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Guidance for Impact Companies on Disclosure and Dialogue in Capital Markets - Version 1
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The Global Steering Group for Impact Investment Japan National Advisory Board (current GSG Impact Japan) launched the Impact IPO Working Group (hereafter “the Working Group”) in July 2023 to foster a common understanding and constructive dialogue between impact company and capital market participants, primarily investors, through information disclosure, etc., so that impact companies can create impact while realizing continuous enterprise value growth throughout the process before, at, and after an IPO. The Working Group is comprised of 26 members, including business companies, listed and unlisted investors, securities firms, and experts. After five meetings, the Working Group released a draft guidance in January 2024 and then, solicited opinions from the public from January to February of the same year. By taking these comments and discussions into consideration, the Working Group officially released the first edition of “Guidance for Impact Companies on Disclosure and Dialogue in Capital Markets” today. |
▶Documents
① Guidance
１．Background
Currently, there is a lack of a well-defined method for companies that intend to generate positive, measurable social and environmental impact through their products and services while achieving business growth (hereafter "impact companies") regarding how to have a constructive dialogue with investors, both when they go public and after listing, by effectively communicating the link between pursuing impact and achieving sustainable business growth. In addition, there is only a limited amount of guidance for impact companies on how to incorporate the perspective of impact creation into their business management process.
To address these issues, the Working Group, comprised of capital market participants, including business companies, investors, and securities firms, developed this guidance to foster a common understanding and constructive dialogue between impact company and capital market participants, primarily investors, through information disclosure, etc., so that impact companies can create impact while realizing continuous enterprise value growth throughout the process before, at, and after an IPO.
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.” These four steps span from impact companies’ strategy development to information disclosure/ engagement throughout the pre- to post-IPO process.
The steps that impact companies are advised to take to accelerate a positive feedback loop. These steps span the process from strategy development to information disclosure. They explain how the concept of IMM can be best understood and applied to a company’s business management.
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 and feedback on the Guidance from users, we hope we can update the Guidance.
* 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.
２．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 to create 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 that balances 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 and constructive dialogue among all parties involved.
I hope that many people, including impact startups, will make use of this guidance in the future, and that many examples will be created to accelerate such a "positive feedback loop," leading to the growth of 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 was often understood as a trade-off relationship, involving costs in terms of both time and money, and not necessarily in line with business growth and profitability. On the other hand, in recent years, we have seen 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 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 raised by 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.３．Index
| 1. Background 2. Objective 3. Intended Users and Usage of the Guidance 4. Underlying Principles of the Guidance 5. Four Steps to Accelerate a Positive Feedback Loop Appendices 1. Six Capitals Identified by the IIRC 2. Reference 3. Relationship between Recommended Disclosure Items and Documents |
４．Impact IPO Working Group Committee Members List
This guidance was developed by 26 Impact IPO Working Group members, including business companies, listed and unlisted investors, securities firms, and experts, who crossed organizational boundaries and engaged in vigorous discussions over multiple sessions.
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（As of January 22, 2024）
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５．Inquiries
If you are interested in in-house training or seminars on this guidance or related subjects, please contact us.
| Inquiries
Impact IPO Working Group, The Japan National Advisory Board, Secretariat : Michiru Toda・Kyoji Sasaki MAIL : lab@siif.or.jp |
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