How do you estimate the impact potential of a climate tech startup? That's the most important question if you want to invest in technology that should help reduce greenhouse gases. In other words, how do you make sure your money contributes to reducing GHGs? And how do we avoid greenwashing?

After reading this article, you will know…

  • Why this framework is important to estimate the impact potential of a company
  • How we avoid greenwashing by funds and companies
  • How we make sure your money has real impact

Introducing GHG Forecasting: Unlocking real impact

The Project Frame working group, which I joined this year, aims to improve investment decisions. We develop standards and methods for calculating the future impact of a company or technology. This is known as GHG forecasting.

There is a remarkable absence of standards or best practices for accurately assessing impact potential. It's not surprising, then, that opportunistic funds may inflate their impact figures. Call it greenwashing 2.0. Ultimately, such actions fail to accelerate the much-needed transition. Moreover, it makes it harder to determine where money makes the most impact.

This is why the Project Frame working group aims to develop standards and methods for calculating the future impact of a company or technology and improve investment decisions.

Now, let's delve deeper into our work.

Basics of GHG forecasting

For the best investment decisions, you want to have a good idea of the impact an investment will have (if all goes well). In other words, how many GHGs will we cut if this company becomes a success? And what is the contribution of your investment? 

This entails calculating two factors. Let's use electric driving as an example.

  1. The baseline. This is how much GHGs a sector emits if nothing changes. So in our example, how many GHGs are released by traditional fuel engines in cars?
  2. The alternative line. This is how many GHGs your investment cuts—so in our example, electric cars.

Unfortunately, this is easier said than done.

Challenges with GHG forecasting

In the stock market, analysts estimate a company's future value to determine its stock price. There are two types of companies: "value companies" and "growth companies." Value companies are established with profitable products, while growth companies rely on future profits. Estimating the growth of these companies is challenging and requires assumptions about the economy, interest rates, and competition.

Climate tech startups are growth companies with future financial AND climate impact. As they grow, they contribute more to reducing GHG emissions. That makes GHG potential forecasting so hard. First we need to forecast how quickly a technology will be adopted, e.g. how many EVs do we expect to be sold in the world by 2030? And what share of that market can our company capture?

Secondly, the GHG impact of a technology will change over time. Today, most electricity on the grid is still made from fossil fuels, and thus has a larger footprint. In 2030, we expect more renewables on the grid – but how many?

Lastly, we need to factor in Big Disruptors, i.e. what will the future of cars look like generally? Will it still be the norm in 2030 to have your own car? Or will car and ride sharing become more common, especially if autonomous vehicles come online?

By considering these factors, we can better understand the growth potential and environmental impact of climate tech startups.

How we make sure our funds avoid greenwashing

When it comes to answering these questions, analysts and investors rely on assumptions. To avoid greenwashing, it is crucial to substantiate these assumptions effectively. Our funds are responsible for conducting these analyses, and whenever we review a fund, we make sure to examine a selection of their analyses. It's one of the steps we take to find the best funds.

Here are the key points from the previous working group's white paper.

Unit Impact: where it all starts

The main consideration here is the amount of GHG emissions saved by one product. For example, how much GHG does an EV save compared to a fuel-powered car? Analysts need to consider:

  1. The solution's scope: What contribution does a solution have in the overall chain of contributors? Is it a complete product (like an EV), a component (like a battery), or an enabling solution (like solar panels for electricity) that yields the GHG impact?
  2. The solution's generated effects: How much GHG emissions are reduced by the new technology? Is the reduction per product a one-time occurrence (as with a plant-based burger) or recurring (as with a continuously used EV)?
  3. Measurability: How can the impact be quantified and monitored over time?

To avoid overly complex calculations, analysts must use system boundaries. These boundaries define what is included and excluded in the analysis. For example, when considering a more efficient car, it may be reasonable to assume that emissions factors for material extraction, manufacturing, or disposal remain relatively unchanged compared to a standard car. Therefore, the system boundary would focus solely on the car's usage.

