As the world strives to attain its goals of net zero, the carbon credit market continues to offer investors portfolio diversification as well as an aspect of growth. KraneShares has a pair of exchange traded fund (ETF) options to consider.
Market analysts foresee more growth ahead as the world transitions from carbon-based energy sources to renewable alternatives. As such, massive growth opportunity exists in the investment arena as the carbon credit market looks to grow exponentially in the next decade.
“In the absence of a regulated UN market for carbon offsets the voluntary, unregulated carbon market has expanded as corporate and net-zero targets have proliferated,” Energy Intel noted. “This trade was worth some $2 billion in 2021, and some industry watchers forecast the sector could balloon to up to $50 billion-plus by 2030.”
2 Global Options
Getting global diversification provides investors with opportunities abroad that they may not be able to realize domestically. With that in mind, one option to consider is the KraneShares Global Carbon Offset Strategy ETF (KSET ).
The fund tracks the S&P GSCI Voluntary Carbon Liquidity Weighted Index. It offers a unique benchmark for the global voluntary carbon futures market performance that trades through the CME group. It comes with a 0.79% expense ratio.
As presently structured, KSET offers global coverage of voluntary carbon markets by tracking carbon offset futures contracts comprised of nature-based global emissions offsets (N-GEOs) as well as global emissions offsets (GEOs). As the world continues to move towards decarbonization, KSET offers tremendous growth potential that can reap gains in the short- and long-term investment horizons.
Another option is the KraneShares Global Carbon Strategy ETF (KRBN ), which offers another broad-based option to the global carbon credit market. Per its fund description, KRBN is benchmarked to IHS Markit’s Global Carbon Index, which offers broad coverage of cap-and-trade carbon allowances by tracking the most-traded carbon credit futures contracts. Given this strategy, the index introduces a new measure for hedging risk and going long on the price of carbon while supporting responsible investing.
Currently, the index covers the major European and North American cap-and-trade programs: European Union Allowances (EUA), California Carbon Allowances (CCA), the Regional Greenhouse Gas Initiative (RGGI), and United Kingdom Allowances (UKA). KRBN comes with a 0.78% expense ratio.
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