Scoring Methodology

Detailed breakdown of how Verdex calculates LMA compliance scores, greenwashing penalties, and final eligibility determinations.

Score Overview

Verdex calculates a project's transition loan eligibility using two independent scores: LMA Transition Score (compliance with LMA 5 Core Components minus greenwashing penalties) and DNSH Score (EU Taxonomy environmental harm screening).

Two Independent Scores

LMA Transition Score
LMA Base − Greenwashing Penalty
0-100 (affects eligibility)
DNSH Score
EU Taxonomy Article 17
0-100 (displayed separately)

LMA Component Scoring

Projects are scored against the 5 Core Components from the LMA Transition Loan Guide (October 2025):

ComponentMax ScoreSub-CriteriaWeight Distribution
1. Transition Strategy203 criteriaPublished plan (8) + Paris aligned (7) + Entity-wide (5)
2. Use of Proceeds203 criteriaEligible activities (10) + Quantifiable (5) + No lock-in (5)
3. Project Selection203 criteriaStrategy aligned (10) + Evaluation (5) + Sector fit (5)
4. Management of Proceeds202 criteriaAllocation tracking (10) + Documentation (10)
5. Reporting203 criteriaKPI framework (8) + Disclosure (7) + Verification (5)

Component 1: Transition Strategy (20 pts)

typescript
const transitionStrategyScoring = {
  // Does the entity have a published transition plan?
  hasPublishedPlan: {
    maxPoints: 8,
    criteria: [
      { condition: 'Publicly disclosed plan', points: 8 },
      { condition: 'Internal plan only', points: 4 },
      { condition: 'No documented plan', points: 0 }
    ]
  },

  // Is the plan aligned with Paris Agreement?
  parisAlignment: {
    maxPoints: 7,
    criteria: [
      { condition: '1.5°C aligned with SBTi', points: 7 },
      { condition: 'Well-below 2°C', points: 5 },
      { condition: 'NDC aligned only', points: 3 },
      { condition: 'No alignment stated', points: 0 }
    ]
  },

  // Does it cover the entire entity?
  entityWideScope: {
    maxPoints: 5,
    criteria: [
      { condition: 'Entity-wide scope', points: 5 },
      { condition: 'Division/project only', points: 2 },
      { condition: 'Unclear scope', points: 0 }
    ]
  }
};

Greenwashing Penalty Calculation

The greenwashing penalty reduces the LMA score based on detected red flags. When AI evaluation is enabled, it uses a weighted combination of two methods:

60%
AI Pattern Detection
LLM analysis of document text for greenwashing language
40%
Rule-Based Detection
15 predefined red flag patterns
💡Rule-Based Fallback
When AI evaluation is unavailable, greenwashing penalty is calculated purely from rule-based detection. The risk score is mapped to penalty: ≥70 risk → 20 pts, ≥40 → 10 pts, ≥20 → 5 pts, <20 → 0 pts.

Red Flag Severity Weights

SeverityPoint DeductionExample Red Flags
HIGH25 points eachMissing baseline emissions, fossil fuel lock-in, no published plan
MEDIUM15 points eachNo verification, vague timeline, missing financials
LOW5 points eachMissing Scope 3, generic language, unclear governance
typescript
// Greenwashing penalty calculation (DNSH is separate)
// Rule-based risk score → Penalty mapping
function calculatePenaltyFromRiskScore(riskScore: number): number {
  if (riskScore >= 70) return 20;  // High risk
  if (riskScore >= 40) return 10;  // Medium risk
  if (riskScore >= 20) return 5;   // Low-medium risk
  return 0;                        // Low risk
}

// Final LMA Score = LMA Base Score - Greenwashing Penalty
// DNSH Score is displayed separately (not subtracted from LMA)
function calculateFinalLMAScore(
  lmaBaseScore: number,           // 0-100 from 5 components
  greenwashingPenalty: number     // 0-60 from red flags
): number {
  return Math.max(0, lmaBaseScore - greenwashingPenalty);
}

DNSH Score (Independent)

The DNSH (Do No Significant Harm) assessment is an independent score displayed alongside the LMA Transition Score. It evaluates EU Taxonomy Article 17 compliance across 6 environmental objectives.

