A Tiny Fund’S Assets Jump 1,700% This Year Thanks To Carbon Boom

(Bloomberg) -- This year’s surge in carbon prices has turned a little-known ETF into one of the fastest-growing products in the $6.2 trillion industry.

In just five months, the KraneShares Global Carbon ETF (KRBN) has seen its assets jump more than 1,700% to $311 million, according to data compiled by Bloomberg. The exchange-traded fund that invests in carbon credits worldwide is up over 40% since the end of 2020, riding the green revolution sweeping across global markets. That’s about four times the rally in the S&P 500.

One of the most important reasons for the fund’s success this year is the fact that a portion of its holdings is in European Union carbon futures. Prices have soared about 70% in 2021 amid prospects the region will enact aggressive climate policies.

In the EU, industrial and power companies are required to buy carbon allowances to account for their emissions. The idea behind such credits is that as prices increase, polluting companies will eventually decide to invest in reducing emissions -- rather than purchasing the credits.

“Many countries are putting into legislation that companies need to decarbonize, so there will be more demand for carbon credits,” Linda Zhang, chief executive officer of Purview Investments.

President Joe Biden’s renewed pledge to establish the U.S. as a leader in the fight against climate change is further expected to benefit the market.

“The Biden administration has made it very clear that as part of its overall agenda, it wants environmental and sustainability issues to be front and center,” said Craig Fehr, investment strategist at Edward Jones. “Carbon credits play into that environment where there is more of a focus on environmental issues.”

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