Alternative Investments/ESG: A New ETF From KraneShares Provides Exposure To Carbon Offsets

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The KraneShares Global Carbon Offset Strategy ETF (KSET) is the first U.S.-listed ETF offering investors exposure to the voluntary carbon market.

Asset management firm Krane Funds Advisors launched the KraneShares Global Carbon Offset Strategy ETF (NYSEARCA: KSET) on the New York Stock Exchange on April 27. The ETF provides investors with exposure to the voluntary carbon market by tracking carbon offset futures contracts traded on the CME, the largest derivative exchange in the world. (CISION PRNewswire)

Voluntary carbon market

“Started in the 1990s, the Voluntary Carbon Market (VCM) is a decentralized market where private actors voluntarily buy and sell carbon credits that represent certified removals or reductions of greenhouse gases (GHGs) in the atmosphere.” – ClimateFocus

A carbon offset is a certificate representing the reduction of one metric ton (2,205 lbs) of carbon dioxide emissions, the principal cause of climate change. Credits are issued proportionate to the amount of GHG emissions an activity removes, avoids, or reduces. With the purchase of a carbon offset, a business, a government, or an individual (that has a carbon emitting footprint) effectively pays someone else to cut or remove a given quantity of GHGs from the atmosphere. Buyers of offsets should first reduce their own Scope 1, 2, and 3 emissions and then purchase a corresponding quantity of credits to offset their residual emissions.

“Voluntary Carbon markets are a vital tool in the fight against climate change and are increasingly viewed as a cornerstone in global efforts to achieve mid-century net-zero targets,” said Eron Bloomgarden, co-founder of Climate Finance Partners (CLIFI) KSET’s non-discretionary sub-advisor. “Investors can feel confident that the offset credits behind KSET are generated from emission reduction activities that have been third-party verified by leading carbon offset registries.”

According to CME Group (NASDAQ: CME) , the voluntary market will need to scale by roughly 15 times its current size in order to achieve global emission goals. Establishing a physically delivered futures market is among their key recommendations for bringing this market to scale.

The expense ratio of the ETF is 0.79%.

Related Story: KRBN, A New ETF, Could Move The Needle on Carbon Pricing

Image Credit: Flickr

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