With the decarbonization trend in full swing around the world, carbon ETF’s and stocks have become more accessible investments for retail investors than ever before.
In particular, Canadian investors will be pleased to know that options are starting to open up for those without access to the American markets, or those who would rather not deal with currency exchange and associated fees.
Previously, those who wanted exposure to the carbon allowance or offset markets had their choices limited mostly to products listed in the U.S.
However, earlier this February, the first Canadian-listed carbon credits ETFs hit the exchanges up north. We’ll cover the top carbon ETF’s of 2022 options below:
Horizons Carbon Credits ETF (CARB)
Listed on the Toronto Stock Exchange, Horizon’s Carbon Credits ETF (CARB.TSX) is the first carbon-credit-related investment product to list on the Canadian markets.
A passive fund based on the Horizons Carbon Credits Rolling Futures Index, CARB is comprised solely of European Carbon Allowance (EUA) futures, with contracts rolled forward as they expire.
Of the two major types of carbon allowance futures, EUAs had the superior performance last year, as the chart below shows:
Many of the other leading carbon credit investment products on the U.S. exchanges, such as the KraneShares Global Carbon Strategy ETF (KRBN), have holdings that are heavily weighted towards EUA futures over the other regional carbon credits, or are comprised of EUA futures entirely, like the iPath Series B Carbon ETN (GRN).
As such, CARB is a good choice for Canadian investors looking for an ETF similar to GRN, with an emphasis on European carbon allowances.
- You can learn more about CARB here.
Ninepoint Carbon Credit ETF (CBON / CBON.U)
The Ninepoint Carbon Credit ETF (CBON) came in hot on the heels of the Horizon ETF (CARB), with the former launching on the NEO exchange just a week after the latter.
Similar to CARB, CBON’s holdings are comprised entirely of carbon allowance futures. Where they differ, however, is that CBON provides exposure to a mix of the three leading carbon emissions trading schemes:
- The European EUAs,
- The Californian CCAs, and
- The RGGIs of the northeastern U.S. states.
This makes CBON more similar to the previously mentioned top U.S. carbon credit ETF KRBN, which also holds a mix of futures for all three types of carbon allowances.
Ninepoint is a leading alternative investment manager focused on the clean energy economy. With this Fund, investors can access the global emissions market, which is expected to grow significantly over the next couple of decades.
An orderly energy transition supports Canada’s long-term energy leadership and is supported by various incentives. The investment community is also contributing to the success of this transition.
For Canadian investors looking for something with more balanced exposure to the compliance carbon markets instead of just the E.U.’s Emissions Trading System like KRBN, CBON is a good choice.
- In addition, CBON has a second, U.S. Dollar-denominated listing – CBON.U. This is the exact same product as CBON, just trading under U.S. Dollars instead of Canadian Dollars.
For those carbon conscious Canadian investors who already have investments or savings held in USD, choosing CBON.U instead can help eliminate the currency risk associated with making an investment in CBON.
- You can learn more about CBON here.
The NEO ETF Tracker
The NEO exchange has launched user-friendly market intelligence portal to track all things ETF. It’s a place where investors can sort and filter for any particular ETF, providing a one stop location for real-time institutional grade market data.
This market expands the ESG and net zero markets by covering ETF’s from all across the Canadian market landscape.
Powering the NEO ETF portal is Trackinsight, which provides news data and analytics to many tier 1 digital media companies and platforms.
Most Canadians have access to online brokerage accounts and can easily access the following US based ETF as well.
KraneShares Global Carbon Strategy ETF (KRBN.NYSE)
KRBN is the world’s largest carbon ETF with a mix of carbon allowances from various compliance markets. It’s also one of the largest dollar volume ETF’s trading in the carbon markets.
KRBN is focused on providing exposure to the performance of various compliance markets. Retail investors and other financial institutions are already using these funds to invest in the carbon markets.
The ETF contains various types of carbon allowances available in different regions. Some of these include the European Union Allowances and the California Carbon Allowances.
- Click here to learn more about KRBN.
Through its holdings, KRBN allows investors to add exposure to the performance of the compliance markets without having to purchase futures.
Those who believe that carbon allowance prices will continue to rise in 2022 will want to keep an eye on this ticker.
Carbon Streaming Corporation (NETZ.NEO and OFSTF)
It would be remiss to talk about Canadian carbon investments and not bring up NETZ, trading on the NEO exchange.
Not only was NETZ the first carbon-related investment of any kind to hit the Canadian markets, it also still remains the only listed company of its kind on any exchange.
In addition to being the first streaming/royalty type company in the carbon space, NETZ is also still one of the only companies focusing on carbon offset credits – the voluntary carbon market – as opposed to carbon allowances, which are tied to the compliance markets.
Since it’s an individual company as opposed to an investment product like an ETF, NETZ is a much higher risk investment than something like CBON or CARB. In addition, the voluntary carbon markets are still in their early stages, which further compounds the risk factors.
However, for Canadian investors with a greater appetite for risk, NETZ offers unique exposure to the voluntary carbon offset markets with a business model already previously proven to work in other sectors.
- You can learn more about NETZ here.
Strong Carbon Net Zero Mandates
Due to the large number of companies that have announced their intention to be net-zero, and the amount of money that’s going into renewable energy, it’s becoming a major theme in the financial markets.
Among the tech companies that are leading this charge are Microsoft, Facebook, Netflix, and Apple. Mining and energy companies like Barrick, ConocoPhillips and Exxon are also making major corporate moves to go net zero.
The increasing number of investors interested in carbon will accelerate as 2025 and 2030 net zero target gets closer.