NEW YORK, Aug. 1, 2022 /PRNewswire/ — Krane Funds Advisors, LLC (“KraneShares“), an asset management firm known for its global exchange-traded funds (ETFs) and innovative investment strategies, announced that the KraneShares Global Carbon Offset Strategy ETF (Ticker: KSET) now tracks the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index—the first-to-market benchmark for the current performance of global voluntary carbon futures markets.
KSET, listed on the New York Stock Exchange on April 27 this year, is the first US-Listed ETF to track the global Voluntary Carbon Markets (VCM)1, which is complementary to the global carbon allowance markets tracked by KraneShares’ flagship global carbon ETF (KRBN).
KSET’s new index tracks carbon offset futures contracts. These contracts include nature-based global emission offsets (N-GEOs) and global emission offsets (GEOs), which trade through the CME Group, the world’s largest financial derivatives exchange. Due to the evolving nature of carbon markets, an important characteristic of the index is the flexibility to reweight, add or remove constituents at regular intervals to ensure that it can adapt over time.
“Previously, KraneShares and IHS Markit, which is now part of S&P Global, made history when we launched the KraneShares Global Carbon Strategy ETF (KRBN). KRBN uses the IHS Markit Global Carbon Index as its benchmark,” said Luke Oliver, Managing Director and Head of Strategy at KraneShares. “We are pleased to deepen our relationship with S&P Global and leverage their extensive history as an index provider and their strong research capabilities to capture the complex and ever-changing voluntary carbon market through KSET’s new index.”
“We’re excited that KraneShares has selected our S&P GSCI Global Voluntary Carbon Liquidity Weighted Index as the underlying benchmark for its exchange-traded fund,” said Fiona Boal, Head of Commodities and Real Assets at S&P Dow Jones Indices (S&P DJI). “This new voluntary carbon futures index is a key addition to S&P DJI’s continued efforts to grow its suite of new and innovative thematic alternative indices for the commodities space.”
“The voluntary carbon market serves as a powerful tool in the global fight to combat climate change and an important way to accelerate the transition to a decarbonized world,” said Eron Bloomgarden, co-founder of Climate Finance Partners (CLIFI) KSET’s non-discretionary sub-advisor. “At the same time, it provides price discovery, a potential hedge for climate risk exposure, and diversification* from traditional asset classes.”
The S&P GSCI Global Voluntary Carbon Liquidity Weighted Index was launched on June 22, 2022.
What are Carbon Offsets?
Carbon offsets are intended to counteract emissions that corporations, governments, or individuals generate as part of their business-as-usual activities. The governing bodies overseeing the registration and verification of carbon offset projects are called carbon offset registries. These registries issue credits for emission-reducing projects or programs such as forest conservation, the creation of wind farms, methane gas capture in a landfill, and hydropower projects. Credits are issued proportionate to the amount of greenhouse gas (GHG) a project takes out of the atmosphere. Entities can calculate their emissions and purchase a corresponding quantity of credits to offset their activity. Entities often utilize offsets as a short-term bridge to abate emissions that they cannot avoid within their own operations while they work on implementing longer-term decarbonization measures.
For additional information on the KraneShares Global Carbon Offset Strategy ETF (Ticker: KSET), contact your financial advisor or visit kraneshares.com/KSET.
*Diversification does not ensure a profit or guarantee against a loss.
About Krane Funds Advisors, LLC
Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. KraneShares is a premier platform that develops and delivers differentiated, high-conviction investment strategies to global investors.
Since 2013, KraneShares has become one of the leading China ETF providers. Given China’s importance in addressing the global climate challenge, our Climate Suite is a natural extension of our China focus. KraneShares strives to deliver innovative first-to-market strategies based on strong partnerships and deep investing knowledge. KraneShares helps investors stay current on global market trends and provides meaningful diversification.
Krane Funds Advisors, LLC, is a signatory of the United Nations-supported Principles for Responsible Investing (UN PRI). The firm is majority-owned by China International Capital Corporation (CICC).
About Climate Finance Partners
Climate Finance Partners delivers innovative climate finance solutions and investment products to address capital needs for emerging environmental challenges. CLIFI is led by a team of investment professionals with deep experience in the fields of traditional investment and environmental finance.
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s full and summary prospectus, which may be obtained by visiting www.kraneshares.com Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated objectives. Indices are unmanaged and do not include the effect of fees. One cannot invest directly in an index.
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change. Certain content represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results; material is as of the dates noted and is subject to change without notice.
The market for carbon offset credit futures may be less developed, and potentially less liquid and more volatile, than more established futures markets. While the market has grown, there can be no assurance that this growth will continue. The price for carbon offset credit futures is based on a number of factors, including the supply of and the demand for carbon offset credit futures as well as the supply and demand for carbon offset credits. The performance of carbon offset credit futures and carbon offset credits may differ and may not be correlated with each other, over short or long periods of time. There is no assurance that cap and trade regimes will continue to exist, or that they will prove to be an effective method of reduction in GHG emissions. Changes in U.S. law and related regulations may impact the way the Fund operates, increase Fund costs and/or change the competitive landscape. New technologies may arise that may diminish or eliminate the need for cap and trade markets. Ultimately, the cost of emissions credits is determined by the cost of actually reducing emissions levels. If the price of credits becomes too high, it will be more economical for companies to develop or invest in green technologies, thereby suppressing the demand for credits.
