There is a need to develop investment-useful metrics to assess companies’ avoided emissions over the long term as a way for investors to find investment opportunities in support of the energy transition. Current investment practices lack a lifecycle approach, ignoring environmental impacts beyond a company's legal boundaries. The financial sector needs a lifecycle perspective to understand how investments truly affect the environment. This study evaluates the impact of transitioning to renewable energy—specifically wind and solar—using comprehensive life cycle assessment (LCA) studies. The methodology assesses the net environmental impact of investments by aggregating the environmental benefits of renewables and the avoided emissions from reducing fossil fuel use. The environmental impact assessed includes more impact categories than global warming. This approach enables a broader perspective of the environmental impact of an investment, thus minimizing the risk of suboptimization.

The results from the LCA study shows that investments in solar and wind power plants have a positive net environmental impact and, thereby, mitigating crossing the planetary boundaries assessed. Furthermore, the net environmental impact also varies depending on what baseline is used. By anticipating different scenarios for future development of the global electricity mix this assessment contributes with plausible over- and underestimates of the emissions from the electricity production sector. To illuminate the uncertainties and their effect on the net environmental impact, a nuanced estimate of the net environmental impacts is provided. The net environmental impact varies depending on the powerplants’ location but remain positive regardless of the region. Since it can be difficult to know where the powerplants will be located, a global approach to assess environmental impacts is sufficient, acknowledging the regional nuances.

To prevent any single actor from claiming sole ownership of the avoided emissions achieved collectively with other actors, allocations must be made. Since there is no direct link between avoided emissions and specific components in power plants, a market value-based allocation is suitable. This approach discourages companies from claiming an undue proportion of the avoided emissions. The methodology developed contributes with quantitative data regarding environmental sustainability aiming for increasing transparency to accelerate energy transition and mitigate the climate crisis.