Carbon Strategy ETF Launches on the NYSE with Ticker KARB to Provide Exposure to Global Compliance Carbon Markets

Rhea-AI Summary

Carbon Fund Advisors has launched the Carbon Strategy ETF (NYSE: KARB), targeting global compliance carbon markets. The ETF aims to offer exposure to carbon allowance futures, addressing barriers that prevent investors from accessing these markets directly. The global compliance carbon markets surged in value from 186 billion euros in 2018 to 760 billion euros in 2021. The ETF will focus on heavily traded markets in Europe and North America, including EUAs and CCAs. This initiative coincides with a rising demand for emissions trading systems amid climate change regulations.

Positive

• Launch of Carbon Strategy ETF (KARB) provides investor access to carbon allowance futures.
• Significant growth in compliance carbon markets, from 186 billion euros in 2018 to 760 billion euros in 2021, indicating potential for future investment gains.
• Addresses investor challenges in accessing derivatives related to carbon markets.

Negative

• Exposure to carbon futures may lead to significant losses if market access is disrupted.
• Cap and trade programs may not be effective or could be terminated, affecting fund viability.

Actively managed ETF will hold futures contracts on carbon allowances in emissions trading systems in Europe and North America

SARASOTA, Fla.--(BUSINESS WIRE)-- Carbon Fund Advisors Inc. (“Carbon Fund Advisors”) is pleased to announce the launch of the Carbon Strategy ETF (NYSE: KARB), an actively managed thematic ETF that will provide investors with exposure to the global compliance carbon markets, which have grown from 186 billion euros ($220 billion) in 2018 to 760 billion euros ($899 billion) in 2021 according to Refinitiv.

“There is a growing global push to regulate and reduce greenhouse gas emissions in an effort to combat climate change, and emissions trading systems can be an effective tool for governments across the globe to achieve their climate goals,” said Tim Collins, a founder and President of Carbon Fund Advisors.

The compliance carbon markets are comprised of emissions trading systems (“ETS”) established by regional, national or subnational jurisdictions to put an explicit price on greenhouse gas (“GHG”) emissions. A cap is set on the total annual GHG emissions to be generated by companies in regulated industries. The cap, or permitted emissions, declines annually to achieve the climate goals of the jurisdiction(s). Carbon allowances equal to the emissions cap may then either be freely allocated and/or auctioned to emitting companies by the governing entity. Companies within an ETS may buy or sell carbon allowances based on need (i.e., a company with lower emissions may choose to sell allocated carbon allowances to an entity with higher emissions). Emitters with an insufficient amount of allowances to offset their emissions at the end of the reporting period incur penalties.

“Most investors do not have access to directly buy and sell carbon allowances in these systems, which is limited to those registered in an ETS,” continued Tim Collins. “While active futures markets can provide investors with exposure to certain compliance carbon markets, investing directly in carbon allowance futures contracts can be challenging because of the difficulties associated with gaining access to derivative markets. The Carbon Strategy ETF is a potential solution for that issue because it opens the door to invest in a portfolio of carbon allowance futures at a time when global carbon prices are forecast to rise as the world aims to achieve the goals of the Paris Agreement.”

The fund uses the Carbon Streaming BITA Compliance Index (the “Index”) as a reference index, which tracks the performance of the compliance carbon markets through an allocation into a series of carbon allowance futures contracts. The Carbon Strategy ETF will initially hold futures contracts for carbon allowances in some of the most heavily traded carbon markets, located in Europe and North America, including European Union Allowances (EUA), California Carbon Allowances (CCA), and the Regional Greenhouse Gas Initiative (RGGI) CO₂ Allowances.

(2018: $1 = 0.847 euros and 2021: $1 = 0.845 euros)

About Carbon Fund Advisors Inc.

Carbon Fund Advisors Inc. was founded by individuals with decades of experience in capital markets to provide investors with exposure to the global carbon markets. The team is comprised of professionals with a diverse set of skills and experiences across asset classes and industries. To learn more, please visit karbetf.com.

