Global X ETFs Australia has continued to build out its suite of exchange-traded fund (ETF) products with the launch of a carbon allowance fund focused on emission trading schemes in Europe, the United Kingdom and United States.
The Global X Global Carbon ETF (Synthetic), which carries the Australian Securities Exchange code GCO2, will track the ICE Global Carbon Futures Index and have access to the European Union Emissions Trading Scheme, Regional Greenhouse Gas Initiative (covering 12 US states), Western Climate Initiative (California cap and trade program) and UK Emissions Trading Scheme.
Global X head of investment strategy Blair Hannon said there was a growing investment case for carbon allowances due to international political pressure and capital expenditure related to climate change.
“We are witnessing a watershed moment as investors seek out climate-focused investment opportunities, but do not want to compromise on potential returns,” Hannon said.
“GCO2 is an innovative way to leverage the global transition to net zero, which has significant tailwinds thanks to government-backed climate change targets.
“Carbon emissions are front of mind for governments and the public alike, so as global decarbonisation and clean energy initiatives become more ambitious, demand for carbon allowances will likely increase – which we expect to push up the price of carbon over the medium to long term.”
He added that since carbon allowances are usually a difficult, illiquid asset to access, their addition to a portfolio worked as a diversification tool as well as a growth opportunity.
The GCO2 ETF is the fourth fund launched by Global X ETFs Australia since rebranding from ETF Securities in September and the 27th fund in the firm’s ETF product suite, and follows the recent release of an ETF focused on companies involved in the mining and refining of uranium for use in power stations.
Global X said the GCO2 ETF will carry the lowest management fee of a carbon ETF in the country at 0.45 per cent a year and the firm would also contribute 10 per cent of the fund’s annual management fees towards the Yarra Yarra Biodiversity Corridor Plant-a-Tree program.
This program will create a green corridor to reconnect coastal regions with drier inland habitats by planting trees in the West Australian wheatbelt region.
“Global X is supporting the Yarra Yarra Biodiversity Corridor Plant-a-Tree program because we understand how important climate-related issues are for investors and this is our way of acknowledging the fight against climate change is a community effort,” Hannon said.
