Page 31 - DIY Investor Magazine - Issue 28

They can be expressed in a formula as the difference between GHG emissions from a business-as-usual (BAU) baseline scenario and GHG emissions from a climate change solution scenario: ‘USING THE CALIFORNIA GOLDRUSH ANALOGY, THEY ARE THE COMPANIES SUPPLYING THE SHOVELS’ We believe that the best way to reduce CO2e in the atmosphere is by not emitting them in the first place: we are driven by the products and services that can enable CO2 avoidance. We started by looking at the 100 most substantive, technologically viable, existing solutions that can decarbonise the planet as listed by the incredible Project Drawdown, a non-profit organisation dedicated to reducing GHGs in the atmosphere. We applied our own screening rules to make 360-degree assessments of the environmental impacts of companies and developed a unique equity benchmark, the iClima Global Decarbonisation Enablers Index, managed by Solactive. We have spent over 15 months quantifying the CO2e avoidance that each company in our Index can generate from annual sales. We look at 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 electric vehicle (EV) car). Key for us is the comparison of what the companies in our index can potentially avoid in CO2e emissions in 2021 to the amount of CO2e that needs to be avoided in the year. Our iClima Global Decarbonisation Enablers Index is currently comprised of 151 companies. The products and services they represent fall within five categories (Green Energy, Green Transportation, Sustainable Products, Enabling Solutions and Water & Waste Improvements). We estimate they will contribute to more than 0.6 gigatons of the new and recurring CO2e avoidance in 2021. These companies supply relevant climate change solutions; using the California goldrush analogy, they are the companies supplying the shovels. We see tailwinds supporting these climate champions coming from global agreements and targets combined with green stimulus and policies and a positive shift in consumer behaviour. This helps to explain the strong performance of our Total Return Index, which is up 63.6% so far this year (4). Investors can invest in the Index through the iClima Decarbonisation Exchange Traded Fund. Net Avoided Emissions = (BAU baseline emissions) - (solutions-enabled emissions) E.g. a company that switches electricity supplier from a fossil fuel-based provider to one that sources power from renewable resources such as solar or wind projects would achieve net avoided emissions virtually equivalent to the CO2 emitted by its former supplier to generate its energy. THE FOCUS IS ON SUPPLIERS Companies that have reduced their carbon footprint such as Google and Microsoft are users of key climate change solutions, such as renewable energy, electric vehicles and even plant-based meals served in their cafeterias. At iClima Earth we focus instead on the suppliers of the solutions; not just because we think these companies can do well financially, given they sell what the world needs to fight climate change and increasing demand for their products, but also because more capital needs to be channelled to the companies in these key segments. Shedding light on these climate champions will direct capital to much needed R&D and innovation. Fig 1: Annual reductions needed in global CO2 emissions Year Emissions in GtCO2e 202056 2021 51.74 2022 47.81 2023 44.18 2024 40.82 2025 37.72 2026 34.85 2027 32.2 2028 29.76 2029 27.49 2030 25.4 % Annual Cumulative Cumulative GtCO2e GtCO2e % 0 0 0 0% 7.60% 4.26 4.26 7.60% 7.60% 3.93 8.19 14.60% 7.60% 3.63 11.82 21.10% 7.60% 3.36 15.18 27.10% 7.60% 3.1 18.28 32.60% 7.60% 2.87 21.15 37.80% 7.60% 2.65 23.8 42.50% 7.60% 2.45 26.24 46.90% 7.60% 2.26 28.51 50.90% 7.60% 2.09 30.6 54.60% DIFFERENT FOCUS YIELDING DIFFERENT RESULTS At iClima Earth we have developed a fact-based, data driven methodology to vet the companies that have potential to contribute towards the goal of decarbonising the planet. 31 DIY Investor Magazine | Apr 2021