Thanks to recent strong performance and low correlation to other global asset classes, investor buzz around the carbon markets is growing. This year, the California Carbon Market stands out as regulators have committed to aggressive emissions reduction targets that will constrain the supply of credits in the region. These measures could drive the price of California Carbon Allowances (CCAs) upward.
In the upcoming webcast, The California Carbon Opportunity: An Advisors Guide to Carbon Investing, Luke Oliver, Managing Director and Head of Strategy, KraneShares; and Eron Bloomgarden, Partner, Climate Finance Partners, will explain the intricacies of the carbon markets and consider an investment strategy focused on the burgeoning Californian carbon allowance market to help financial advisors access this rapidly expanding marketplace that was historically inaccessible to retail investors.
Specifically, the KraneShares California Carbon Allowance ETF (KCCA) provides targeted exposure to the California Carbon Allowances (CCA) cap-and-trade carbon allowance program. KCCA is benchmarked to the IHS Markit Carbon CCA Index, which tracks the most traded CCA futures contracts.
The KraneShares California Carbon Allowance ETF is seen as a vehicle for participating in the price of carbon and hedging risk while supporting responsible investing and ESG goals, according to KraneShares.
According to KraneShares, the CCA cap-and-trade program began in 2012, implemented by the California Air Resources Board (CARB), and covers approximately 80% of the states Green House Gas (GHG) emissions. In 2014, the program was expanded to cover Quebec and its emissions. The program plans to reduce carbon levels to 60% of 1990 levels by 2030 and achieve carbon neutrality by 2045. The cap will reduce by 4% per year to achieve this objective. Further, the program has a floor price that rises by 5%, plus an inflation adjustment each year.
Furthermore, the ETF can provide potential portfolio diversification due to the underlying market’s historically low correlation to traditional asset classes.
Financial advisors who are interested in learning more about the California carbon opportunity can register for the Tuesday, October 25 webcast here.