At Evergreen, delivering climate impact is why we’re here and what we’re aiming for – but how do we define and measure it? After all, as the saying goes, what gets measured gets managed, but measuring climate impact is not always as easy as it sounds.
Evaluating climate impact is baked into our investment process, starting as soon as we begin evaluating companies for potential investment. We’re asking questions to learn more about how they think about impact, the metrics they are measuring against, and the mechanisms by which that impact occurs.
When we draft our investment memo book for our Investment Committee, there is a page on impact for each company that outlines how we think about the climate impact of the business in question. So, what does that look like in practice?
We start off by identifying the type of environmental impact outcome the company is pursuing – Evergreen invests in companies that address climate mitigation, adaptation, and also other environmental sustainability factors like natural resource conservation.
We then explain what are known as the Five Dimensions of Impact:
- What is the nature of the impact
- Who is being impacted
- How Much impact is being achieved
- Risks to impact
- Contribution – what’s the additionality of this solution?
Some of these are straightforward to describe; others, especially “How Much?” take a lot of effort to calculate. We build an impact model that integrates into the company’s financial model assumptions to calculate the potential for emissions mitigation the company can achieve at scale – for us, we calculate this annually in 2040 (since it takes a time for hardtech companies to scale up and meaningfully impact the market); we also calculate what we expect their impact to be just based on the financial model that has been assembled.
The template we use requires us to think about the specific mechanisms at play, communities affected, risks involved, magnitude of climate impact, and also prepares us to track the company’s impact going forward (we also include a section on key metrics to track).
For example, one of the portfolio companies highlighted in our 2024-2025 Impact report, Aquarry, leverages decommissioned open pit mines for durable carbon removal, while helping clean up sites that are frequently environmental liabilities. When we were evaluating the company for investment we calculated the potential impact of what Aquarry’s approach could achieve at scale: the potential to mitigate 670 million metric tons of CO2 per year, in 2040 – which could lead to the company mitigating 7 gigatons (billion metric tons) of CO2, cumulatively, by 2050. This analysis can add valuable context to our investment process – one of the things that made Aquarry a compelling impact opportunity was that if they completed only one project at one lake, that alone could still mitigate millions of tons of CO2 over the course of its project (a larger amount than the potential impact of some entire businesses that we evaluate).
All models are wrong, and predicting the future is difficult, but our impact measurement approach enables us to understand, describe, and quantity impact in consistent terms that are meaningful inputs to our investment process. This information helps us make the best decisions, driving innovation, and working to scale up our climate impact.
