Last month KraneShares announced the launch of its flagship carbon strategy on European exchanges. European investors can now access the KraneShares Global Carbon Strategy ETC (KRBN) on Italian and German Exchanges.
The strategy, previously only available on the NYSE as the KraneShares Global Carbon Strategy ETF (KRBN ), seeks to track the S&P Global Carbon Credit Index. It’s the first fund of its kind to offer exposure to cap-and-trade carbon markets. What’s more, the Index contains the world’s most liquid carbon credit futures contracts. It includes contracts from the European Union Allowances and California Carbon Allowances. It also includes the RGGI markets and United Kingdom Allowances.
“KraneShares is a global leader in carbon market ETFs. We launched the first, largest, and most liquid carbon ETF on the New York Stock Exchange in 2020 in partnership with Climate Finance Partners (CLIFI),” Luke Oliver, head of climate investments at KraneShares, said in the press release. “We are excited to expand access to this critical market through our new KRBN ETC listing on the Italian and German Exchanges.”
European investors may now access the KRBN ETC on the Borsa Italiana and Deutsche Börse Xetra Stock Exchanges.
Carbon Allowance Investing and KRBN
Cap-and-trade carbon markets work to reduce greenhouse gas emissions by putting a price on emissions via carbon allowances. Market participants are allotted a certain number of emissions annually, measured in metric tonnes, and must buy additional allowances should they exceed that cap.
It’s also worth noting that carbon allowances differ in many fundamental ways from voluntary, project-based carbon offsets. Carbon allowance markets are heavily regulated by government entities, with transparent frameworks and market mechanisms. Furthermore, with a goal to reduce emissions to a net-zero reality, many of the markets contain tightening mechanisms. This in turn creates structural upside for carbon allowance prices according to Oliver. This structural upside makes carbon allowances unique amongst commodities.
KRBN offers investors a chance to go long the energy transition through an overlooked commodity class. Carbon allowances offer low correlations to traditional portfolio asset classes. “They are structurally designed for long-term price appreciation as part of their core application of decreasing emissions," explained Dr. Xiaolin Chen, head of international at KraneShares, in the press release.
“Besides the potential portfolio benefits, allocating to carbon supports price discovery and liquidity in the markets, which we believe promotes sustainability and true environmental impact.”
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