknowledged trade-offs for it)(Source) Safaricom ANNUAL REPORT AND FINANCIAL STATEMENTS 2023(ii) Orsted (comparison of new expectations from stakeholders with the company’s abilities to59

identify areas for improvement)(Source) Orsted Green energy to power lasting positive impact

60

(i) Vital Farms (key stakeholders identified and governance structured to incorporate thesestakeholders’ interests)(Source) Vital Firms 2023 IMPACT REPORT

61

(ii) Kry (example of key stakeholders identified and stakeholder engagement)(Source) Kry Sustainability Report 2022

62

(iii) Beyond Meat (example of key stakeholders identified and stakeholder engagement)(Source) Beyond Meat ENVIRONMENTAL, SOCIAL,AND GOVERNANCE UPDATE JULY 2022(iv) Oxford Nanpore (established sustainability governance)(Source) Oxford Nanopore SUSTAINABILITY REPORT FY 2022

63

(i) Kokusai Electric (disclosure of a record and targets related to human capital in a Securities
Report (Part I)(Source) Securities Report for Initial Listing Application (Part I) by Kokusai Electric64

(ii) Emimen (disclosure of ToC and a logical framework in a Securities Report (Part I)(Source) Securities Report for Initial Listing Application (Part I) by Emimen

65This section focuses on the documents required at the time of an IPO, namely a securities report,
documents illustrating the company’s growth potential, and corporate governance report (CG). Other
documents, such as a prospectus and written notice, are also required when a company goes public.
Those documents, however, contain essentially the same details as those in a securities report.
Information may also be disclosed in documents for voluntary disclosure in addition to those forstatutory disclosure. A check (✓) indicates that the items are closely connected, although theconnection is not limited to those items.

(i) Trends in

(ii)

(iii)

(iv) Risk/(v) Overallsocial/environme

GrowthQuantitati

Opportunit

picture ofntal issues to be

strategyveystakeholde

addressed(includin

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scale of TAM)

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TAM)

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I. Overview of✓

the Company(employee-⚫

Employees

relatedinformation)

II. Overview ofSecurities
report✓✓✓✓Business⚫

Management
Policy,Business
Environment,
and Issues tobe66

Addressed⚫

Approach to

✓

✓

✓

✓

✓

Sustainabilit(strategies, metrics,(strategie(strategies,(risk(governance)and goals)s, metrics,

metrics, andmanagement

and goals)

goals))y and
RelatedInitiatives*1⚫

Business

✓

Risks
⚫

Management✓

Analysis ofFinancial
Position,
OperatingResults, andCash Flows⚫

Business✓

model
Documen

⚫

g the

✓

✓

conditions

ts
illustratinMarket⚫

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company'

advantagess growth
potential⚫

*2

Business

✓

plan
⚫

Risk

✓

information
I-1. Basic views
I-1 (2)CG *3

Disclosure
based on
each

✓
✓

✓

✓

✓

✓

(Principle 2-3)

(Principle(Principle 2-(Principle 2-(Principle 2-

2-1)

4)

3)

2,
Principle 4-1

67principle of
the Code *4
II. Business✓

Management
Organization
and Other
Corporate
Governance
Systemsregarding
Decision
Making,Execution ofBusiness,
andOversight
III.

