Growth of Carbon Technology Could Help Boost Climate Change ETFs

The carbon sector is rife with investment opportunities, and technology could be a driving force in attracting capital to the space. As carbon technology increases, it could also increase investor interest, particularly those who put climate change near the top of their portfolio priorities.

In a 2022 fraught with inflation fears and broad market weakness, it may have stifled venture capital (VC) investments in certain parts of tech, but in terms of carbon technology specifically, VCs weren’t deterred.

“Carbon tech raised $10.7 billion in VC investments across 517 deals in the first three quarters of the year, according to Pitchbook’s 2022 Carbon & Emissions Tech Report, including standout deals such as Climeworks $634.4 million Series F funding, Carbon Clean’s $150 million Series C funding and Twelve’s $130 million Series B funding,” a Green Biz article noted.

Federal laws created to intensify the move towards a reliance on green energy sources helped to spur investments in carbon tech. The Inflation Reduction Act, in particular, helped to fuel investor interest.

“Experts from Breakthrough Energy Ventures, Pitchbook and the Carbon Business Council all informed GreenBiz that the passage of the Inflation Reduction Act in the United States will encourage investors to increase spending on carbon capture ventures and will undoubtedly catalyze future boosts in funding,” the article added.

Get Global Carbon Offset Exposure

One of the diversifying aspects of carbon exposure is its global reach. As such, this opens up investors to opportunities overseas, adding an extra drop of portfolio diversification.

For global exposure in the carbon sector, investors can consider the KraneShares Global Carbon Offset Strategy ETF (KSET). KSET is the first U.S.-listed ETF giving investors carbon offset exposure to the growing carbon markets.

The fund tracks the S&P GSCI Voluntary Carbon Liquidity Weighted Index. It offers a unique benchmark for the global voluntary carbon futures market performance that trades through the CME group.

As presently structured, KSET offers global coverage of voluntary carbon markets by tracking carbon offset futures contracts comprised of nature-based global emissions offsets (N-GEOs) as well as global emissions offsets (GEOs). As the world continues to move towards decarbonization, KSET offers tremendous growth potential that can reap gains in the short- and long-term investment horizons.

“According to CME Group, the voluntary market will need to scale by roughly 15 times its current size in order to achieve global emission goals,” KraneShares noted on the KSET product website. “Establishing a physically delivered futures market is among their key recommendations for bringing this market to scale.”

For more news, information, and analysis, visit the Climate Insights Channel.