ETF and ETP sponsor and asset manager WisdomTree announced today the launch of WisdomTree Carbon ETP (CARB), a new instrument aimed at providing investors with exposure to the performance of carbon emission allowances.
CARB will track movements in the price of the ICE Carbon Emission Allowances (EUA) futures contract through the Solactive Carbon Emission Allowances Rolling Futures index. The EUA futures are based on the price of carbon emission allowances under the European Union Emissions Trading Scheme (EU ETS), the world’s biggest carbon market. The EU ETS, sets a cap limiting the amount of greenhouse gas (GHG) that can be emitted by companies each year, and a fixed number of carbon emissions allowances are issued annually, with companies required to hold enough allowances to cover their emissions and ensure they fall under the cap.
Alexis Marinof, Head of Europe, WisdomTree said:
“Climate change mitigation is front of mind for investors, corporates and policymakers alike, with many seeking to reduce their carbon footprint and align with the Paris Agreement. The importance of these initiatives cannot be understated and has driven demand for a vehicle that provides exposure to carbon emission allowances futures. CARB builds on our differentiated product range and our deep knowledge of commodities, providing investors with thoughtful exposure to a corner of the environmentalEnvironmental criteria consider how a company performs as a steward of nature., socialSocial criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. and governanceGovernance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. (ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.) market investors have found difficult to access.”
According to WisdomTree, greater investor involvement in the EUA futures market could boost liquidity of the futures and the underlying EUAs, assisting in the price-discovery process, and helping accelerate the progress of decarbonization.
Nitesh Shah, Director of Research, Europe, WisdomTree added:
“The EU ETS has firmly established itself as the pre-eminent model for a cap-and-trade carbon abatement system. Its success is seeing a material reduction in greenhouse gas emissions from the sectors and countries covered by the scheme. Futures based on the European carbon market are the most liquid in the world and present an investment opportunity for investors looking to contribute to price discovery in this vital market. Further investor involvement could boost the futures liquidity, continue to improve this market and further this cause.”
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