My guess is since you’re looking at this article, you can see the profit potential in the business of decarbonization.
Companies that can’t meet carbon reduction targets can buy carbon credits from other companies that exceed carbon reduction goals and use those carbon credits to meet regulatory or voluntary requirements for their own operations.
A carbon credit represents a project that helps to mitigate climate change—such as preserving a forest that was slated to be cleared or producing a battery electric vehicle.
With expanding regulatory requirements and a growing number of jurisdictions invoking new carbon reduction goals, it is widely anticipated that the market for carbon credits will continue to grow and that demand pressure will be a significant factor.
The Taskforce on Scaling Voluntary Carbon Markets, a private sector-led initiative working to scale an effective and efficient voluntary carbon market to help meet the goals of the Paris Agreement, estimates that demand in the voluntary market for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050.
According to the World Bank, there are 28 ETSs operating worldwide that collectively cover 9 gigatons of carbon dioxide equivalent , representing 17 percent of global GHG emissions.
A range of carbon ETFs differentiate across a number of factors, including geographic orientation and nature of holdings.
The company focuses on acquiring, managing, and growing a diversified portfolio of investments in projects and/or companies that generate or are actively involved, directly or indirectly, with voluntary and/or compliance carbon credits.
The ETF is benchmarked to IHS Markit’s Global Carbon Index, the first benchmarking and liquid investable index to track carbon credits markets globally.
The KraneShares European Carbon Allowance ETF provides direct exposure to the European Union Allowances that trade under the EU’s Emissions Trading Scheme.
This ETF isn’t exactly about direct exposure to the carbon markets, but it will benefit from decarbonization while providing more long-term stability due to its diversified holdings.
The BlackRock World ex US Carbon Transition Readiness ETF is comprised of mid-to-large-cap global companies that are considered to be positioned to benefit from the transition to a low-carbon economy.
It’s low-risk thanks to its broad diversification, but it provides less direct exposure to the growth of carbon markets.
The iShares Global Green Bond ETF follows an index made up of investment-grade green bonds that have been issued to fund environmental projects around the world.
VanEck Vectors Green Bond ETF tracks the S&P Green Bond US Dollar Select Index, made up of US dollar-denominated bonds issued to fund environmental projects around the world.
Unlike most of the other exchange-traded products that are also tied to EUAs, CO2.L directly purchases and holds EUAs instead of the futures.
For Canadian investors looking for something with a balanced exposure to the compliance carbon markets instead of just the EU’s Emissions Trading System, Ninepoint Carbon Credit ETF is a good choice.
Since being involved in putting the very first Globe Conference on Business and the Environment on CD ROM , I’ve held that green is profitable.
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