How To Communicate Your Climate Impact 🌍

For most climate entrepreneurs, measuring and reporting impact is a key element of raising capital.

Enduring Planet sat down with Mia Diawara, Partner at Lowercarbon Capital, to explore effective strategies to communicate climate impact with prospective investors and other key stakeholders.

Transparency is 🔑

Today’s proliferation of climate tech is outpacing the development of substantive standards around impact measurement. As a result, impact communication can feel like the Wild West, with neither founders nor investors knowing what the gold standard is.

To counter this ambiguity, climate entrepreneurs should be fully transparent with investors about three key aspects of their impact statements:

• Methodology: There may be no “correct” method for communicating your specific climate impact, but that is not an excuse to be vague about your approach. Be clear about the metric(s) that you use to measure impact and thoroughly explain how you are making your calculations.
  
• Assumptions: When you make an assumption in your impact model, be sure to document it. Investors will want to play around with these as they evaluate your impact story, so make it easy for them. Ideally, your impact assumptions should also be clearly delineated in your financial model so that revenue growth and climate impact can be analyzed in concert.
  
• Baseline: It is critical that founders establish a benchmark climate scenario against which they measure their venture’s impact. Consider providing investors with an outline of a counterfactual baseline world in which your product doesn’t exist and highlight the differences.

Communicating direct impact

If your venture directly mitigates or removes emissions, expect investors to be laser-focused on the quantitative aspects of your stated climate impact. A few tips to keep in mind:

• Your key metric will likely be tons of CO2e avoided or removed, measured over a specific time period, attributable to your product or service, relative to the baseline scenario that you establish.
• Remember that mitigation doesn’t happen in a vacuum and that net impact is the metric of interest for most investors. If possible, best practice in communicating emissions impact is to subtract out the emissions associated with providing your product and service (see the point below on LCAs). It's also important to look beyond emissions where relevant to understand the broader environmental and social impacts of your products. What does your supply chain look like? How will communities be impacted by your product?
• When calculating your venture’s climate impact, you may consider investing in a Life Cycle Assessment (LCA) by an independent third party or building one yourself. There are many different levels of detail/rigor at which to conduct an LCA and it's important to figure out the most appropriate for your purposes. For a pre-seed round, when a product is at an MVP stage, a simple spreadsheet model may be sufficient for getting to a figure you can discuss with investors. While full standardized LCAs or streamlined LCAs from third parties can be expensive for early stage startups, they’re worth considering given the validation they provide for your impact story - particularly if you plan to make any external claims. For lower cost alternatives, founders can also utilize free or lower-cost tools such as OpenLCA and SimaPro.
• The bigger and bolder your climate impact number is, the more scrutiny it will receive. Stay grounded in reality and, if your company is in the early stages, don’t bend yourself into a metric that you can’t back up. Instead, consider weaving in a qualitative assessment of your venture’s high-level potential.

What about indirect impact?

For many climate startups, impact can be difficult to quantify because it is indirect. A SaaS company focused on improving residential solar sales, for example, is one step removed from the direct impact that the solar companies themselves can claim. So, how do the secondary and tertiary players get their due? A handful of observations:

• Not all investors have strict thresholds or targets on avoided emissions. Many understand that there is nuance in attribution, and that some solutions are enabling technologies that help "unlock" impact elsewhere in the value chain. Seek out these investors; they will be receptive to an impact statement with alternative metrics and qualitative impact narratives.
• When making claims about indirect impact, make sure to speak to additionality and attribution. The burden of proof increases when your influence is indirect, so be particularly clear about your assumptions and methodology. The questions you need to answer are:
  • When you zero in on where emissions are actually avoided, what additional impact did your product unlock?
  • Would the “impact” have occurred anyway?
  • How is the impact actually attributable to your tech?

Communicating adaptation & resilience impact

Founders in the adaptation and resilience space face the most amorphous climate impact measurement and reporting landscape. Since there are few standard metrics around adaptation and resilience, keep it simple and stick to some basic strategies:

• Make sure your metrics clearly communicate the true impact on the “beneficiary.” Clearly define who you’re serving and how their ability to respond to climate shocks is being DIRECTLY improved.
• Focus on the actual resilience/adaptation impact, rather than proxy metrics. For example, if you’re in the climate risk data space, do your best to measure the actual impact your data/analytics are having on the end consumer. If you’re serving insurance companies, are they improving their underwriting and extending insurance to a greater subset of customers? Or improving pricing to better reflect underlying risk?
• Clear assumptions and transparent methodology are SUPER critical here, given the lack of formal impact methodologies. There’s no risk of over-communicating.
• Many resilience and adaptation ventures have co-benefits that span other important impact areas (poverty, inequality, etc). Be sure to understand your startup’s place in the broader community of stakeholders, be thoughtful about how its impact is distributed, and note all of the co-benefits you’re creating. This can dramatically expand the pool of investors you can access.

Impact Framework Tools for Mitigation/Removal

For those of you working in mitigation and removal, here are some helpful resources you can leverage when thinking about measuring and communicating your impact in a way that will land with your investors:

• CDP and Breakthrough Energy Framework
• WRI / GHG Protocol Guidance on Estimating and Reporting Avoided Emissions
• CRANE tool
• SERC tool; simple emissions reduction calculator for startups
• PlaneTECH Impact Hypothesis tool

Mia Diawara is a Partner at Lowercarbon Capital, where she invests in unreasonably ambitious teams building climate tech that will move the needle for the planet and its people. She also focuses on making sure this work is carried out inclusively and equitably. Prior to joining Lowercarbon, Mia spearheaded decarbonization strategy across a portfolio of over $90B in assets under management at TPG, where she developed and kicked off the execution of the firm’s first comprehensive climate roadmap and advised portfolio companies on climate risk, emissions reduction, and ESG strategy. At TPG, she was instrumental to the development of the fund’s climate impact assessment methodology for TPG Rise Climate - their climate focused impact fund.

Lowercarbon Capital is an early stage venture firm that backs kickass companies that make real money slashing CO2 emissions, sucking carbon out of the sky, and buying time for frontline communities and ecosystems while we work to unf**ck the planet.