Impact Valuation Lenses - Or How Not to Get Impact Valuation Wrong

Summary: The idea we present below represents a disruption in impact accounting. It will lead to a much broader adoption of this practice by businesses and investors. Valuation perspectives are crucial to inform effective decision-making processes and business strategy. However, the field of impact valuation is still struggling with consistency and comparability. We offer a solution by defining five valuation lenses that will answer most of the business decision-making context.

Assigning a universal, standardized value to any given impact driver is the fastest path to getting impact valuation wrong. This issue is deeply embedded in current practices and stems from the historical context in which impact valuation has evolved. Practitioners typically use very different valuation techniques to value different impact drivers within the same analysis, leading to values comparable in units (all expressed in USD, for instance) but fundamentally different in terms of meaning.

To illustrate this, imagine preparing a budget to build a new house. Typically, you would estimate and sum up your anticipated costs: architectural design fees, materials, labor, and permit fees, based on what you expect to pay (market prices). However, imagine if you created your budget like this:

• Architectural design: valued at the price of the software it uses.

• Materials: valued at their disposal fees.

• Labor: valued based on employers’ social contributions only.

• Permits: valued using people's willingness-to-pay (a stated preference method commonly used in impact valuation).

Would this make sense as a practical, realistic budget? Clearly not.

Yet, this is precisely how much of the field currently approaches impact valuation. At Valuing Impact, we find this concerning. Even though we have used such practices in the past, justified by pragmatism, lack of viable alternative, and concern for uncertainties, we have now developed a set of more consistent valuation methods, among which is the eQALY impact valuation method.

Nevertheless, there is a trend towards standardization, justified by the need for "robust," "comparable,” “transparent,” and “low-cost" methods, which ironically obscures the underlying lack of consistency. True transparency would instead reveal significant methodological discrepancies, particularly given the widely agreed-upon definition of "impact" as a measurable change in human well-being (Capitals Coalition, VBA, IFVI). Standardization is not the solution; diversification towards consistency is.

Here are some examples highlighting common inconsistencies in impact valuation practices:

• Climate Change: Frequently valued using the Social Cost of Carbon (SCC), reflecting GDP loss due to climate change. But since when is GDP a direct indicator of human well-being?

• Air Pollution: Valued by health impacts (years of life lost), often based on subjective, self-reported valuation of life. Complementary valuations frequently mix in unrelated economic impacts like reduced agricultural yield or visibility loss.

• Wages: Valued through subjective well-being linked directly to income, but inconsistently applied compared to other human health valuations.

• Training and Education: Often quantified by potential future earnings. Yet, if training boosts earnings, why isn’t its valuation consistent with wage valuation through subjective well-being?

• Medicines: Usually valued by estimating GDP increases due to improved health and productivity. Paradoxically, this is the opposite of wage valuation methods, which start with money and express changes in subjective well-being.

Confusing, right? And this confusion only grows when these valuation techniques are embedded in opaque methodologies, becoming standardized without critical scrutiny.

We first publicly reported this issue in 2021 (see our report, written in collaboration with the World Business Council for Sustainable Development (WBCSD), on the benchmarking of natural capital accounting methods). Unfortunately, there has been little progress so far.

At Valuing Impact, we have actively addressed this problem by creating methodologies such as the Health Utility of Income (HUI) and the Human Utility of Tax (HUT), as well as human rights frameworks. Additionally, we've developed eQALY, a standardized measure systematically evaluating all impacts across natural, social, and human capital through changes in human well-being. A unified metric ensures clarity and consistency, crucial for meaningful impact valuation.

However, we recognize that there is no single, universal approach to impact valuation. Each question requires its own appropriate methodology. Below are common questions we encounter, along with the valuation methods we employ:

• What is the societal impact in terms of well-being? - Our eQALY methodology directly assesses changes in well-being.

• How much will stakeholders pay? - We use economic valuations such as damage costs, mitigation costs, or increased state expenditures.

• What does it cost to solve the issue? - We conduct cost-benefit analyses to assess potential interventions, often combined with avoided impact valuations.

• What if we do nothing? - Our risk impact valuation informs double materiality assessments required by frameworks like TNFD or CSRD.

• What's the benefit for my business? - This question demands a set of methodologies, from avoided operational costs, change of sourcing costs and reputational value to more complex assessments predicting future revenues, dividends, or impacts on stock price.

Our comprehensive suite, called Valuing Impact Lenses, systematically addresses these varied business questions with depth and clarity (see figure below).

The true potential of impact valuation is realized only when multiple valuation perspectives are used together—for instance, combining financial and impact metrics to optimize returns, or determining maximum achievable impact within a fixed budget. Mixing methodologies under a generic "best available" approach is insufficient and misleading.

The figure below shows the different valuation perspectives applied to the climate change impact driver. We added as benchmark the traditional Social Cost of Carbon. We realized that we obtain very different answers depending on the value perspective that we chose. In addition to those, climate change can be further valued in terms of taxes, willingness to pay from consumers or population, market prices (for instance, carbon credits), and more.  The possible perspectives are infinite, although the one we chose for our methodologies relies on the key decision-making questions above.

This example shows that impact valuation and accounting can provide very different results depending on the lens we use, which aligns with different decision-making context and use cases. We encourage organizations to start by defining better what they are really looking for, and next chose the appropriate tool and value lens.

Through our commitment for transparency, we have made the eQALY method publicly available and plan to release our risk methodology in the second half of 2025. Methods addressing business value and solution costs will follow in 2026.

We invite you to engage with us to understand better specific valuation approaches tailored to your needs and context. The future of impactful decision-making lies in transparent, flexible methodologies—not rigid standardization.

Get in touch to discuss how to deploy the Impact Valuation Lenses for your organization!