KraneShares' Carbon Offset ETF Rallies in First Weeks of 2024

KraneShares’ carbon offset ETF is starting off 2024 on a high note, leading in returns across commodity ETFs.

The KraneShares Global Carbon Offset Strategy ETF (KSET) has gained 34% year to date through January 16. The fund’s impressive recent returns make it the top-performing commodity ETF year to date.

KSET is notably beating the next-best-performing commodity ETF, the Breakwave Tanker Shipping ETF (BWET), by 20%. Most of the top-performing commodity ETFs this year are funds offering exposure to fossil fuel energy commodities, making KSET an outlier.

The ETF tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index. KSET’s underlying index provides broad coverage of the voluntary carbon market by tracking carbon offset futures contracts.

While KSET has offered lucrative returns year to date, the fund is down considerably over longer durations. This gives investors bullish on carbon offsets the chance to buy in while prices are still low.

See more: “The Difference Between Carbon Offsets and Credits

Under the Hood of KraneShares’ Carbon Offset ETF

The carbon offset ETF offers global coverage of voluntary carbon markets by tracking carbon offset futures contracts comprising nature-based global emission offsets (N-GEOs) and global emission offsets (GEOs), which trade through the CME Group. KSET is designed to dynamically add additional offset markets as they reach scale, according to KraneShares.

The index is structured in a way that will allow flexibility in reweighting the securities it tracks. KSET’s underlying index can also move securities in and out of the index regularly, and it only tracks carbon offset credit futures that have a maturity within the next two years. The index weights the offset futures it tracks by the total value of their traded volume over the last six months.

KSET carries an expense ratio of 0.79%.

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