Carbon Fund Turns One With $540 Million Assets and Zero Outflows
Carbon Fund Turns One With $540 Million Assets and Zero Outflows
(Bloomberg) -- The red-hot market for global emissions credits has handed one exchange-traded fund a perfect first year of trading.
The KraneShares Global Carbon ETF (ticker KRBN) celebrated its birthday Friday, up about 80% since its inception with $540 million in assets and not a single day with a net outflow.
That’s a testament to the boom in carbon credits, tradable permits that allow companies to emit carbon dioxide. As prices increase, the idea is that polluting businesses will invest in reducing emissions rather than buying the credits.
Demand for green investments is surging, and carbon is an easy way for investors to participate, according to Bo Qin, an analyst at BloombergNEF.
“You don’t need to take a position on a company or one technology or one business model or an entry point,” Qin said. There are barriers to access the carbon market directly, so ETFs are a solution particularly for retail investors, she said.
KRBN largely holds European Union carbon futures, which have surged more than 60% this year. The fund itself has returned about 46%.
The remarkable run without outflows shows investors are looking at the fund as a longer-term holding, according to Ariel Perez, head of environmental products at Hartree Partners, which trades in carbon markets.
“Typically people take a bit of profit,” he said. “The people buying this are more looking to buy this as a hedge, a long-term position.”
That could continue because carbon prices haven’t reached the level needed to foster corporate change that would help meet increasingly ambitious environmental targets, he said.
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