Climate investment boutique iClima Earth has made its US debut with the launch of a pair of ETFs designed to provide investors with exposure to the next generation of companies leading the fight against climate change
Gabriela Herculano, iClima co-founder and CEO.
Listed on NYSE Arca, the iClima Global Decarbonization Transition Leaders ETF (CLMA US) and iClima Distributed Renewable Energy Transition Leaders ETF (SHFT US) emphasize investment in companies that “do more good” rather than companies that simply “do less harm”.
Gabriela Herculano, iClima co-founder and CEO, said: “The next generation of climate change investment does not revolve only around emissions reduction. Instead, it is laser-focused on the leading companies that provide products and services that enable emissions avoidance altogether.
“CLMA and SHFT will appeal to investors who have a strong interest in sustainability themes and early adopters who are seeking more impactful portfolio exposure to technology-forward solutions in the ongoing fight against climate change.”
The funds are the same two strategies that are already offered by the London-based firm in UCITS ETF format in Europe via listings on the LSE, Xetra, Borsa Italiana and SIX Swiss Exchange.
Investment process
CLMA is linked to the iClima Global Decarbonisation Enablers Index comprising companies operating in green energy, green transportation, water and waste improvements, enabling solutions, and sustainable products.
The index targets companies that specifically facilitate the avoidance of CO2e (or carbon dioxide equivalent, a measure of carbon emissions) by offering climate change mitigation solutions that enable activities to be performed with reduced emissions. This incorporates a broad sweep of companies ranging from renewable energy providers, to electric vehicle manufacturers, to waste treatment plant operators, to alternative fuel cell makers, to plant-based food producers.
The index selects the companies that either generate at least 20% of their revenue from the sale of products and services that enable decarbonization (i.e. CO2e avoidance), or have grown sales from such products and services by at least 10% over previous years, or disclose in publicly available communications a specific CO2e avoidance solution as a key revenue source.
An ESG screen excludes companies operating in industries deemed counterproductive or undesirable, such as oil producers, operators of coal-fired power plants, and manufacturers of nuclear and non-conventional weapons.
Companies must have a minimum market capitalization of $200 million to be included and are then weighted according to a custom modified equal-weighting scheme that tilts towards larger and more liquid firms while capping any single constituent at 2%.
The index is rebalanced semi-annually and presently comprises 156 companies. It is independently calculated by Solactive.
SHFT is linked to the iClima Distributed Renewable Energy Index composed of companies that provide products and services that enable the practice of distributed energy generation.
Distributed energy generation is a decentralized approach to electrical supply that favors small, consumer-specific sources of power at or near to where it is used.
The index spans three key pillars (decentralization of the power sector, digitalization of energy solutions, and decarbonizing of energy sources) which encompass a range of different distributed energy companies. This includes companies that provide products and services such as residential solar panels, local energy storage, smart meters, vehicle-to-grid energy, electric vehicle charging, smart inverters, and software solutions that leverage artificial intelligence to manage the system.
The index selects the companies that generate at least 20% of their revenue from the sale of products and services that enable distributed energy resources, or have grown sales from such products and services by at least 10% over previous years, or that disclose a specific distributed energy resources solution as a key revenue source.
Companies must have a minimum market capitalization of $200 million and must not operate in industries deemed counterproductive or undesirable from an ESG perspective, as identified by an exclusionary screen.
The index, which is rebalanced semi-annually, comprises 50 companies that are equally weighted. It is calculated by Solactive.
Both funds come with expense ratios of 0.65%.
Toroso Investments serves as investment adviser.