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Negative Screening

April 8, 2021

iClima Team - Gabriela Herculano, Rina Cerrato and Gary Hart


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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 Improvements, 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 involve 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 27 subsegments. These subsegments were defined by iClima, leveraging the work of Project Drawdown and the EU taxonomy of sustainable activities. iClima looks at a company revenue, to quantify green (environmentally sustainable solutions that can enable CO2e avoidance) and brown (defined as associated with fossil fuel, further defined below) revenue as a key selection criteria as well as additional negative screening of controversial revenue-generating activities which are outlined below.



  • 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.
  • Our Enabling Solutions subsegments 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 purposes 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 cases where the revenue is above our threshold.


  • iClima 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 revenue generating 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 the IEA’s 2019 report stating nuclear power represents 18% of total generation in advanced economies.
  • Iberdrola SA and Edison International are examples of companies with nuclear assets that are part of iClima’s universe.
  • Siemens have decommissioned nuclear assets that do not generate revenue. The ownership of decommissioned nuclear assets is not negatively screened.
  • Nuclear is deemed to be neutral as it is not a fossil fuel source.


  • iClima does not include waste-to-energy as a desirable solution but as a transitional one. However, 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 excludes any companies with assets in oil exploration and processing activities.
  • Land property that is leased for E&P activities that are owned and operated by a third party are acceptable.
  • Diesel blended with biofuel is deemed to be a transitional solution and is acceptable. A 10% limit applies to resale of petroleum diesel.
  • In the Renewable Energy Assets and Green Utility subsegments a few companies have peak generators that run on diesel. We have a clear cap on these revenues at 1%.
  • Companies that manufacture back up power products that run on either diesel or natural gas have a revenue threshold of 50% of total sales.


  • 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.
  • A buffer of 1% is applied to such revenue if it is associated with a coal fired power plant that is to be decommissioned within three years. An example of this is Orsted, whose revenue derived from coal generated electricity oscillates around 1% of total revenue. However the company has plans to exit coal completed by 2023.
  • China Longyuan Power Group 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.
  • Transalta Renewables Inc is an example of company with renewable generation, but material operations related to natural gas distribution and power generation.
  • Fuel Cell makers that sell equipment that can use natural gas are acceptable, where the technology is transitioning to an application based on biogas or green hydrogen.


  • In the Renewable Energy Assets and Green Utility subsegments some companies have transmission and distribution assets. We estimate the electricity derived from fossil fuel sources and have a cap of 40%.
  • 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 applies best efforts to identify and quantify the companies generating over 40% of their sales to clients that enable fossil fuel E&P activities.
  • GE and Canadian Pacific Railway are example of a companies that were excluded due to significant fossil fuel association.
  • In our Waste Management subsegment some companies have environmental services provided to E&P companies. We don’t class that as a brown revenue (nor as green).
  • For our EV subsegment, iClima Earth excludes companies generating over 40% of their sales of automotive with ICEs that run on fossil fuel.
  • Hybrid vehicles, Public transit ICE vehicles and ICE carpooling are seen as transitional solutions and are therefore deemed as green.
  • Emissions reductions components sales to ICE makers are defined as green from a transitional perspective. An example of a company in such case is BorgWarner Inc.
  • 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 attribute green sales to what is derived from EV based rides with ICE carpooling and hybrid rides seen as transitional.
  • iClima is cognisant of the 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’s company selection is based on products and services that can decarbonise the planet. As such, companies with revenues over 1% from direct alcohol production (spirits, beer or wine), adult entertainment, gambling, and tobacco production and sale are not allowed.



We are aware of the fact that many companies are developing new solutions and product lines that contribute to enabling CO2 avoidance. That means that in some cases the revenue derived from what iClima deems to be “green solutions” represent less than 20% of a company’s total revenue.  In these cases where company reporting makes this percentage difficult to ascertain, iClima looks at several indicators to assess if a green solution, although possibly representing less than 20% of a “Climate Champion’s” 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.
  • At the time of launch Nikola Motor was 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 excluded, with a concession for companies that have restructured operations, shifting strategy and product lines towards more relevant carbon avoidance solutions.
  • A company must have a market capitalisation above US$200 MM to be considered to iClima’s universe.

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