About Carbon Streaming Corporation

Carbon Streaming Corporation (NEO: NETZ) (OTCQB: OFSTF) (FSE: M2Q), an ESG principled company, offers investors exposure to carbon credits, and holds a 50% equity interest in Carbon Fund Advisors Inc.

Disclosures

Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s full and summary prospectus, which may be obtained by visiting http://karbetf.com/investor-materials. Read the prospectus carefully before investing.

The investments held in the Fund’s portfolio may experience sudden, unpredictable drops in value or long periods of decline in value. Cap and Trade Risk. There is no assurance that cap and trade programs will continue to exist. Cap and trade may not prove to be an effective method of reducing greenhouse gas emissions. As a result, or due to other factors, cap and trade programs may be terminated or may not be renewed upon their expiration. Investment Capacity Risk. If the Fund’s ability to obtain exposure to carbon credit futures contracts, which are commodity futures contracts linked to the value of emission allowances (“Carbon Futures”), consistent with its investment objective is disrupted for any reason including, limited liquidity in the Carbon Futures market, a disruption to the Carbon Futures, or as a result of margin requirements or position limits imposed by the Fund’s FCMs, the CME, or the CFTC, the Fund would not be able to achieve its investment objective and may experience significant losses.

Distributor: Quasar Distributors, LLC.

The Carbon Streaming BITA Compliance Index is jointly owned by Carbon Fund Advisors Inc. and BITA GmbH, and is calculated, administered, and disseminated by BITA GmbH.

While the Carbon Strategy ETF utilizes the Carbon Streaming BITA Compliance Index (the “Index”) as a reference index, it is an actively managed fund and is under no obligation to follow the rules of the Index or invest in the underlying holdings of the Index and may not track the performance of the Index.

An emissions trading system, sometimes referred to as a cap-and-trade program, is a regulatory program designed to limit, or cap, the total level of emissions of greenhouse gases, particularly carbon dioxide, by companies in regulated industries, such as manufacturers or energy producers. The regulator, such as a governmental entity or supranational organization, allocates and/or auctions a limited number of annual emission allowances that allow companies to emit a certain amount of greenhouse gases. Companies are then penalized if they are unable to offset their emissions with enough emission allowances. If a company reduces its emissions levels, it can sell, or “trade,” unused emission allowances to other companies on the open market. Over time, regulators lower the number of emission allowances available each year, thereby lowering the total cap on emissions, making emission allowances more expensive, thereby incentivizing regulated entities to reduce their emissions.

The Fund expects to gain Carbon Futures exposure by investing in a wholly owned and controlled subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”). The Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in the prospectus, is not subject to all the investor protections of the 1940 Act.

The Fund’s investment exposure to futures instruments will cause it to be deemed to be a commodity pool, thereby subjecting the Fund to regulation under the CEA and CFTC rules. Registration as a CPO imposes additional compliance obligations on the Advisor and the Fund related to additional laws, regulations, and enforcement policies, which could increase compliance costs and may affect the operations and financial performance of the Fund.

Shares are to be bought and sold in the secondary market at market prices. Although it is expected that the market price of Shares will approximate the Fund’s NAV, there may be times when the market price of Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount) due to supply and demand of Shares or during periods of market volatility.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220912005931/en/

Media:

Sarah Griffin

Kane & Hook Communications

T: 617.285.0432

E: sarah@kaneandhook.com

Source: Carbon Fund Advisors Inc.

FAQ

What is the Carbon Strategy ETF (KARB)?

The Carbon Strategy ETF (NYSE: KARB) is an actively managed ETF that provides exposure to global compliance carbon markets through futures contracts on carbon allowances.

How has the compliance carbon market grown recently?

The compliance carbon markets grew from 186 billion euros in 2018 to 760 billion euros in 2021, highlighting a trend toward increased investment potential.

What are the risks associated with the Carbon Strategy ETF (KARB)?

Risks include potential losses due to market access disruptions and the uncertain future of cap and trade programs.

Which carbon markets will the Carbon Strategy ETF focus on?

The ETF will initially focus on heavily traded markets in Europe and North America, including European Union Allowances (EUA) and California Carbon Allowances (CCA).