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.
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.