(Bloomberg) – This year’s rise in carbon prices has made a little-known ETF one of the fastest-growing products in the $ 6.2 trillion industry.
In just five months, the assets of the KraneShares Global Carbon ETF (KRBN) rose more than 1,700% to $ 311 million, according to data compiled by Bloomberg. The ETF that invests in carbon credits worldwide has risen more than 40% since the end of 2020, fueling the green revolution sweeping global markets. That’s roughly four times the rally of the S&P 500.
One of the most important reasons for the fund’s success this year is the fact that a portion of its holdings are in European Union carbon futures. Prices have soared around 70% in 2021 amid prospects that the region will enact aggressive climate policies.
In the EU, industrial and electricity companies must buy carbon rights to account for their emissions. The idea behind such credits is that as prices rise, polluting companies will eventually decide to invest in reducing emissions, rather than buying the credits.
“Many countries are legislating that companies must decarbonize, so there will be more demand for carbon credits,” said Linda Zhang, CEO of Purview Investments.
President Joe Biden’s renewed promise to establish America as a leader in fighting climate change will further benefit the market.
“The Biden Administration has made it very clear that, as part of its overall agenda, it wants environmental and sustainability issues to be a priority,” said Craig Fehr, investment strategist at Edward Jones.
Original Note: A Tiny Fund’s Assets Jump 1,700% This Year Thanks to Carbon Boom
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