The Fund invests through a subsidiary, and is indirectly exposed to the risks associated with the Subsidiary’s investments. Since the Subsidiary is organized under the law of the Cayman Islands and is not registered with the SEC under the Investment Company Act of 1940, as such the Fund will not receive all of the protections offered to shareholders of registered investment companies. The Fund and the Subsidiary will be considered commodity pools upon commencement of operations, and each will be subject to regulation under the Commodity Exchange Act and CFTC rules. Commodity pools are subject to additional laws, regulations and enforcement policies, which may increase compliance costs and may affect the operations and performance of the Fund and the Subsidiary. Futures and other contracts may have to be liquidated at disadvantageous times or prices to prevent the Fund from exceeding any applicable position limits established by the CFTC. The value of a commodity-linked derivative investment typically is based upon the price movements of a physical commodity and may be affected by changes in overall market movements, volatility of the Index, changes in interest rates, or factors affecting a particular industry or commodity.
The Fund and the Subsidiary will be considered commodity pools upon commencement of operations, and each will be subject to regulation under the Commodity Exchange Act and CFTC rules. Commodity pools are subject to additional laws, regulations and enforcement policies, which may increase compliance costs and may affect the operations and performance of the Fund and the Subsidiary. Futures and other contracts may have to be liquidated at disadvantageous times or prices to prevent the Fund from exceeding any applicable position limits established by the CFTC. The value of a commodity-linked derivative investment typically is based upon the price movements of a physical commodity and may be affected by changes in overall market movements, volatility of the Index, changes in interest rates, or factors affecting a particular industry or commodity. The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Funds’ gains or losses. A derivative (i.e., futures/forward contracts, swaps, and options) is a contract that derives its value from the performance of an underlying asset. The primary risk of derivatives is that changes in the asset’s market value and the derivative may not be proportionate, and some derivatives can have the potential for unlimited losses. Derivatives are also subject to liquidity and counterparty risk. Liquidity risk means that certain investments may become difficult to purchase or sell at a reasonable time and price. If a transaction for these securities is large, it may not be possible to initiate which may cause the Fund to suffer losses. Counterparty risk is the risk of loss in the event that the counterparty to an agreement fails to make required payments or otherwise comply with the terms of derivative.
The use of futures contracts is subject to special risk considerations. The primary risks associated with the use of futures contracts include: (a) an imperfect correlation between the change in market value of the reference asset and the price of the futures contract; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the inability to predict correctly the direction of market prices, interest rates, currency exchange rates and other economic factors; and (e) if the Fund has insufficient cash, it may have to sell securities or financial instruments from its portfolio to meet daily variation margin requirements, which may lead to the Fund selling securities or financial instruments at a loss. Fluctuations in currency of foreign countries may have an adverse effect to domestic currency values. The Fund is subject to interest rate risk, which is the chance that bonds will decline in value as interest rates rise. Narrowly focused investments typically exhibit higher volatility. The Fund’s assets are expected to be concentrated in carbon offset credit futures and carbon credit futures and its investments could react similarly to market developments. Thus, the Fund is subject to loss due to adverse occurrences that may affect these futures. KSET is non-diversified.
ETF shares are bought and sold on an exchange at market price (not NAV) and are not individually redeemed from the Fund. However, shares may be redeemed at NAV directly by certain authorized broker-dealers (Authorized Participants) in very large creation/redemption units. The returns shown do not represent the returns you would receive if you traded shares at other times. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns. Beginning 12/23/2020, market price returns are based on the official closing price of an ETF share or, if the official closing price isn’t available, the midpoint between the national best bid and national best offer (“NBBO”) as of the time the ETF calculates the current NAV per share. Prior to that date, market price returns were based on the midpoint between the Bid and Ask price. NAVs are calculated using prices as of 4:00 PM Eastern Time.
The KraneShares ETFs, KFA Funds ETFs, and KraneShares Mutual Funds are distributed by SEI Investments Distribution Company (SIDCO), 1 Freedom Valley Drive, Oaks, PA 19456, which is not affiliated with Krane Funds Advisors, LLC, the Investment Adviser for the Funds, or any sub-advisers for the Funds.
The ‘S&P GSCI Global Voluntary Carbon Liquidity Weighted Index’ is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has been licensed for use by Krane Funds Advisors, LLC (“KraneShares”). S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); GSCI is a registered trademark of The Goldman Sachs Group, Inc. (“Goldman”) and has been licensed for use by S&P Dow Jones Indices; and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by KraneShares. KraneShares Global Carbon Offset Strategy ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or Goldman, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P GSCI Global Voluntary Carbon Liquidity Weighted Index.
1Data from Bloomberg as of 4/25/2022
SOURCE Krane Funds Advisors, LLC