What is a Value Factor?
As a lens capturing the results of scientific or social studies and research, when combined with financial, environmental, people, or production data, a value factor provides the relevant context to inform decisions.
In today’s data-rich environment, the use of value factors has become increasingly crucial for comprehensive, well-informed, and effective business decision-making and steering.
A value factor is an expression of the relative importance, worth or usefulness of changes in natural, human, social, and economic or produced capitals to people.
Valuing impacts with value factors requires first the measurement in, for example, physical or social metrics, as value factors are typically expressed as the ratio of an input (e.g., days of training provided per year) or an output (e.g., GHG emitted in tonnes CO2e) to an outcome (e.g. increase in average temperature) or an impact (annual increase in human capital). Whilst they can be expressed in monetary terms, it is also possible for value factors to be based on biophysical, social, demographic, or other quantitative, or even qualitative measurements.
How can we build confidence?
It can be challenging to identify or access the most appropriate value factor to use in a specific circumstance or for a specific application. There is a lack of clarity on how value factors are produced and a growing number of providers, some of which can only be accessed commercially.
The leading people involved in value factor creation and use have therefore come together through the Value Commission to address these challenges and are developing a Governance for Valuation that has been released as beta-version in September 2024.
This document helps increase transparency and confidence in the use of value factors. It guides developers of value factors on how to share critically important information on the generation of values and allow users of value factors—on a case-by-case basis—to assess consistently whether or not value factors are fit for purpose in a specific use case.
Collaboration across the landscape
Within the Capitals Coalition and Value Commission, there are several other organizations that are explicitly contributing to this area of work.
- The International Foundation for Valuing Impacts in partnership with the Value Balancing Alliance is developing an impact accounting methodology in a consistent and comparable monetary form to account for a company’s contribution to society. It has established a Valuation Technical & Practitioner Committee and due process to provide oversight, transparency and stakeholder input into its research and methodological development.
- In addition, the Value Balancing Alliance has been carrying out a sprint review of the main commonalities across impact valuation methodologies and value factors, with a specific aim of using them in financial markets.
Where can you find value factors?
Whilst we expect everyone who creates and uses value factors to comply with the Governance for Valuation, you may already be using, or want to start using, value factors. The Governance for Valuation allows transparency and confidence in value statements.
Therefore, we have included below a non-exhaustive list of providers of publicly available value factors. Please note that some may require subscriptions, others are readily available. We will continue to add to this list as more become available.
This list is not exhaustive and should not be interpreted as an endorsement. The Capitals Coalition have not conducted a formal review or quality assessment of these sources.
- GIST Impact and WifOR Institute have teamed together to make a selection of their factors publicly available. These factors are developed specifically with business in mind. They are available at a country and regional level. They cover all four capitals, across 25 countries, and are broken down into the following 20 categories:
Natural Capital: GHG Emissions; Water Use; Waste Generation; Plastic Waste & Pollution; Land & Water Pollution; Air Pollution; Biodiversity and Ecosystem Services.
Human Capital: Training; Health & Safety; Fair Wages.
Social Capital: Diversity, Equity & Inclusion; Community Investment / CSR; Child Labor; Forced Labor; Inclusive Green Economy Business Model Features.
Produced Capital: Employee Compensation; Depreciation & Net Rent; Net Interest; Profits; Tax.
Download the press release on the launch here.
Find out about the factors here.
For support on using the factors and to find out more,
contact info@gistimpact.com, dialogue@wifor.com - The International Foundation for Valuing Impacts, in partnership with the Value Balancing Alliance, has just released a suite of impact accounting resources, including the Global Value Factor Database (GVFD), that enable companies and investors to measure and value the most significant environmental impacts in monetary terms. These resources span six environmental categories: GHG emissions, air pollution, land use conversion, waste, water consumption, and water pollution. It covers more than 430 different types of impacts, tailored for the unique contexts of over 268 countries and regions worldwide.
Check out the resources here. - The Ecosystem Service Valuation Database is the largest freely accessible database of monetized natural capital value factors containing over 10,800 unique values. Covering ecosystem services in all biomes on all continents, it is based on over 30 years of peer-reviewed academic research and official reports. The value factors provided here have been used in many situations by businesses NGO’s and government agencies.
- The Global Value Exchange is a crowdsourced database of value, outcomes, indicators, and stakeholders, covering social and human capital. It is a searchable database that lists common indicators and their sources. The Global Value Exchange was founded by Social Value UK, Edge ThreeSixty and the Nominet Trust in 2015.
- The Environmental Prices Handbook is developed by CE Delft (Netherlands). The corresponding tool gives the environmental prices of over 3,400 substances, for emissions from an average emission source at an average location in the Netherlands. The prices are per kilo emission in Euros. The most recent methodological update is available for Environmental Prices for the Netherlands, explained and presented in the Dutch Environmental Prices Handbook 2023. The most recent Environmental Prices for the EU can be found in the 2018 update of EU28 prices. An updated English version with prices for the EU is foreseen in the fall of 2024. Environmental prices of many common substances can be found in the handbooks.
- The Handbook Value Factors – Methodological Convention has been published by the German Environment Agency since 2007 and includes science-based value factors for environmental impacts on climate, air pollution, nitrogen emissions and others, and applies them to sectors like energy generation, transport and construction. The latest version 3.1 is from 2020, version 3.2, with updated climate costs, has just been published and a fully updated version 4.0 is expected in 2025. Value factors are developed for Germany but can be applied to countries with similar economic and environmental conditions.
- Valuing Impact published its impact valuation method, eQALY, developed over the past 10 years together with a range of multinational businesses, impact investors and family offices. The eQALY method includes a full range of valuation factors covering social, human, and natural capital. Natural capital valuation factors are regionalized and available for all countries in the world, and cover 19 different impact drivers. Human and social capital built mainly on the Health Utility of Income and Taxes publications. The dataset includes other data supporting the estimation of outcomes, such as earning premium from education and wages per skill level worldwide. Finally, all this dataset is embedded in an Excel tool template that allows to easily replicate the modeling for any activity, based on the template used across thousands of modeling done by Valuing Impact team.
The impact valuation method paper, value factors and Excel tool template are available here.
For more information contact sv@valuingimpact.com
Further work and information
The list above shows that there has been more focus on natural capital and that further work is needed on social and human capital value factors going forward.
Please contact us at info@capitalscoalition.org if you have publicly available value factors that you would like to have included here or would like to know more about how to use value factors when carrying out a valuation.
Trainers and technical advisors
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