Alter Equity and Carbone 4 announce the development of the first methodology for assessing companies’ impacts on nature, tailored to the needs of small and medium-sized enterprises (SMEs) and mid-sized companies

Alter Equity, the first French asset management firm to offer an investment model focused on unlisted companies whose business activities have a positive social or environmental impact, and Carbone 4, an independent consulting firm specializing in climate and biodiversity issues, announce the development of the first rigorous, cross-cutting methodology for assessing companies’ impacts on nature.

For Carbone 4, which invented or helped develop the methodologies behind Bilan Carbone, Net Zero Initiative, MyCO2, OCARA, and Carbon Impact Analytics, this new initiative highlights the company’s creativity and its position as a leading player in the development of tools to combat environmental disruption, designed specifically for stakeholders in the financial sector.

Alter Equity has thus adopted a rigorous method for assessing the environmental impact of its portfolio companies—a major new step in its investment approach, which is increasingly focused on the long-term interests of people and the environment. At the same time, Alter Equity has developed a tool to assess the social and societal impact of its portfolio companies.

Carbone 4 and Alter Equity thus aim to help define shared impact measurement tools, a necessary step in the development of positive-impact finance, which is itself a driver of a sustainable world. Carbone 4 will share this tool in the same spirit as the tools it has developed previously.

The First Rigorous Methodology for Assessing Environmental Impact

Alter Equity co-developed and funded Carbone 4’s creation of a new, unique, and disruptive method for assessing the environmental footprint of small and medium-sized enterprises (SMEs) and mid-sized companies, in that it:

• rigorously and comprehensively integrates the impact of businesses on the climate, terrestrial, freshwater, and marine ecosystems, living organisms, and non-living natural resources (abiotic resources), grouped into three indicators: climate, biodiversity, and other resources;
• transforms the main standards, databases, and studies developed by experts, nongovernmental organizations, and scientists into a practical tool for businesses (with easy-to-understand questions);
• enables a company or fund to conduct a rapid, self-assessment of its contribution to the low-carbon transition, to limiting biodiversity loss, and to reducing the consumption of abiotic resources—prior to validation by Carbone 4;
• measures the positive contribution of businesses (and not just the negative impact).

Climate

The methodology draws on Carbone 4’s expertise in carbon footprinting and calculating avoided greenhouse gas emissions to identify companies that are contributing to the energy transition.

To the best of its knowledge, Alter Equity already holds the record in France for greenhouse gas emissions avoided relative to the amounts invested, with more than 4 million metric tons of CO2e avoided by its portfolio companies as of the end of 2022 since the investment, relative to €150m in assets under management.

Biodiversity

The method developed measures a company’s contribution to limiting biodiversity loss, using the definitions and key standards developed by:

• IPBES (Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services). The pressures on biodiversity identified by IPBES serve as a framework that enabled the Carbone 4 teams to define the key questions to ask companies;
• the SBTN sectoral materiality tool, developed as part of the first step of the SBTN guide (1A—maturity assessment) by the global SBTN (Science Based Targets Network) and the ENCORE database of impacts and materiality ratings (Exploring Natural Capital Opportunities, Risks, and Exposure), developed by the Natural Capital Finance Alliance in partnership with UNEP-WCMC, and funded by the Swiss State Secretariat for Economic Affairs and the MAVA Foundation. The company’s impact on biodiversity is assessed across its value chain, as well as upstream of its value chain.

Resources

Third, the tool makes it possible to assess the company’s impact on critical raw materials (which are in high demand, including rare earth elements, indium, and cobalt) and water resources, and to estimate its contribution to the development of a circular economy.

This "Resources" indicator is based, in particular, on the definitions and key standards developed in the market by:

• IPBES (see above),
• ADEME (the "7 Pillars of the Circular Economy" framework), and
• the European Commission (definition and classification of the thirty critical raw materials).

The Carbone 4 teams used these frameworks to identify the key questions to ask companies regarding the Resources indicator.

An initial version of the tool has been completed. A number of companies in Alter Equity’s portfolio have been analyzed.

Measuring the Social and Societal Impact of Businesses

At the same time, Alter Equity has developed:

• a Social Barometer, which surveys employees on the level of responsibility their employer demonstrates toward its employees, customers, suppliers, and other stakeholders (local communities, the government, shareholders), and
• a methodology for evaluating the social practices of its portfolio companies.

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About Alter Equity

Alter Equity, an independent investment management firm, was founded with the goal of financing the social and environmental transitions our society needs to move toward a more sustainable, more generous, more humane, and overall more responsible economy. It was the first firm in France to support social and environmental transition while seeking a financial return that compensates its investors for the risk they take. In doing so, it pioneered the concept of positive-impact investing and was the first to use that term. This combination is symbolized by the “3P” in the names of its funds, Alter Equity3P and Alter Equity3PII, standing for People, Planet, and Profit. It is based on the conviction that companies have a significant impact on their employees, the environment, and their other stakeholders.

Alter Equity currently manages two funds totaling 150m€, investing amounts ranging from 3 to 10m€ in the equity of European companies whose business activities promote social inclusion and/or the low-carbon transition. Furthermore, it makes its investment contingent on a commitment to a CSR approach through the implementation of a dedicated action plan, known as the Non-Financial Business Plan (BPEF). It has brought about a radical disruption in the private equity industry (investment in unlisted companies) and continues to innovate to make finance increasingly respectful of the long-term interests of people and the environment.

For example, it was the first investor to require all its portfolio companies to conduct a carbon assessment—the first step in a decarbonization process—and to open up equity ownership to all employees. Twenty-five investments have already been made, notably in the fields of renewable energy, energy efficiency, waste collection and recycling, appliance repair, sustainable mobility, sustainable agriculture, as well as social integration through employment and education.

Alter Equity is now a team of twelve professionals, 75% of whom are women.

About Carbone 4

Led by Alain Grandjean, Laurent Morel, and Jean-Marc Jancovici, Carbone 4 is an independent consulting firm specializing in climate, biodiversity, and resource issues, offering its expertise to public and private sector organizations. Convinced that proactively addressing the challenges of climate change is the best possible approach, Carbone 4 works with its clients to help them transform these challenges into a powerful driver of innovation, a source of competitive advantage, and a motivator for their teams. For the financial sector, Carbone 4 develops methodologies and tools tailored to each business line to enable them to measure and highlight the carbon impact of their financing, their contribution to the energy transition, and their role in limiting biodiversity loss.