DNSH Score Interpretation

DNSH Score 83-100Fully Compliant
DNSH Score 70-82Mostly Compliant
DNSH Score 50-69Partial Compliance
DNSH Score 25-49Non-Compliant
DNSH Score 0-24Severe Harm Detected
💡Two Independent Scores
LMA Transition Score and DNSH Score are displayed side-by-side but calculated independently. A project can have high LMA compliance (100/100) but partial DNSH compliance (61/100), indicating strong transition credentials but environmental harm concerns that need addressing.

Final Score Calculation

typescript
interface AssessmentScores {
  // LMA Component Scores (0-20 each, 0-100 total)
  lmaBaseScore: number;
  components: {
    transitionStrategy: number;     // 0-20
    useOfProceeds: number;          // 0-20
    projectSelection: number;       // 0-20
    managementOfProceeds: number;   // 0-20
    reporting: number;              // 0-20
  };

  // Greenwashing Assessment
  greenwashingPenalty: number;      // 0-60 points deducted
  greenwashingRisk: 'low' | 'medium' | 'high';

  // DNSH Assessment
  dnshScore: number;                // 0-100
  dnshStatus: 'compliant' | 'partial' | 'non_compliant';

  // Final Score
  overallScore: number;             // lmaBaseScore - greenwashingPenalty
  eligibilityStatus: 'eligible' | 'partial' | 'ineligible';
}

function calculateFinalScore(
  lmaBaseScore: number,
  greenwashingPenalty: number,
  greenwashingRisk: 'low' | 'medium' | 'high'
): { overallScore: number; eligibilityStatus: string } {
  const overallScore = Math.max(0, lmaBaseScore - greenwashingPenalty);

  let eligibilityStatus: string;
  // High greenwashing risk with score >=80 = automatic ineligible
  if (greenwashingRisk === 'high' && overallScore < 80) {
    eligibilityStatus = 'ineligible';
  } else if (overallScore >= 60 && greenwashingRisk !== 'high') {
    eligibilityStatus = 'eligible';
  } else if (overallScore >= 30) {
    eligibilityStatus = 'partial';
  } else {
    eligibilityStatus = 'ineligible';
  }

  return { overallScore, eligibilityStatus };
}

Eligibility Thresholds

≥60
ELIGIBLE
Meets LMA transition loan criteria. Proceed with DFI discussions.
30-59
PARTIAL
Conditional eligibility. Address identified gaps before financing.
<30
INELIGIBLE
Significant gaps exist. Major remediation required.
⚠️Automatic Ineligibility
Certain projects are automatically marked as INELIGIBLE regardless of score:
  • • Fossil fuel extraction or production projects
  • • Coal-related activities
  • • Projects in non-African countries (outside supported 7)
  • • Projects with fundamental DNSH incompatibility

Scoring Examples

Example 1: Strong Solar Project

LMA Components
  • Transition Strategy: 18/20
  • Use of Proceeds: 17/20
  • Project Selection: 16/20
  • Management: 15/20
  • Reporting: 14/20
  • LMA Base: 80/100
Greenwashing
  • Penalty: -5 pts
  • LMA Score: 75/100
  • Status: ELIGIBLE
DNSH (Separate)
  • Score: 85/100
  • Status: Compliant

Example 2: Project with Mixed Results

LMA Components
  • Transition Strategy: 20/20
  • Use of Proceeds: 20/20
  • Project Selection: 20/20
  • Management: 20/20
  • Reporting: 20/20
  • LMA Base: 100/100
Greenwashing
  • Penalty: 0 pts
  • LMA Score: 100/100
  • Status: ELIGIBLE
DNSH (Separate)
  • Score: 61/100
  • Status: Partial
  • Environmental concerns need addressing
💎Improving Your Score
The most impactful improvements:
  • +8 pts: Publish a transition strategy document
  • +7 pts: Align with Paris Agreement 1.5°C pathway
  • +5 pts: Commit to third-party verification
  • -10 pts avoided: Include baseline emissions data