KraneShares' Carbon ETF Recorded Gains as Equities Fell

KraneShares’ California carbon ETF is outperforming broader commodities and U.S. equities, highlighting the value of portfolio diversification.

The KraneShares California Carbon Allowance ETF (KCCA) offers targeted exposure to the California Carbon Allowances (CCA) cap-and-trade carbon allowance program. CCA future contracts have historically low correlations to traditional asset classes, making KCCA a suitable portfolio diversifier.

KCCA climbed 3.7% in October, outpacing U.S. large caps and the broader commodity market. During the same period, the Bloomberg Commodity Index held relatively steady, up 0.3%, while the S&P 500 fell 2.1%.

KCCA’s outperformance is even more pronounced year to date as of November 1. The KraneShares’ California carbon ETF is up 25.5% while the S&P 500 has climbed 11.9% and the Bloomberg Commodity Index has declined 3.6%.

See more:Climate ETFs Are a Long-Term Play

How KraneShares’ California Carbon ETF Is Positioned for the Future

KCCA provides exposure to the largest cap-and-trade market in the U.S. and one of the fastest-growing carbon allowance programs globally. Climate disclosure laws recently enacted in California are poised to increase the purchase of voluntary carbon credits, further supporting the space.

The state’s new climate disclosure laws require businesses operating in California with annual revenues exceeding $1 billion to disclose their direct and indirect emissions. Some 5,300 companies must comply with this new mandate when it goes into effect in 2026, according to KraneShares.

California Governor Gavin Newson signed the mandate into law last month. This represents the U.S.’s most comprehensive corporate climate emissions disclosure laws to date. Notably, California-based heavyweights including Apple and Microsoft endorsed the rule.

Straightaway, the emissions scope includes anything from building operations to employee business travel to product shipping and transport, KraneShares wrote. In 2027, downstream value-chain emissions from a company’s suppliers (Scope 3 emissions) will be added.

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