Assessing Environmental Impact: A Framework Comparison
A look at three environmental impact frameworks that often use similar language in very different ways: life cycle assessment, GHG impact assessment, and GHG footprinting.
The landscape of climate and environmental analysis can be overwhelming, even to seasoned professionals. The range of available frameworks reflects the complexity of addressing environmental impacts comprehensively and there is no one framework to rule them all; each method offers different insights and serves different purposes.
Understanding how to navigate these choices and integrate their best practices is crucial for effectively managing and mitigating environmental impacts in a coherent way. In this guide, we introduce a simple classification system for ways investors assess environmental issues. We then take a look at three frameworks that often come up in climate investing: Life Cycle Assessment (LCA), GHG impact, and GHG footprint.
While these aren't the only frameworks available, they offer a useful starting point as climate investors navigate a complex landscape.
Assessing Environmental Issues
Focus Types
There are three focus types in environment-related assessment that are most applicable in Project Frame: comparison to a baseline or incumbent, relationship with time, and number of metrics or environmental topics covered.
Comparative
Absolute: Analysts can look at GHGs in absolute quantities, where they tally up all sources of emissions to report on cumulative values. This is not comparative.
Comparison to baseline: Analysts can quantify sources of difference between an intervention or solution and its comparable baseline or incumbent. This is the more precise meaning of impact.
Detailed comparative analysis: When analysts quantify on an absolute basis and subtract values, reporting the difference.
Focused comparative analysis: When analysts exclude sources of emissions that are likely the same when comparing a solution, product, or company and its incumbent and only focus on quantifying sources of difference.
Timeframe
Backward-looking: Examining what has occurred
Forward-looking: Examining what could or is likely to occur
GHG impact assessment can be both forward- and backward-looking. To learn more about the different GHG impact types, review the GHG Impact Methodology Comparison Chart.
Topics Covered
There are many environment-related metrics, including pollutants, such as GHGs or lead; resource use, such as land or water use; depletions, such as ozone; biodiversity; and much more.
Mixing and Matching Focuses
Analysts mix and match focuses according to their needs and priorities. For example, an analyst can project GHGs or ozone depletion into the future or compare water use between an intervention and incumbent in the past. No existing methodology equally covers all combinations.
Comparing Frameworks
Area |
GHG Impact Analysis |
Life Cycle Assessment (LCA) |
GHG Footprint |
What is it? |
A method of assessing the difference in GHGs between a climate solution and a baseline or incumbent. Includes forward-looking and backward-looking assessment. At its core, GHG impact is unit impact multiplied by volumes over a specified time frame, where unit impact is the difference in emissions between a unit of a solution and incumbent. This is Frame’s focus. We also focus more on forward-looking assessment, although that may change over time. |
A method of evaluating the environmental effects of a product, service, or process as part of a value chain, or the eras of life associated with a solution, product, or service — from creation to retirement or recycling. |
Measures total GHG emissions associated with a product, individual, organization, or event. Sometimes referred to as carbon footprint. |
Why did it form? |
Because investors and policymakers looking at climate solutions have to decide whether to support climate solutions, either based on what occurred or before tangible data is available on the solution’s efficacy. |
Because the complexity of human systems made it too easy for us to ignore or misunderstand complex upstream and downstream environmental impacts resulting from our choices. |
Because climate change is the result of historical, status quo practices. By clarifying historical sources of emissions, we can improve future practices and help consumers make better choices. |
Who uses it and how? |
Early-stage investors, investors, entrepreneurs, policymakers, and climate-focused organizations utilize GHG impact analysis to assess whether to allocate capital to climate solutions. Forward-looking assessments are uniquely tailored to solutions that may not demonstrate their effectiveness for many years, particularly those that achieve impact through scaling. |
Product designers, sustainability professionals, and policymakers use LCAs to minimize environmental footprints across multiple metrics in product development, policy formation, and system design. |
Companies, individuals, and organizations leverage GHG footprints to establish benchmarks for emissions, helping them identify where and how to improve. |
Is it used for third-party certification or compliance? |
GHG impact analysis is gaining importance in the context of climate finance and sustainable investment regulations, but is not yet used for third-party certification or compliance. |
LCA is increasingly referenced in environmental regulations and product standards, especially in the European Union (EU). |
GHG footprints are often used to comply with corporate sustainability reporting requirements and carbon disclosure initiatives for Net-Zero alignment. |
Scope of Analysis |
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What topics are covered? |
Exclusively focused on GHGs. |
Includes analysis of many environmental areas, including GHGs, water use, eutrophication, land use, toxicity, and more. |
Exclusively focused on GHGs. |
Is it comparative? |
GHG impact analysis calculation is designed to show the difference between a solution and an incumbent. This is often a focused comparative analysis. Where incumbents do not exist, such as carbon removal, comprehensive quantification of GHGs is often recommended. |
Comparativity is determined in scope of analysis. While designed to invite comprehensive quantification, such as a full GHG footprint, comparative LCAs focus quantification on the difference between a solution and an incumbent. This is often a detailed comparative analysis. |
Focuses on full, absolute GHG quantification. |
What timeframe is considered? |
Forward-looking methods are designed to focus on projecting change into the future when it comes to both the solution and the incumbent. The number of years into the future varies depending on the purpose of analysis. Backward-looking assessments should begin in the year that data is available. |
LCAs typically look at what has already occurred, either in a single year or over a period of time. It is not built to consider future projections. |
GHG footprints typically look at what has already occurred, either in a single year or over a period of time. It does not consider future projections. |
What data is required? |
Solution and incumbent unit emissions and market sizes and segments are required, depending on the purpose of analysis and available information. |
LCA requires a variety of data across various stages of the life cycle, including raw material extraction, production, use, and disposal. |
GHG footprinting requires a variety of GHG data across various stages of the life cycle, including raw material extraction, production, use, and disposal. |
What are the strengths of this methodology? |
GHG impact analysis offers insight into past and/or possible future benefits or drawbacks of novel climate solutions, aiding in long-term investment decisions. |
LCA provides a holistic view of environmental impacts, helping to identify opportunities for improvement across the product life cycle. |
GHG footprinting facilitates the quantification of GHG emissions, helping to identify opportunities for improvement across the product life cycle. |
What are the limitations of this methodology? |
Definitions of the baseline are highly case-dependent and forward-looking assessments are always uncertain. |
LCAs can be complex and resource-intensive to conduct, particularly for products with intricate supply chains. It is not realistic for earlier-stage investments. |
Focuses solely on GHGs, potentially overlooking other critical environmental impacts. |
Want to learn more? Read Project Frame GHG Impact Methodology to dive into emissions impact assessment and reporting.