For obvious reasons, it is important to be critical of the selected system boundaries. When harmful elements are intentionally omitted, greenwashing becomes a concern.

In the next step, the impact of the new technology is compared to the existing technology, also known as the baseline mentioned earlier. I think it is important to be conservative when estimating the impact relative to the baseline because existing technologies often become more fuel efficient each year.

Calculate potential global GHG impact

What impact can we achieve if the entire market transitions to the new technology? This is known as the Total Accessible Market (TAM).

Estimating the long-term potential impact of new solutions requires a thorough analysis of several factors. A critical aspect is examining market trends, including the rate of technology adoption and the phase-out of incumbent technologies.

It's important to consider realistic growth rates and the presence of competing innovations. Moreover, determining the Serviceable Obtainable Market (SOM) is crucial—this represents the market share a company can reasonably capture. One of the most challenging aspects is assessing how and when the market will embrace a new climate solution. The Diffusion of Technology theory explains the process by which innovation is adopted and spreads throughout the market.

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Consequently, considering the rate of technology diffusion becomes vital in calculating the Serviceable Obtainable Market (SOM) accurately. To assess the potential impact, the unit impact is multiplied by the SOM.

Calculate planned impact of the specific company

The main question is: what portion of the market will this company capture? The starting point is the company's commercial forecast, which indicates the expected number of products to be sold. This forecast is then multiplied by the Unit Impact.

Commercial forecasts are provided by companies and should be evaluated for feasibility, realism, past performance, and industry expectations. When conducting due diligence, it is important to align impact modeling with financial modeling, as the underlying principles for business growth apply to both.

Here are some key considerations when assessing company commercial forecasts and growth:

  • Was the forecast prepared for operational purposes or to attract investors?
  • How was the forecast developed? Is it based upon factual data or assumptions of year-on-year growth rates?
  • Does the forecast align with industry growth expectations?
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This year’s plan

In the previous year, the Project Frame working group reached a consensus on the topics of unit impact, potential impact, and planned impact. However, there are other crucial factors to consider for optimal investment decisions.


Attribution methodology is crucial for dividing the overall reduction of GHG emissions among all those involved in a solution. It helps us avoid greenwashing and being too optimistic about achieving Net Zero by making sure that no single contributor takes credit for the entire reduction.

There are two distinct ways to attribute GHG emission reduction of a given proposed climate solution: horizontal attribution and vertical attribution (see the image below). Horizontal attribution involves allocating emissions reduction impact across companies in the value chain, while vertical attribution involves allocating it among the shareholders of the company responsible for the solution.

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 A robust attribution methodology should:

  • Avoid double counting: each ton avoided GHG is allocated only once.
  • Reward the most impactful contributors: prioritize contributors that have a significant amplifying effect.
  • Be practical: Utilize readily available data and minimize room for interpretation.


This is the topic I’m working on. Additionality refers to determining whether GHG savings would have occurred even without the specific solution or company you invested in. In other words, the focus is on assessing whether the GHG savings would have been achieved regardless of your investment.

For example: Were you funding undiscovered pioneers or joining a market with already 100 promising companies? If the reductions would happen anyway, then the proposed climate solution's GHG reduction is not additional.

  1. Laws & regulations: Governments may require GHG reductions in various markets (e.g., banning fossil fuel-powered cars), so introducing a proposed climate solution in that market may not result in additional GHG reductions.
  2. Alternative solutions: If there are already alternative solutions available with similarly low GHG emissions (e.g., another type of EV), then the proposed climate solution may not be considered additional.
  3. Creating new energy demand (rebound effect): Sometimes, a proposed climate solution that offers lower GHG emissions compared to the current option may inadvertently lead people to switch from other low GHG options to a higher emissions product. One example of this could be if an electric bike replaces a regular bike, rather than replacing car usage.
  4. Elimination of market entry barriers: In the past, renewable energy was much more expensive than fossil fuel-based electricity. By removing these barriers, new applications become possible. This can be counted as additional GHG reductions.

As always, I'll keep you posted on my progress! Let me know if you have any questions 🙂.