✓

Implementati
on ofMeasures for
Shareholders
and Other
Stakeholders(Impact

✓

✓

✓

✓

✓

report,Voluntary

sustainability

reports *5

report,integrated
report, etc.)*1: In the new section for sustainability information, the disclosure of information about governance andrisk management is required of all companies, and information about strategies, as well as indicatorsand targets, should be disclosed if it is judged to be important (“Commentary on Amendments to the
Cabinet Office Order on Disclosure of Corporate Affairs,” the Financial Services Institute). The
recommended disclosure items (i) to (v) in this Guidance may also be disclosed.
*2: “Matters related to Business Plans and Growth Potential” in the growth market*3: Corporate Governance Report*4: The principles in Japan’s Corporate Governance Code that may be related are shown as examples,68which does not mean that these are the only related principles. Moreover, depending on which market
section the company is in, some principles with supplementary principles may require more detail.
[Principle 2.1 Business Principles as the Foundation of Corporate Value Creation Over the Mid- toLong-Term][Principle 2.2 Code of Conduct][Principle 2.3 Sustainability Issues, Including Social and Environmental Matters][Principle 2.4 Ensuring Diversity, Including Active Participation of Women][Principle 4.1 Roles and Responsibilities of the Board (1)]
*5: Since the voluntary disclosure of an impact report and other documents is not based on any
regulations, companies are allowed considerable latitude in what to include in these documents.
Consequently, companies submit reports that significantly vary in content and format.

69

In issuing this guidance
Sayaka Tomihara,

Director, Startup and New Business Promotion Office,Economic and Industrial Policy Bureau,
Ministry of Economy, Trade, and Industry
In Japan, which is said to be a leading nation in social issues, it is important to be the first country in
the world to create a mechanism to view social and environmental issues as positive drivers and tocreate new social opportunities and markets through business.
To this end, the Ministry of Economy, Trade and Industry (METI) last year established the "J-Startup
Impact" startup development support program, which aims to raise awareness and build momentum
for impact startups and provide intensive support through public-private partnerships.
Impact companies enhance their management capital and make upfront investments by disclosing
information and engaging in dialogue with investors based on a business model and strategy thatbalances impact and profitability. Further, impact companies enhance corporate value while improving
the capital market’s evaluation of such companies. These are very important tasks, but not easy ones.
I feel that issuing this guidance will be meaningful in fostering a common understanding andconstructive dialogue among all parties involved.
I hope that many people, including impact startups, will make use of this guidance in the future, andthat many examples will be created to accelerate such a "positive feedback loop," leading to the growthof impact companies and the development of capital markets that support them.

Hideki Takada,

Director of Strategy Development Division,
Financial Services Agency of Japan

In the past, the promotion of improvement effects (impact) on social and environmental issues wasoften understood as a trade-off relationship, involving costs in terms of both time and money, and notnecessarily in line with business growth and profitability. On the other hand, in recent years, we haveseen a variety of companies and investors working to promote and grow their businesses by addressing
issues from the perspective that the two are mutually reinforcing and complementary.
This guidance was compiled by the GSG National Advisory Committee through discussions among
companies and investors with a variety of knowledge and experience regarding the impact companies’
evaluation and disclosure, as well as the dialogue with investors. The importance of unlisted companies

70seamlessly obtaining accurate evaluations from the capital markets, including the listed markets,regarding their strategies such as the realization of impact, is a point that has been frequently raisedby the JFSA's "Study Group on Impact Investment (Impact Finance)". We believe that this report will
provide an important impetus for discussion.
The JFSA would like to stimulate and support discussions on various issues, including corporate
valuation, through public-private partnerships such as the Impact Consortium.

71Impact IPO Working Group Committee Members List
（As of January 22, 2024）
Alphabetical order within each role
★ as authors
Chair

Tomoya Shiraishi

Member of Japan National Advisory Board of GSG
Representative Director, Phronesis Partners
Member of Japan National Advisory Board of GSG

Vice chair

Chunmei Huang

Managing Director, Impact Investment Team, Shinsei
Corporate Investment Limited

Members

Masaaki Amma

Hiroki Iura

Shinobu Ikegawa

Yoshiaki Ishikawa

Adjunct Professor, both at Hitotsubashi University and Fukui
Prefectural University
Chief Fund Manager, Equity Investment Division, Resona
Asset Management Co., Ltd.
Managing Director, Head of IPO Dept 1, Daiwa Securities Co.
Ltd.
CFO / Impact Officer, Life is Tech, Inc.
Managing Director, Sustainable Finance Dept. and Investment

Teruhiko Ishida

Banking Business Development Dept., Nomura Securities Co.,
Ltd.

