Investing in market segments that support companies directly implementing a transition to a low carbon economy offers investors a unique way to play the climate change theme, according to impact fintech business, iClima Earth.
Rather than just invest in those companies at the front line of tackling climate change such as Iberdrola and Tesla, investors can access this megatrend by investing in companies that supply anti-carbon solutions.
iClima has identified companies that supply relevant climate change solutions that not only reduce carbon emissions but prevent them being emitted in the first place, or ‘CO2 avoidance’.
These companies are listed in the iClima Global Decarbonisation Enablers Index. The products and services they represent fall within five different categories including Green Energy, Green Transportation, Sustainable Products, Enabling Solutions and Water & Waste Improvements.
The index, which delivered a return of 83.51 per cent in USD terms in the last 12 months, is tracked by the iClima Global Decarbonisation Enablers UCITS ETF (CLMA). Past performance is no guarantee of future performance. The ETF launched in December 2020 via the HANetf platform and is listed on the London Stock Exchange, Deutsche Boerse’s Xetra and Borsa Italiana.
Gabriela Herculano, CEO of the iClima Global Decarbonisation Enablers ETF, says: “Using the California goldrush analogy, these are the companies supplying the shovels. We see tail winds supporting the positive trends for these ‘climate champions’ coming from global agreements and targets combined with green stimulus and policies and a positive shift in consumer behaviour.
“A fundamental shift can happen if more capital flows into the segments that support the transition to a low carbon economy, accelerating the uptake of existing individual and system solutions, and encouraging the development of new solutions.
“This is a unique approach and currently there is no ETF with a similar focus and ability to quantify impact with a tangible and clear metric.”
iClima has spent over 15 months quantifying the CO2 avoidance that each company in the iClima Global Decarbonisation Enablers Index can generate from annual sales. It analyses the solutions to assess those that are transient (such as a plant-based Beyond Meat burger, or a telepresence call on Zoom) and those that are based on products with long useful lives (such as a Siemens Gamesa wind turbine, or a Tesla EV car), with avoidance that has an impact over the long term.
iClima also compares what the companies in its index can potentially avoid in CO2 emissions in 2021 to the amount of CO2 that the world needs to be avoided in the year. This enables iClima to ascertain the true impact of the solutions of the companies it has selected.
iClima Earth is a green fintech that creates investment products targeting companies that make impactful contributions to solving climate change.
The iClima Global Decarbonisation Enablers Index was built using a tiered approach, meaning there is no over-exposure to large cap companies and it provides a balanced exposure to the key climate change solutions.