VanEck has announced that it is planning to launch Australia’s first global carbon credits ETF pending ASX and final regulatory approval.
The VanEck Global Carbon Credits ETF (Synthetic) is set to trade under the ticker code XCO2 and will track the ICE Global Carbon Futures Index based on carbon credit futures prices from the most actively traded and largest carbon markets and emission trading schemes globally.
These include 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 with a collective annual trading volume of US$683.9 billion.
VanEck said that investments in carbon markets were seen as a vital tool in helping to combat climate change with carbon credit prices potentially set to rise.
“This opportunity is important because it gives investors access to a global marketplace for carbon credits,” said VanEck’s Asia-Pacific CEO and MD Arian Neiron.
“Importantly, carbon credit prices are expected to increase significantly as the fight against climate change gains momentum. This will raise the value of carbon credits futures and this asset class will likely benefit significantly over the longer term, making it attractive for investors to get exposure.”
The firm explained that a carbon credit allows a company to emit up to a set amount of carbon dioxide or other greenhouse gases and aims to limit the extent of pollution caused by emissions by taxing companies who pollute in excess of this cap.
“Carbon credits have historically been lowly correlated to mainstream asset classes and can be potentially used as a hedge against the impact of carbon emissions risks on investor portfolios,” said Mr Neiron.
“The VanEck Global Carbon Credits ETF (Synthetic) will allow investors to take advantage of the potential rise of carbon credit prices by giving investors access to the biggest global emissions trading schemes.”
Carbon credit prices are forecasted to reach over US$100 per ton of CO2, while the Net Zero Asset Owner Alliance previously estimated that prices would need to reach US$147 per ton to be in line with limiting global warming to 1.5 degrees celsius by 2050.
“Any rise in carbon prices would also support responsible investing and incentivise pollution reduction schemes and policies as governments work harder to meet global climate agreements,” Mr Neiron said.
“Companies too are better aligning their production with environmental, social, and governance (ESG) investment goals, and many are using carbon credits to do this.”
Mr Neiron also noted that Australia does not currently have a carbon credit cap and trading scheme in place.
“With the new Labor government now in power and climate change front and centre, time will tell if climate policy will be more ambitious in mitigating greenhouse gas emissions and align to the likes of the European Union,” he said.