Katsuji Imata

Shohei Iwaya

President, Social Impact Management Initiative (SIMI)
General Manager, Investment Div., Equity Investment Group,
Asset Management One Co., Ltd.

Taizo Otsuka

Chief Impact Officer, Ame Kaze Taiyo, Inc.

Katsuya Kikuchi

ESG specialist, Tokio Marine Asset Management Co., Ltd.

Keiji Kuramoto

Managing Executive Officer, IPO Dept., SBI SECURITIES Co.,
Ltd.

72

Hisakazu Sakai

Managing Director, Senior Deputy Head, Private Corporate
Finance, SMBC NIKKO SECURITIES INC.

Lina Sakai

CEO, Fermenstation Co., Ltd.
Member of Japan National Advisory Board of GSG

Kotaro Sueyoshi

Joint General Manager, Sustainable Business Promotion
Department, Mizuho Financial Group, Inc.

Terunori Takahashi

Haruna Tanaka

Masato Takebayashi

Business Unit, Mitsubishi UFJ Morgan Stanley Securities
Head of Corporate Planning, Gojo & Company, Inc.
Part-time University Lecturer, Graduate School of Business
Administration, Keio University

Masato Nakamura

Founding Partner, GLIN Impact Capital

Yohei Hamada

Finance & Sustainability Specialist, Shizen Energy Inc.

Yuji Hisanou

Director of Corporate Affairs（CFO）, CureApp, inc.

Hitoshi Fujiwara

Hiroki Maekawa

Kotaro Yamagishi

Reiji Yamanaka

Masashi Wada

Observers

Head of Startup Acceleration Team, lnvestment Banking

Sayaka TomiharaPartner, Certified Public Accountant, Growing Enterprise
Support, Ernst & Young ShinNihon LLC
Board Director and Chief Financial Officer (CFO), Axcelead,
Inc.
CEO, Keio Innovation Initiative, Inc.
Managing Director, KIBOW Impact Investment Fund Associate
Professor, GLOBIS University
Sustainability Strategist, Sustainability Promotion Dept.,
Mizuho Securities Co., Ltd.
Director, Startup and New Business Promotion Office,Economic and Industrial Policy Bureau

73Director of the Sustainable Finance Office, Strategy
Yuki Nishida

Development Division, Strategy Development andManagement Bureau, Financial Services Agency

Saya Mizuno

Keisuke Arai

Secretariat

Satoshi Oda

Deputy Director, Green Finance Office | Ministry of theEnvironment, Japan
Director, New Listings Department, Tokyo Stock Exchange,
INC.

Knowledge Development Officer, Impact Economy Lab, Japan
Social Innovation and Investment Foundation (SIIF)
Impact Catalyst, Impact Economy Lab, Japan Social Innovation★Aiko Kozaki

and Investment Foundation (SIIF) (Supported the secretariat
as a consultant until the end of December 2023)
CEO, stream-i, Inc.

Kyoji Sasaki★Fumi Sugeno

Impact Catalyst, Impact Economy Lab, Japan Social Innovation
and Investment Foundation (SIIF)
Chief of Impact Economy Lab, Impact Economy Lab, Japan
Social Innovation and Investment Foundation (SIIF)
Impact Catalyst, Impact Economy Lab, Japan Social Innovation★Sumika Tabara

and Investment Foundation (SIIF) (Supported the secretariat
as a consultant)CEO, Bipedal, Inc.

Michiru Toda

Deputy Chief of Impact Economy Lab, Impact Economy Lab,
SIIF: Japan Social Innovation and Investment Foundation

Secretariat’s
Advisors

Nao Sudo

Director, Impact Frontiers

Toshikazu Hayashi

Head of ESG, Nippon Life Global Investors Europe Plc.

74

Guidance for Impact Companies
on Disclosure and Engagement in Capital Markets

Impact IPO Working Group, The Japan National Advisory Board,
The Global Steering Group for Impact Investment（GSG Japan NAB）

GSG Japan NAB / Impact Economy Lab,
Japan Social Innovation and Investment Foundation (SIIF)
PUBLICATION DATE：May 2024