Australia’s first global carbon credits, the VanEck Global Carbon Credits ETF (Synthetic), will be listed on the ASX on Thursday under the ticker code XCO2.
VanEck said that the new ETF, which it originally unveiled in May, will allow local investors to take advantage of the potential rise of carbon credit prices by providing them access to the biggest emissions trading schemes (ETSs) in the world.
“We believe Australian investors will benefit from XCO2 exposure as a hedge for the impact of carbon risks/climate change on investor portfolios,” explained VanEck CEO and managing director for Asia Pacific, Arian Neiron.
“The carbon price of the ETFs has historically been lowly correlated to mainstream asset classes which reinforce the case for its use to enhance diversification particularly given Australian equities is so concentrated in resources and energy.”
XCO2 will track the ICE Global Carbon Futures Index, which sources carbon credit futures prices from the European Union Emissions Trading Scheme, the Western Climate Initiative (California Cap and Trade Program), the Regional Greenhouse Gas Initiative (RGGI) and the UK Emissions Trading Scheme.
“The benefit of global carbon credit futures is that they can be freely traded on global exchanges with attractive market size and liquidity, giving investors full price discovery,” said Mr Neiron.
“This opportunity is important because it gives investors access to a global marketplace for carbon credits. Carbon credit prices are expected to increase significantly as the fight against climate change ramps up. The value of carbon futures and this asset class will likely benefit significantly over the longer term, making it an attractive way for investors to get exposure.”
VanEck noted that the carbon credit market was growing and that in 2021, the carbon credit futures market traded almost US$700 billion.
“Government policies seeking to transition economies to net zero emissions are likely to increase globally, presenting growth opportunities for investors as carbon markets continue to incentivise changes in production and consumption patterns toward decarbonisation,” Mr Neiron said.
In August, the Commonwealth Bank predicted that the use of Australian Carbon Credit Units would increase due to the rising number of net zero commitments from businesses.
