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Clima’s negative screening rules and vetting process

April 8, 2021

Gabriela Herculano, Rina Cerrato, Gary Hart, and Albina Stukalkina


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Negative Screening Rules & Vetting Process

iClima Earth has identified five major segments with companies whose products and services enable their users to reduce CO2 emissions. The segments are Green Energy, Green Transportation, Water & Waste Improvement, Enabling Solutions and Sustainable Products. Broadly speaking, the avoidance of CO2 takes place at the user phase (e.g. when driving an EV car), at the manufacturing phase (e.g., water treatment facilities that are more energy efficient) or are a sequestration of CO2 (e.g., pulp & paper producers with sustainable forestry practices).

The companies in our universe, referred to as the “Climate Champions” operate in 29 subsegments. These subsegments were defined by iClima, leveraging the work of Project Drawdown and PRI’s taxonomy recommendation to the EU. iClima Earth looks at the revenue derived from the sales of the “green enabling solutions” as a key vetting process. However, insufficient disclosure in the companies’ financial statements and/or complex revenue lines, with multiple products being related to different subsegments, required the definition of additional vetting and screening rules.



  • Companies that directly manufacture and sell any type of armament are not permitted. Specific segments completely unacceptable include nuclear weapons or systems, chemical or biological weapons, landmine, cluster bombs, or depleted uranium weapons
  • AeroVironment Inc is a company that was selected as a potential enabler of CO2 avoidance (solar powered drones, electrical aviation solutions), but was excluded because of the company’s direct activity in manufacturing missile systems.
  • Our Enabling Solution segments encompass battery solutions, electrical equipment, and electrical components. Some companies sell components that are sold to conventional military use.
  • Companies with sales of components that are used for conventional military purposed must have a revenue derived from such customers below 10%. Eaton Corp Limited and EnerSys are two examples of companies in iClima’s universe with such exposure. iClima will monitor the revenue generated by military sales and the companies will be excluded from the universe in case the revenue goes above our limit level.


  • iClima Earth does not include nuclear energy in its definition of Green Energy, nor sees it as a needed solution to climate change.
  • However, a few companies in our Renewable Energy Assets, Green Utility and Renewable Energy Developer subsegments have nuclear assets. Companies that are predominantly renewable energy based but have nuclear assets that represent less than 20% of their revenue are permitted, in line with IEA’s 2019 report stating nuclear power represents 18% of total generation in advanced economies.
  • Iberdrola SA is an example of a company with nuclear assets that is part of iClima’s universe.


  • iClima Earth does not include waste to energy as a desirable solution but a transitional one. Therefore, we do include waste to energy revenue of the companies with this type of assets when calculating what we deem to be green revenue.
  • The solution is perceived by leading sustainability investors (a case in point is Breakthrough Energy) as a pragmatic acceptable practice until better technologies are available.
  • Some companies in our Water & Waste Improvement as well as in our Sustainable Forestry subsegment have waste to energy (or biomass) assets.


  • iClima Earth excludes any companies with assets in oil exploration and processing activities.


  • No coal exploration or processing activities are allowed for the companies in our universe.
  • iClima Earth excluded renewable energy players with material power generating assets that use coal as a fuel.
  • We make a concession for generators that are predominantly renewable energy players with less than 1% of their total revenue associated with coal-based power generation.
  • China Longyuan Power Group Corporation is predominantly a wind energy asset owner. However, they do have ca. 15% of their sales derived from coal power plants. The company was excluded on that basis.
  • Iberdrola SA has ca. 0.3% of its revenues derived from coal power plants. Under iClima Earth’ 1% concession rule, Iberdrola remains in iClima’s universe.


  • iClima Earth excluded renewable energy players with renewable energy assets but with the majority of power being generated by natural gas CHP or CCGTs.
  • We make a concession for generators, or companies with gas distribution assets, that are predominantly renewable energy players with less than 50% of their total revenue generated by natural gas power plants.
  • AGL Energy is an example of company with renewable generation, but material operations related to natural gas distribution and power generation.


  • Some of the companies in our Renewable Energy Equipment, Pollution Control, Alternative Fuels, Battery Supply Chain, Electric Systems, Energy Efficiency, Energy Storage, Green Finance, Semiconductor Devices, Lighting Systems, Measurement Instruments, Sustainable Infrastructure, Electrical Components, Telepresence, Efficient Materials & Processes subsegments do derive sales to clients involved with fossil fuel exploration, processing or distribution.
  • iClima Earth excludes companies generating over 40% of their sales to clients that enable fossil fuel E&P and processing activities.
  • Canadian Pacific Railway is an example of a company that was excluded due to significant fossil fuel association (diesel locomotives and largest client being coal miner).
  • For our EV subsegment, iClima Earth excludes companies generating over 40% of their sales of automotive with ICEs that run on fossil fuel.
  • On iClima’s EV subsegment that means that companies like Toyota or Volkswagen, albeit with relevant R&D and EV sales growth, are still predominantly ICE automakers. These companies did not merit to be included in iClima’s universe.
  • For our Ride Sharing subsegment, iClima Earth attribute green sales to what is derived from car pooling and EV based rides.
  • iClima is cognisant of the still high ICE usage by the companies in the space, but pledges to get to majority EV based rides in the next decade justify a concession to the current high ICE exposure.  
  • For our Pollution Control segment, we make a concession and allow companies with substantial sales to fossil fuel related companies, as the pollution control products are pragmatic, transitional solutions for GHG emissions.


  • iClima Earth company selection is based on products and services that can decarbonise the planet. As such, companies involved in alcohol production, adult entertainment, gambling, and tobacco are not allowed, concession for companies with less than 1% of revenue associated with alcohol production is granted.



  • We are cognisant of the fact that many companies are developing new solutions and product lines that can contribute to enabling CO2 avoidance. That means that in many cases the revenue derived from what iClima deems to be “green solutions” represent less than 20% of a company’s total revenue. iClima looks at several indicators to ascertain if a green solution although representing less than 20% of a “Climate Champion” revenue is a relevant part of the business:
  • Growth rate rule: When data is available, iClima looks at the CAGR of the product revenue line. If the CAGR for previous years is in double digits, the green solution is defined as an “up and coming”.
  • Segment growth rule: iClima also looks at the overall reported annual growth in the reported segment of where the green solution is accounted. If year over year growth of the segment is in double digits, the green solution is defined as “up and coming”.
  • Xiaomi Corp is a case in point. The company is predominantly a smartphone producer. However, its IoT and LifeStyle products are growing segments with relevant green solutions, such as their foldable electric bike, LED smart lighting and Xiaomi Ecosystem products.
  • Relevance: The product & service deemed green shall represent a product line that is a material segment for a company.
  • Microsoft Teams is not a stand-alone product and Telepresence is not a segment that Microsoft discloses and refers to as a key revenue line. Therefore, Microsoft was not considered for a Telepresence solution within iClima’s universe.


  • Companies need to be revenue positive to be part of iClima’s universe.
  • Nikola Motor is currently not, and although their solutions are in line with the subsegments we deem to have potential to decarbonise the planet, it is currently not part of iClima’s universe.
  • Companies with three consecutive fiscal years of negative revenue growth are also excluded.
  • A company must have a market capitalisation above US$200 MM to be considered to iClima’s universe.