There are an increasing number of ETFs coming to market that focus on the energy transition as the world works towards a net-zero emissions future by 2050. The KraneShares Global Carbon Transformation ETF (KGHG) offers investors a unique opportunity to capture companies as they transition to low and zero emissions practices and grow their value, while also diversifying across the energy transition value chain.
KGHG is one of the only funds to focus not just on the companies that are actually transitioning now, positioning them to become industry leaders in the carbon transition, but also across the green energy transition value chain. The following companies are an example of the investing strategy that KGHG employs to capture the emissions transition most effectively for advisors and investors.
Energy Suppliers: BP
British Petroleum is a front-runner for the energy transition within the oil and gas industry. BP’s current CEO, Bernard Looney, took over the company and 2020 and has committed entirely to moving away from the standard business model that BP had thrived on for decades, and instead is transitioning to a business model that aligns with the Paris Agreement and a net-zero future by 2050.
The oil and gas “supermajor” is doing so by cutting in half the dividends paid out to shareholders, spending $5 billion annually to convert to a renewable energy business model, and cutting its oil and gas output by 40% by 2030 and net-zero by 2050. BP is expanding aggressively into offshore wind energy and hydrogen, but also looks to invest in bioenergy, carbon capture and storage, and EV charging.
Energy Transition Enablers: Baker Hughes
Baker Hughes is an energy technology company that supplies advanced technologies (such as carbon capture, technologies to aid in converting hydrogen into a fuel source, AI integration into energy operations, and more) as well as services to energy and industrial companies. From oilfield companies to manufacturing companies, Baker Hughes aims to assist in delivering better, more efficient performance and provide the technology necessary to help companies decarbonize.
At its core, the technology supplier recognizes that the world will continue to need oil and gas to meet energy needs, but that by making the fossil fuel portion of the energy sector as efficient as possible, it will reduce scope 1 and 2 emissions, something that Baker Hughes’ technologies assist with. Baker Hughes also recognizes the need for technology solutions today as well as investing in the new technology and energy solutions of tomorrow, including hydrogen, carbon capture tech, geothermal energy, net-zero LNG, and energy storage solutions.
Raw Material Suppliers: Cameco
Cameco is the world’s biggest producer of uranium and is headquartered in Canada. The company has interests in several tier-one uranium mining and milling operations located globally and is a leading supplier of uranium conversion, refining, and fuel manufacturing services.
Nuclear energy remains a complex solution for many, but it is an emissions-free power source that many countries rely on heavily, with increasingly more committing to developing nuclear power plants. Cameco has a number of undeveloped uranium projects and is well-positioned to continue to grow alongside increasing global demand.
Investing in the Energy Transition with KGHG
The KraneShares Global Carbon Transformation ETF (KGHG) focuses on the global industry leaders like BP, carried at a 3.85% weighting within the fund as of 11/29/22; Baker Hughes, carried at a 3.45% weight; and Cameco, carried at a 2.04% weight, that are pushing the global transition to net-zero emissions. KraneShares believes that the upside potential of investing in these companies as they transition is enormous.
KGHG is an actively managed fund that invests globally across market caps and sectors in carbon emissions reducers that are taking active steps to reduce their carbon footprints and services or the carbon footprints of other companies. This also includes companies within the supply chain of the carbon-reducing companies and companies that are growing their businesses with companies that are materially reducing carbon emissions.
The fund utilizes proprietary, fundamental, bottom-up analysis using information disclosed by companies and third-party data.
KGHG carries an expense ratio of 0.89%.
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