FAQ – How to use the Discovery tool

THE DISCOVERY TOOL

What is the purpose of this Discovery tool?

The Discovery page is designed to allow individuals to research the companies that we see as “climate champions” – the companies with great potential to enable CO2e avoidance. We believe the best way to reduce CO2e in the atmosphere is by not emitting in the first place. Therefore, the companies in our universe are the companies with products and services that enable activities to be performed at a lower CO2e emission level.

The purpose of the tool is to share information, open source. Individuals that care about climate change and want to invest for green impact struggle to pass beyond greenwashing solutions. At Clima, we combat greenwashing with data, and we share with you our views on the companies with potential to decarbonise the planet.

I don’t know how to use this page. Can you give an overview?

When you first open the page you see, as default, the full list of ca. 200 securities that are in line with the segments and subsegments that we see as “green”. There are 5 categories for you to “play” with, namely:

  1. Size of Market Capitalisation: From micro cap (Market Cap below $300 MM) to large cap (Market Cap above $10 billion).
  2. Jurisdiction: You can choose your geographical area of focus (EU, Asia, UK, North America, Emerging Markets excluding Asia).
  3. Strategy: Dividend yield, growth, value stocks or a blend.
  4. Segment: The many different solutions that we see as enabling CO2 avoidance.
  5. Type of equity instrument: If shares, ETFs, or Closed End Trusts (an instrument popular in the UK).

You should think of the common denominator of the names you would like to see. A few examples:

  • Are you interested in seeing all the Renewable Energy Equipment companies in our list? Then click “Renewable Energy Equipment” in the Segment list. 
  • If you would like to see all companies in Emerging markets, tick “Emerging Markets excluding Asia” under Jurisdiction.
  • If you want to see intersection of ideas, click on the different criteria, for example Asia (in Jurisdiction) + Growth Stocks (under Overall Strategy) + Electric Vehicles and Bikes (under Segments).

Can you explain the 5 categories in more detail?

When you do stock picking, selecting shares to invest into, it is important to understand some definitions in more detail:

  1. Size of Market Capitalisation: The equity value of a company. Technically speaking, the formula is number of outstanding shares times current price per share. It is what the stock market sees as the “true equity value” of a company.
  2. Jurisdiction: Relates to the home country of a company, where the HQ is located. The reality is that many companies operate in a global scale and in multiple countries, but the domicile of the company is the country where it was incorporated.
  3. Strategy: Dividend yield, growth, value stocks or a blend. Companies can be in a faster growing stage or be more mature (usually large cap stocks) or also paying dividends to investors. However, note that there are large cap companies (like Tesla) that are in a fast growth trajectory.
  4. Segment: The many different solutions that we see as enabling CO2 avoidance. You can see details of the solutions here. 
  5. Type of equity instrument: Most of the securities in our universe are common shares of companies. We also have vetted Exchange Traded Funds (ETFs) with exposure to interesting climate change related themes, and lastly Closed End Trusts (an instrument popular in the UK in particular for investments into portfolios of renewable energy assets).

What is the default list I see when I open the page?

When the Discovery page first opens, you see the full list of all the securities that have passed our vetting process. In other words, it is as if you have ticked all the boxes under the five categories of filters. 

At Clima we put in place a methodology to quantify potential avoided emissions, together with parameters to determine the “shades of green” of the different companies, and negative screening rules. We vetted thousands of names, and selected ca. 200 securities as those with material level of “green” revenue that are not “doing harm”. We screened out a lot of companies, for example those that have relevant solutions in renewable energy but also with material revenue related to oil & gas enabling businesses (e.g., GE manufactures wind turbined, but it is not part of our universe as it also manufactures diesel locomotives, turbines for airplanes and multiple solutions to the oil & gas industry).

In practical terms, what do I tick?

Our five categories are filters. By ticking the little boxes, you will be selecting the specific topics of interest to you. Tick the regions, type of securities, size of market cap, strategy, and segments of interest to you and wait for the list at the bottom of the page to refresh.  

You can select a single box or several boxes. The filter function will show you the intersection of all your choices. If you make a very narrow search, it may not yield any results. For example, there are no Closed End Trusts in Asia. In that case, the filter function will say “couldn’t find any equity matching your search”.

Do you show information beyond the list itself?

Yes, the filter will show the names of the companies in line with your criteria. If you double-click on each company, you will be redirected to the company’s page. There you will see a graph with the share performance, as well as key information on the company’s financials, multiples, and overview of operations and our description of their “green” revenue. 

RESEARCHING

How do I know what to look for?

You should think of the strategy you want to pursue. Are you interested in gaining exposure to a specific sector? How do you see your risk versus return appetite? 

Users have demonstrated a great interest for the Segments category, a lot of curiosity around the names of the companies that are in our five sectors. Many users also want to see names that are “high growth” or names that are “value and income (dividend yield)” potential.

Are you interested in more growth (capital appreciation) or more income (cash on cash return)? What type of risk are you willing to take? Usually companies in the developed economies face less risk than those in Emerging Markets.

What are the most frequent search combinations?

Below are some of the popular combinations we have recently seen:

  • Full list of ETFs 
  • Asia + Electric vehicles & bikes
  • Dividend yield + EU + US + UK
  • Value + US
  • Alternative Fuels & Fuel Cells + Growth

DISCOVERY AND COMPS

How do I relate the Discovery tool with the Weekly Comps?

The Discovery tool will show you the universe of companies we believe can enable the decarbonisation of the planet. You can use the filter function to select companies according to five categories. You can then click on each of the companies in your search and gather more information on them.

Our Weekly Comps show you the universe of companies and highlight their share performance the week before, the share performance year to date (YTD) and show you key metrics like Price/Earnings, Enterprise Value/EBITDA, and dividend yield, to name a few. 

We hope users will keep tracking the share performance and key multiples using the Weekly Comps and will keep doing research by using the filter toll in the Discovery page.

How do I act on my convictions?

If you are convinced that there is an interesting company that you should invest into at the current price you can trade that name using a brokerage account. Building a portfolio of investments, becoming more financially literate, and being able to identify solid climate change investments are goals that we believe are important for us to support. 

CLIMA’s BENCHMARK

Your Clima Decarbonisation Enablers Index has less companies than listed in the Discovery. Why?

Our first index was launched with 152 companies. In our Discovery page we list ca. 200 names. The index needs to consider a minimum liquidity (called “average daily volume”) of $1 MM and a minimum market capitalisation value. 

The Clima universe in our platform includes the 152 names in the index, plus the companies with lower average daily volume and micro cap companies, and the UK Closed End Trusts. Moreover, we have vetted ETFs and show a list of 19 exchange traded funds that are in line with specific green solutions, and these ETFs are also part of the ca. 200 names in the Discovery function.

I read that Clima is launching an ETF. Why don’t you talk about Clima’s ETF here?

Yes, we are launching an ETF. Our platform is not a place for us to market our funds. We want to share our vision and methodology because we think the time has come for us to focus on CO2 avoidance and the enabling companies that produce relevant “green” solutions. We don’t recommend companies or investments.

Moreover, we want to encourage users to do more equity research and stock picking. We know how hard it is to come up with solid investment ideas that can have direct climate change impact. We wanted to make that process easier for committed individuals.

Author: iClima Earth
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