By Fritz Folts, Chief Investment Strategist, 3EDGE Asset Management
3EDGE Asset Management has initiated positions in its tactical ESG strategies (Environmental, Social, and Governance) in the KraneShares Global Carbon ETF (NYSE: KRBN) which tracks the performance of the market for carbon credits. KRBN offers broad exposure to cap-and-trade carbon allowances by tracking the most traded carbon credit futures contracts. The index provides a vehicle for going long the price of carbon while supporting responsible investing. According to the Wall Street Journal, growing awareness and recent warming trends have seen companies shifting their environmental efficiency standards and investing in new carbon credit trading.
3EDGE Asset Management launched its ESG Strategy in January 2018 and its ESG Aggressive Strategy earlier this year. Fritz Folts, Chief Investment Strategist at 3EDGE said, “We believe the recent investment in the market for global carbon credits in our ESG strategies to be an excellent long-term opportunity. The value of carbon allowances should continue to increase as companies across the globe come under increasing pressure to reduce their carbon output as the world shifts away from fossil fuels. Putting a price on carbon is a logical and powerful market-based solution to addressing the challenge of climate change.”
Carbon credit prices may rise as demand increases from companies that use them to offset their carbon emissions. But they may also rise when investors bid and increase the price, which makes it more expensive for carbon-producing companies to buy the credits, thereby providing financial pressure for them to reduce their emission output directly. An investment in the market for carbon credits has the potential for significant long-term growth as it may take a long time to transition away from fossil fuels and meet climate agreements and goals.
Investing in the market for carbon credits provides:
- Support for responsible investing and incentivizing pollution reduction aligned with ESG investment goals.
- Additional portfolio diversification due to the global carbon futures markets’ historically low correlation to other asset classes.
- A way to potentially benefit from the ongoing tightening of carbon
emissions regulation worldwide.
“We believe that our tactical approach to ESG investing can be an elegant and simple solution for investors that are searching for ways to have their investments more closely mirror their values, particularly when it comes to climate change and environmental stewardship.”
3EDGE Asset Management, LP, is a global, multi-asset investment management firm serving institutional investors, the advisor marketplace and private clients. 3EDGE strategies act as tactical diversifiers, seeking to generate consistent, long-term investment returns, regardless of market conditions, while seeking to manage downside risks.
The primary investment vehicles utilized in portfolio construction are index Exchange Traded Funds (ETFs). The investment research process is driven by the firm’s proprietary global capital markets model. The model is tested over the widest variety of economic and market conditions and translates decades of research and investment experience into a system of causal rules and algorithms to describe global capital market behavior. 3EDGE offers a full suite of solutions, each with a target rate of return and risk parameters, to seek to meet investors’ different objectives. Of course, investing involves risks and the potential loss of your investment. There is no guarantee that any target return will be achieved.
DISCLOSURES: This announcement is provided to current and prospective clients of 3EDGE Asset Management for informational purposes only. The opinions expressed are subject to change without notice and are not intended to provide personal investment advice. Investors should only seek investment advice from their individual financial adviser. Observations include information from sources 3EDGE believes to be reliable, but the accuracy of such information cannot be guaranteed. Investments including ETNs, ETFs, common stocks, fixed income and commodities involve the risk of loss that investors should be prepared to bear. Past performance is not indicative of future results.