At Terra Alpha Investments, we believe that a portfolio consisting of companies with enduring business models, attractive valuations, and high levels of Environmental Productivity will provide investors with superior long-term, risk-adjusted returns. As part of our approach, we measure a company’s ability to manage risk and seize opportunity in an increasingly natural resource constrained world, which includes the monitoring of thematic trends, such as: decarbonization, technological innovation, electrification of everything, climate change impacts, evolving food/agriculture systems, demographics, and urbanization. As we analyze companies, we consider transition risks related to policy and legal actions, new technology adoption and business model disruptions, and changing customer and market behaviors. Transition risks include: carbon pricing or taxes, regulation of products and services, litigation, competition from newer lower emission products, changing consumer behavior, increased raw material costs, reputational risk from actions or market perceptions, etc. We also consider physical climate-related risks as part of our company analysis. These physical risks can be in the form of quantity issues (either excesses or scarcities), quality issues (e.g., contaminations due to weather events), and even large price fluctuations in materials. Climate-related risks, whether transitional or physical, lead to operational risk exposures that could ultimately determine how, and even if, a company operates. Regarding opportunities, we mainly focus on product and service offerings, energy efficiency, energy sourcing, and resilience. We attempt to identify disruptors or pioneers within various industries that are changing business models that will allow for a more sustainable world. We also focus on identifying enablers whose products or services will aid in the transition to a lower-carbon future. At a minimum, companies must be working to minimize their own footprints by either becoming more efficient at how they operate or switching to more renewable energy sources or both. Companies that are also building out more resilient operations are better positioned to navigate a more volatile environment and capitalize on the opportunities that are already coinciding with our changing world.