For impact investors, avoiding carbon emissions has long been one of the clearest ways to quantify whether a company is delivering environmental impact.
There is a good reason for that. Carbon is measurable, methodologies are relatively mature and technologies can often be compared with conventional alternatives.
But carbon tells only part of the story.
Investors are beginning to look beyond individual impact indicators and towards the systems in which companies operate: the resources they use, the ecosystems in which they depend, the pollution they prevent and, in areas such as food, the consequences for human health.
For European VC firm ECBF, that shift has emerged from five years of investing in and measuring the impact of companies across its portfolio.
“What we’ve observed in the past five years while making investments and managing our portfolio is that this one single carbon metric doesn’t reflect the impact that we want to deliver as a fund,” says Isabelle Laurencin, partner at ECBF.
The firm is now broadening its impact approach around four interconnected dimensions: climate change mitigation, the transition to a circular economy, nature and biodiversity preservation and prevention-based health improvements through nutrition.
Why carbon accounting alone isn't enough
“Carbon is a very important indicator for most impact investors, including us,” says Laurencin. “It’s one of the indicators that is measurable and comparable.”
Across ECBF’s portfolio, companies generate an estimated average 48% reduction in greenhouse gas emissions compared with conventional alternatives.
But the fund’s experience has shown that technologies delivering climate benefits frequently affect other environmental or social systems at the same time.
A systemic approach allows us to understand those connections rather than optimising for one indicator in isolation.
For example, Spanish food company HEURA reduces greenhouse gas emissions by replacing animal proteins with plant-based alternatives. But the implications extend beyond carbon: livestock production is also associated with land use and biodiversity pressures, while changes in what people eat can have consequences for nutrition and health.
“Impactful innovations rarely operate in a single dimension,” says Laurencin. “If we only look at carbon, we risk missing other material effects of the technology.”
ECBF’s four-dimensional approach is intended to capture more of those relationships.
- Climate change mitigation looks at measurable greenhouse gas reductions and the decarbonisation of value chains.
- Circularity examines how companies can reduce dependence on virgin resources through material efficiency, renewable or recycled inputs and resource recovery.
- Nature and biodiversity considers pressures such as land use, pollution and the degradation of ecosystems.
- Prevention-based health focuses on nutrition and the agri-food system.
“A systemic approach allows us to understand those connections rather than optimising for one indicator in isolation,” says Laurencin.
A systemic approach can also reveal business resilience
The environmental systems on which businesses depend themselves are also under increasing pressure.
The Planetary Boundaries framework identifies nine processes that regulate the stability and resilience of the Earth system. Seven are now assessed as being beyond their safe operating space, including climate change, biosphere integrity, land-system change and freshwater change.
For investors, the significance is that pressures on these systems can translate into constraints on the real economy.
Resource scarcity can increase input costs, water shortages can interrupt production, degraded ecosystems can affect agricultural yields and supply-chain disruptions can increase the value of technologies that use fewer or more readily available resources.
European Central Bank analysis of 4.2m euro-area non-financial companies found that 72% are critically dependent on at least one ecosystem service and could face significant economic problems if those services were severely degraded.
Increasingly, we are interested in situations where solving the environmental problem also solves an economic problem.
“For us, planetary boundaries help explain why a systemic perspective matters,” says Laurencin. “Companies don’t operate separately from nature, resources or climate. When those systems come under pressure, environmental constraints can become economic constraints.”
This is also where sustainability and competitiveness can begin to reinforce one another.
“For a long time, sustainability has often been perceived as something for which customers would have to pay a green premium,” says Laurencin. “Increasingly, we are interested in situations where solving the environmental problem also solves an economic problem.”
Circularity is one example. A company that can make the same product with fewer raw materials may reduce both its environmental footprint and its exposure to volatile raw-material prices or supply bottlenecks.
“The question is not only how much impact a company can generate,” says Laurencin. “It is also what looking at that impact tells us about how the company operates: how efficiently it uses resources, what it depends on and how resilient it may be as its operating environment changes.”
What this looks like in practice
Companies in ECBF’s portfolio illustrate how environmental and economic outcomes can intersect.
German startup Foodforecast uses AI to predict demand for fresh food, helping bakeries, supermarkets and food-service operators produce closer to what they are likely to sell.
The company says its technology has saved more than 8,800 tonnes of food to date. Less waste means lower environmental impact, but also less money spent producing food that will never be sold.
“Sustainability is not an add-on, but an integral part of the value proposition,” says Laurencin. “Foodforecast demonstrates how AI can generate both economic value and measurable impact.”
Swiss agritech company Ecorobotix offers another example. The company develops plant-specific crop care and precision sprayers to target and treat individual weeds or plants, reducing chemical inputs by up to 95% and achieving a 73% estimated average GHG reduction across its client base.
Previously, farmers sprayed agricultural chemicals over entire fields inefficiently. Because these chemicals are carbon-intensive to manufacture and expensive to buy, they are a significant operating cost.
Ecorobotix’s precision sprayers reduce the need for these chemicals.
Sustainability is not an add-on, but an integral part of the value proposition.
The point is not that environmental impact automatically produces superior financial returns. Rather, the same innovation can sometimes address both an environmental constraint and a clear economic problem.
“We don’t start with the assumption that impact creates returns,” says Laurencin. “We look at whether the same underlying innovation can solve an environmental problem and an economic problem. When it can, that becomes very interesting from both an impact and an investment perspective.”
For ECBF, moving beyond carbon doesn’t mean abandoning rigorous measurement. It means applying that discipline more systemically — understanding where a technology intervenes, which pressures it reduces and what dependencies or trade-offs accompany that impact.
As ecological pressures increasingly influence resource availability, regulation, supply chains and cost structures, this broader lens can give investors a better understanding not only of a company’s impact, but also of how well positioned its business model is.
