Investor Attribution – Real world effect vs shared responsibility

In short

At Vidia, we seek to support and develop companies whose technology, products or services are making a significant contribution to climate solution value chains. A key impact indicator is the scale of GHG emission avoidance that can result from the use of a climate solution. When assessing a company’s impact contribution to avoided GHG emissions, two of the most common methodological challenges include:

1) the choice of an appropriate counterfactual baseline and
2) the attribution of a value chain agent’s contribution to the overall climate solutions impact

In this article, we outline Vidia’s approach to the attribution of climate mitigation impact.

The importance of the value chain

When analysing the attributability of a climate solution’s impact performance to a specific company (e.g. a supplier or service provider) that operates upstream or downstream from the manufacturer of the finished product (OEM), it is important to understand the composition of the climate solution value chain and the company’s role within it. In general, value chains consist of a supply side, where a product or service is 1) “innovated”, 2) produced and 3) deployed, and a demand side, where the product or service is 4) purchased and used by end-customers during its lifetime until 5) the end-of-life stage arrives (see image 1). The performance of each value chain stage is dependent on the performance of the previous stage. Without a functioning supply chain and production at scale an effective large-scale deployment of climate solutions would not be possible. Without effective deployment, the impact potential inherent in manufactured products and services waiting to be sold and deployed would remain underutilized. Moreover, without sufficient market demand (including the ability and willingness to pay, which also ties back to a cost-competitive supply) the supply side’s positive impact potential would remain underutilized.

Image 1: Simplified Climate Solution Value Chain

The concept of enables vs. realized (lifetime) impact

While the preceding production and deployment stages facilitate the impact realization, the “use” stage of the value chain realize a climate solution’s impact potential as real-world emission avoidance. The GHG emission avoidance potential existing at the time of sale/purchase is reasonably expected to be converted into real-world GHG emissions during the product’s lifetime. In other words, the supply side enables the real-world climate mitigation impact that is realized over time by the demand-side. The concept of forward-looking “enabled lifetime GHG emission avoidance” provides a case for “multiple” or “overlapping” accounting for the different kinds and qualities of contribution of a given value chain actor. This position is supported by the related concept of “path-dependency”, whereby a specific choice can pre-determine a constrained pathway of further choices and limited options going forward.  At the time of sale/purchase of the finished product (or turnkey system), both the final supplier as well as the end-customer are fully accountable for enabling the future GHG emissions to be realized during its lifetime.

shared impact responsibility for GHG emissions and their avoidance

The actual empirically measurable real-world effect of avoided GHG emissions can only occur “once” in the physical world. In carbon markets (voluntary as well as mandatory), where offset claims on real-world emission effects are monetized, sold and traded, multiple or overlapping accounting of contributions to real-world emission avoidance can indeed represent a problem. At the same time, it is important to keep in mind that the attribution of a company’s contribution to GHG emissions (or their avoidance) relates to a distinctly different phenomenon, i.e. the more abstract idea of “shared responsibility”. Shared responsibilities for collectively enabled GHG emissions or their avoidance can overlap and be attributed multiple times within a value chain because this reflects a complex reality that consists of interconnected and conditional causal relationships. Nevertheless, companies of a collective impact effort need to be careful not to make overly strongly worded impact claims that might misleadingly imply some kind of exclusive attribution.

Typical attributions across value chain stages

For example, a climate solution OEM can legitimately claim to have enabled 100% of the future real-world emission avoidance inherent in the finished hardware product. Similarly, a developer and/or general contractor who oversees the full deployment process (including engineering, procurement, contracting and installation of the finished product or installed system) can also claim to account for 100% of the future emission avoidance enabled through the deployment stage. In contrast, the contribution of key suppliers and sub-contractors, can be approximated in proportion to their share of value add in the respective value chain stage’s final product. Specific situations like supply bottlenecks or local market dominance can be indicative of even higher levels of attribution.

So what?

Full or partial attributions of a climate solution’s impact performance can be derived from a company’s role and its quality of contribution to the climate solutions’ value chain

The above considerations have shown that full or partial attributions of a climate solution’s impact performance can be derived from a company’s role and its quality of contribution to the climate solutions’ value chain. In conclusion, a careful and realistic approach to the attribution of enabled GHG emissions avoidance across the climate solution value chain helps us identify market participants that meet our strict GHG emission avoidance criteria. This allows us to invest in the most impactful companies whose products and services make significant contributions to emission avoidance. They are part of the solution space that needs to grow as the world races towards netzero by 2050.


“Climate mitigation impact“: Net-avoidance or removal of GHG emissions owing to the use of climate solutions (a group of technologies, products or services with a significant GHG emissions avoidance or removal effect), as well as related (enabling, contributing) activities, including policy making.

“Enabled lifetime GHG emission avoidance”: Forward looking estimate of the potential average volume of net-avoided emissions that can be generated throughout a climate solution’s lifecycle. The impact potential is enabled by and embedded in the sale of a climate solution product or service.

“Real-world GHG emission avoidance”: Empirically measurable GHG avoidance realized over time by the actual use of a climate solution.