Alternative Investments/ESG: VanEck Australia Launches Global Carbon Credits ETF
It is the first retail ETF in Australia which tracks global carbon credit futures to attract rising domestic appetite for climate risk investments.
VanEck Australia has launched the VanEck Global Carbon Credits ETF (ASX:XCO2), a new global carbon credits based ETF that will allow retail investors in Australia exposure to international carbon credit markets. The ETF is a valuable diversification for these investors because the local bourse is heavily dominated by climate-sensitive sectors and companies in mining, energy and other resources. (SG VOICE)
VanEck Global Carbon Credits ETF (ASX:XCO2)
First announced in May 2022, the new ETF seeks to take advantage of the rising demand for ESG- and sustainability-themed investment options.
The ETF tracks the ICE Global Carbon Futures Index, which measures the performance of ICE carbon futures across the four most actively traded global carbon markets.
The ICE carbon futures indices are derived from ICE’s quoted carbon markets and account for 95% of global exchange traded volumes.
The four markets in the index are the European Union Emissions Trading Scheme (EU ETS), the UK emissions trading scheme, the Western Climate Initiative (California cap and trade program) and the Regional Greenhouse gas initiative (RGGI) of the Northeastern US. The EU ETS accounts for 90% of the total carbon market trading value, and is the most liquid of all.
“The benefit of global carbon credit futures is that they can be freely traded on global exchanges with attractive market size and liquidity, giving investors full price discovery,” said VanEck chief executive and managing director Asia Pacific Arian Neiron.
“Carbon credit prices are expected to increase significantly as the fight against climate change ramps up. The value of carbon futures and this asset class will likely benefit significantly over the longer term, making it an attractive way for investors to get exposure,” he added.
“The carbon price of the Emissions Trading Schemes has historically been lowly correlated to mainstream asset classes which reinforce the case for its use to enhance diversification particularly given Australian equities is so concentrated in resources and energy,” Neiron said.
“Government policies seeking to transition economies to net zero emissions are likely to increase globally, presenting growth opportunities for investors as carbon markets continue to incentivise changes in production and consumption patterns toward decarbonisation.”
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