Originally published here.
We recently teamed up with Reframe Venture to co-host a Deep Dive on Climate Accounting and Avoided Emissions, where we were joined by Laura Beaulier from Climate Dividends and Lena Thiede from Planet A. Together, they explored how investors can move beyond traditional carbon accounting to embrace the concept of avoided emissions - a crucial piece in assessing the true climate impact of innovation, alongside other metrics.
A huge thank you to both speakers for sharing their insights and practical experience in navigating this rapidly evolving and technically complex area.
Understanding Carbon Accounting vs Avoided Emissions
The session opened by distinguishing carbon accounting from avoided emissions.
Carbon Accounting
Pulling a helpful definition from Sage:
Carbon accounting is a type of carbon-footprint measurement that is predominantly based on an organisation’s existing accounting data. The process that sits behind carbon accounting is known as the spend-based methodology and is recognised by the Greenhouse Gas Protocol.
In simple terms, this approach takes the amount spent on a product or service and multiplies it by an emission factor, estimating the greenhouse gas (GHG) emissions linked to its production or use.
Avoided Emissions
Planet A has written a detailed explainer covering why avoided emissions matter for impact-driven investors and how they can influence investment decisions.
To highlight their overview:
According to the Greenhouse Gas Protocol, Scope 1 includes direct emissions from owned or controlled sources, Scope 2 covers indirect emissions from purchased energy, and Scope 3 — typically the largest — includes all other indirect emissions across the value chain. Enter “avoided emissions”: often called Scope 4, these represent emission reductions that happen outside a product’s own life cycle as a result of its use.
For climate tech startups, avoided emissions often lie at the heart of their value proposition, demonstrating their capacity to drive systemic decarbonisation. However, simplistic calculations rarely capture this complexity fully.
Laura also shared this great illustration alongside the Climate Dividends methodological framework to give an example walking through avoided emissions.
Example: Heat Pumps
Heat pumps emit carbon in their production, installation, and maintenance (captured in Scope 1–3).
Yet, once installed, they enable others to reduce emissions — for instance, households replacing fossil fuel heating.
The result: the producing company appears polluting in its footprint, but actually drives wider decarbonisation across the system.
Visual explanation: The Full Story of Mr Bricks, Mr Manufacturer and Ms Installer
A Product Impact Perspective
Another helpful way to understand avoided emissions is through a product impact lens: does the product create a positive impact in the world?
Many climate tech startups are often intentionally designed to deliver positive environmental outcomes through their products and services. Over time, they seek to demonstrate and evidence these outcomes through structured, proportionate impact measurement and management. From this perspective, avoided emissions help capture the broader value created - highlighting how a product contributes to real-world decarbonisation beyond what traditional carbon accounting alone can show. You can find more on this point and how to embed impact in your startup in our Impact Founder Playbook.
Why Avoided Emissions Matter
Lena raised a powerful question:
“If you’re a VC today relying on carbon accounting alone - what might you be missing?”
Her answer was clear: focusing solely on organisational footprints risks missing systemic change. Early-stage investing isn’t about a company’s footprint; it’s about whether it can shift the system. With seven of nine planetary boundaries already breached, the key question becomes not “Is this greener than the incumbent?” but “Can this change the system?”
Why this metric matters:
Captures how core products contribute to global decarbonisation.
Creates a framework for integrating climate impact into value.
Enables development of sector benchmarks and ratios linking climate performance to enterprise value.
As an example, Planet A uses avoided emissions analysis as part of its consequential Life Cycle Assessment (LCA) before investing - informing decisions on revenue potential, risk profiles, and access to financing.
Making It Work for Founders
One of the most practical parts of the session addressed implementation. Measuring avoided emissions can feel daunting, especially for early-stage founders, but as Lena noted:
“The biggest risk isn’t imperfect data - it’s asking the wrong questions.”
Best practices shared:
Combine founder data with trusted scientific databases.
Model best- and worst-case scenarios rather than single-point values.
Use probabilistic ranges to understand directional impact.
Keep the bar realistic and avoid adding unnecessary burden to startups.
This approach reframes emissions analysis from a “compliance exercise” into a strategic lens, helping founders understand their systems-level contribution.
Responding to Common Critiques
Playing the devil's advocate, we addressed a few myths and grumbles associated with this topic - that avoided emissions are too uncertain or “just another metric.” Both speakers welcomed the critique but argued for context.
“Ignoring avoided emissions is like analysing a company’s expenses but not its revenue.”
Used well, avoided emissions add depth to climate analysis by showing how innovations enable others to decarbonise. The aim isn’t perfection, but transparency, consistency, and credible framing.
How Investors Can Get Started
Practical entry points for VC teams:
Start simple: you don’t need a full LCA immediately.
Ask: “What changes in the system if this company fails?”
Be explicit about counterfactuals (even qualitatively).
Scale expectations by stage — directional at pre-seed, quantified by Series A.
Communicate assumptions clearly and credibly.
There’s also growing interest across the ecosystem to standardise language and build trust with LPs through transparent impact reporting, which Climate Dividends supports with.
In addition, a useful early tool is Prime Coalition’s CRANE, which helps assess the potential for avoided emissions and provides readiness scoring.
Working with Portfolio Companies
Avoided emissions can strengthen both impact reporting and commercial positioning. Investors shared examples of building this into portfolio engagement:
Helping portcos reduce their own emissions while understanding major impact levers.
Building joint impact + investment team processes, rather than siloed structures.
Using frameworks like ImpactVC’s Impact as a Driver of Value to make the link between impact and value creation.
Case in point: Hived, a UK last-mile delivery company. With support from Planet A, Hived explored a circular packaging model and quantified clear environmental benefits - while also identifying and addressing operational pain points.
Some funds cover the cost of LCAs as a form of portfolio value creation, such as Astanor, and Planet A covering this in house.
As this discussion showed, integrating avoided emissions into your climate strategy isn’t just a technical exercise - it can be a strategic lens for understanding real impact. At the same time, avoided emissions are typically considered alongside other metrics, depending on the sector, stage, and business model (such as water use or biodiversity), to build a more complete picture of a company’s overall impact. We look forward to continuing these conversations in future sessions, exploring how investors can drive systems change through more rigorous and forward-looking climate metrics
