Forum Institutional

How to measure real planet-positive impact when it comes to your investment

There is no single metric that can capture the full impact of an investment, but a combination of metrics can be used to get a more complete picture.

There is no single metric that can capture the full impact of an investment, but a combination of metrics can be used to get a more complete picture. Image: The Mills Fabrica.

Cintia Nunes
General Manager, Head of Asia, The Mills Fabrica
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  • A green tech ecosystem is thriving as organizations are keen to meet their ESG goals.
  • Investors are in search of lucrative opportunities with a sense of social and environmental purpose.
  • But we need a better understanding of how to measure climate impact to ensure goals are met.

In the tech world, we’re seeing big ambitions in addressing equally big environmental issues. A broader green tech ecosystem is also thriving as corporations and brands, keen on meeting their ESG (environmental, social, and governance) goals, are hungry to bring these innovative technologies into their practices. Investors – retail and institutional – are in search of lucrative opportunities in the space while feeling a sense of purpose as they better society through investments. So it’s no surprise that, in Asia alone, the market size for green businesses, according to McKinsey, is expected to reach between $4 trillion and $5 trillion by 2023.

Have you read?

While this is all very promising, more should be done by investors at all levels, so well-meaning efforts and investments can lead to genuinely effective outcomes in terms of impact on sustainability. Today, although awareness of sustainability has risen, it is also increasingly difficult to ensure impact through investment. This is largely due to a more crowded market and higher greenwashing risks, making it time-consuming to sift through and scrutinize opportunities. Therefore, better understanding, due diligence, and goal setting need to be incorporated into the process from the get-go – rather than tacked on as an afterthought – in order to meet impact goals.

However, this process doesn’t end with investment. Equally important is a set of measurements that hold investors and corporations accountable for their sustainability efforts.

Measuring environmental and social impact

This is where standardized and measurable methods come in. By adhering to internationally recognized standards, innovators, investors, corporations can all work together in an intentional and concerted effort to generate real planet-positive changes.

For example, one can follow the Stockholm Resilience Centre’s Planetary Boundaries Framework, a scientific approach that defines the safe operating space for humanity within Earth’s natural systems. It identifies nine planetary boundaries (from freshwater use to stratospheric ozone depletion) that must not be crossed to avoid irreversible environmental changes. Although they have already been transgressed, the planetary boundaries can still be referenced by corporations, innovators, and investors to show how they can align them into their work to halt further damage, and utilize measurement systems to capture the impact of their sustainability efforts.

Stockholm Resilience Centre’s Planetary Boundaries Framework.
Stockholm Resilience Centre’s Planetary Boundaries Framework. Image: The Mills Fabrica

There is also the IRIS+ framework created as a free resource by the Global Impact Investing Network to support impact measurement and inform management decisions. For example, venture capital and incubator The Mills Fabrica breaks down key impact metrics according to both frameworks to ensure its investment decisions address a wide range of pressing environmental and social issues, and that its investments and incubation efforts in textile and apparel and agrifood startups translate to positive environmental and social impact.

Case study: chemical recycling technology

Take one of its portfolio companies Circ as an example, it pioneered a chemical recycling technology that can recycle polycotton — what the majority of clothes are made of — into reusable fibres. With 80 billion new pieces of clothing made every year, we’re seeing 2.5% of the world’s cultivated land use for cotton production and 16% of the world’s insecticides used on the crop. To combat this, Circ has recycled 41 tonnes of materials in 2022, which is the equivalent of 66 tonnes of carbon dioxide equivalent (MTCO2e).

Circ pioneered a chemical recycling technology that can recycle polycotton – what the majority of clothes are made of – into reusable fibers. It has recycled 41 tonnes of materials, equivalent to 66 tonnes of carbon dioxide.
Circ pioneered a chemical recycling technology that can recycle polycotton – what the majority of clothes are made of – into reusable fibers. It has recycled 41 tonnes of materials, equivalent to 66 tonnes of carbon dioxide. Image: The Mills Fabrica

With clear measurement frameworks, investors can understand how Circ is alleviating pressure being exerted on the production of polyester and the cultivation of cotton, and how they are able to contribute to the reduction in land-use pressure, chemical, and water usage, and an overall decrease in greenhouse gas emissions. They are thus able to better support Circ’s mission, and at the same time understand how their investment translates to real planet-positive impact.

Case study: non-toxic textile dyeing

Colorifix is another example. To address textile dyeing, one of the most polluting processes in the textile supply chain, Colorifix invented a way to use microorganisms to produce colours with a fraction of water and no toxic chemicals.

By seeking out colours in nature using digital DNA sequencing of organisms, they found a way to save 79% water, reduce 65% of chemical product usage, and reduce 51% of natural gas usage as compared to conventional dyeing methods. This translates to 31% less carbon-intensive, 37% less eutrophication, 38% less ozone layer depletion, and 61% less abiotic depletion of elements. By adhering to measurement frameworks, companies such as Colorifix can pinpoint and address issues through its technology.

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How is the World Economic Forum helping companies track their positive contributions towards achieving the Sustainable Development Goals?

Balancing business interests with sustainability goals

These frameworks are especially important given sustainability efforts are not immediately visible and impactful, same as the degradation of our Earth. For investors, having a detailed understanding of how a company is addressing the issues at hand, the impact it has created, and what impact it will create down the road – all with measurable data – is hugely important to ensure each dollar goes towards a genuine cause with real, measurable outcomes.

It also shows that balancing business interests and sustainability goals can be possible with a forward-looking investment process where all environmental and social principles are considered from the start. And as global citizens, there needs to be more widespread knowledge on the means available and an understanding of why measurement is important – to not only hold yourself accountable, but also keep each other accountable, working together as a community to assure that genuine changes are being made to our planet with our investment and innovation.

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Forum InstitutionalClimate ActionStakeholder Capitalism
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