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Why Carbon Credit ETFs Soared in 2021

Published 01/20/2022, 03:51 AM
Updated 07/09/2023, 06:31 AM
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  • (1:00) - Understanding The Carbon Markets: Carbon Offsets vs. Allowances
  • (9:20) - Measuring Carbon Emissions: How Does The Cap And Trade System Work?
  • (15:30) - KraneShares Global Carbon Strategy ETF: KRBN
  • (21:10) - Global vs Regional Exposure: Which Products Works Best For Your Portfolio?
  • (32:20) - KraneShares CSI China Internet ETF (KWEB): Should You Be Buying The Dip?
  • Podcast@Zacks.com

In this episode of ETF Spotlight, I speak with Luke Oliver, Managing Director & Head of Strategy at KraneShares, about carbon credit ETFs, which were among the best performing areas of 2021.

The governments around the world are focused on moving toward the goal of net-zero emissions by 2050 set by the 2015 Paris agreement. Some of the largest companies including Microsoft MSFT and Apple AAPL have also voluntarily committed to a net zero emissions target.

In addition to investing in renewable energies and carbon capture technologies, some companies use carbon offsets. Another way for companies to manage their carbon footprint is to buy and sell emission allowances.

In the cap-and-trade system, a government sets a limit on overall emissions, which is tightened over time. Big carbon emitters need to buy these pollution permits to stay under regularity caps.

The KraneShares Global Carbon ETF KRBN, which was up more than 100% last year, provides diversified exposure to global carbon markets through futures contacts. The KraneShares European Carbon Allowance Strategy ETF KEUA and the KraneShares California Carbon Allowance Strategy ETF KCCA provide exposure to regional markets in EU and California respectively.

These ETFs can support responsible investing and provide potential portfolio diversification. We also discuss why these funds soared in 2021 and whether the trend can continue.

The KraneShares CSI China Internet ETF KWEB was down about 50% last year due to regulatory crackdown on companies like Tencent TCEHY (OTC:TCEHY), Alibaba (NYSE:BABA) BABA and Baidu (NASDAQ:BIDU) BIDU. However, the fund gathered record inflows of $8 billion as investors bet on a potential rebound. Can China tech stocks rally in 2022?

Tune in to the podcast to learn more.

Make sure to be on the lookout for the next edition of ETF Spotlight and also make sure to subscribe! If you have any comments or questions, please email podcast@zacks.com


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