The 28th United Nations Climate Change Conference, also known as COP28, is taking place this week in Dubai and that’s sure to put carbon-reduction and net-zero strategies in the spotlight.
After all, the low-carbon transition is already widely viewed as a disruptive mega-theme with myriad investment implications. Alone, that bodes well for the long-term trajectory of exchange traded funds such as the KraneShares Global Carbon Strategy ETF (KRBN ). COP28 has the potential to further highlight the potential benefits of funds like KRBN, particularly as various themes are spotlighted at the conference.
“First, climate resilience – society’s ability to prepare for and withstand climate risks – is an underappreciated theme, we think. Second, we eye progress on unlocking climate finance in emerging markets. Third, we watch for new policy plans that could shape the transition path,” according to BlackRock.
KRBN Ready for its Close-Up
KRBN debuted three and a half years ago and today is a $442.6 million powerhouse, confirming that an increasing number of advisors and investors see viability in the carbon investing thesis. Adding to the allure of KRBN is the point that, as its name implies, the fund takes a global view of carbon investing.
That’s a potentially advantageous trait at a time when more companies and governments, particularly those in emerging markets, are taking steps to reduce carbon output and entering the carbon credits market as a result.
“We are closely watching policy developments that could unlock investment opportunities in EMs. They play a pivotal role in the global reduction in carbon emissions, in our view. Why? We estimate EM will account for over half of energy demand and carbon emissions by 2050. Yet transition-related investment in EMs will likely be lower than in DMs due to a higher cost of capital from greater perceived investment risk, and greater exposure to physical climate damage,” added BlackRock.
As for how COP28 affects KRBN over the near term, it might be prudent to not expect dramatic price action in either direction. However, investors evaluating the KraneShares ETF may want to monitor what conference participants are saying at the event and assess their level of commitment to walking the carbon reduction walk.
“We see granular opportunities in public companies that produce climate resilience solutions across sectors. Solutions like early monitoring systems to predict floods or retrofitting buildings to better withstand extreme weather make the technology and industrial sectors stand out to us. And we think reforms could make it easier for private market players to fill the EM financing gap,” concluded BlackRock.
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