Carbon Strategy ETF Launches on the NYSE with Ticker KARB to Provide Exposure to Global Compliance Carbon Markets
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.
- 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.
- 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
“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
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
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
(2018:
About
About
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
Distributor:
The Carbon Streaming BITA Compliance Index is jointly owned by
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
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.
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