KraneShares announced the launch of its Global Carbon Offset Strategy ETF (Ticker: KSET) on the New York Stock Exchange.
Krane Funds Advisors, LLC (” KraneShares”) is an asset management firm known for its global exchange-traded funds (ETFs).
In 2020, they launched the KRBN Global Carbon ETF (KRBN) which gives investors exposure to the EU ETS carbon credits, California’s CCA carbon credits, and the RGGI of the northeastern United States.
In Oct 2021, they also launched the KEUA (European Carbon Allowance ETF) & KCCA (California Carbon Allowance ETF).
KraneShares also provides differentiated and innovative investment strategies to global investors. And KSET is one of them and its most recent ETF strategy.
KraneShares Global Carbon Offset ETF KSET
KSET, KraneShares’ latest addition to its suite of carbon market ETFs, is the first in the U.S. to offer exposure to carbon offset futures. This marks a departure from the existing carbon credit funds. It debuted on the NYSE with an expense ratio of 0.79%.
KraneShares Global Carbon Offset KSET will track carbon offset futures contracts. It also gives investors access to futures contracts that are not available through an ETF before.
And so, it offers broader coverage of the voluntary carbon market (VCM).
In particular, KSET will include the CBL Nature-Based Global Emissions Offset (N-GEOs) and also the CBL Global Emissions Offset (GEO).
These futures contracts trade via the CME Group, the largest financial derivatives exchange. The Group sells those offsets to entities that volunteer to cut their emissions.
KSET will add new offset markets as they reach scale.
What are Carbon Offset Futures?​
The VCM has to scale by about 15x its present size to help reach global emissions goals as per CME Group analysis. And they believe that having a physically delivered futures market is one way to scale up the VCM.
N-GEO futures follow the Verified Carbon Standard (VCS) requirements for AFOLU (Agriculture, Forestry, and Other Land Use) projects.
Also, these futures get certified by the Verra Registry’s Standard. It’s the go-to standard that identifies projects that particularly address climate change. It also verifies projects that conserve biodiversity and support local communities and smallholders.
Meanwhile, GEO contracts are CORSIA-compliant offsets. They aim to zero out the airlines’ carbon footprint.
GEO offset criteria are from the International Civil Aviation Organization (ICAO). They are also from the VCS, Climate Action Reserve, or American Carbon Registry.
These offsets differ from credits tracked in the KraneShares Global Carbon ETF KRBN. The latter allows entities to make emissions under compliance markets.
The Timely Debut of KraneShares KSET
Buyers of carbon offsets should reduce their Scope 1, 2, and 3 emissions first. They can then buy carbon credits to offset their unavoidable emissions.
Firms use carbon offsets as a short-term solution while working on long-term emission reduction efforts. This is where KSET’s launch is a timely market expansion.
KSET includes the $1.4bn KraneShares Global Carbon Offset ETF. It now covers both the compliance market and the VCMs.
As per Jonathan Krane, the company’s CEO,
“KSET is the first US-listed ETF to combine the leading carbon offset futures markets into a single investable fund… It gives investors holistic access to global decarbonization efforts.”
VCMs are a vital mechanism that boosts global efforts to achieve net-zero targets. Though they’re voluntary, pressure from stakeholders will make VCM’s reductions a must.
Luke Oliver, KraneShare’s head of climate investing, said that carbon offsets will drive demand and returns on tow for the contracts.
Investors can be confident that credits behind KraneShares global carbon offset KSET are reliable. They’re from emission reduction activities verified by renowned carbon offset registries.
