China International Capital Corporation Hong Kong Asset Management (CICC HKAM) announced the launch of a carbon futures ETF, the first of its kind in Greater China.
The fund tracks the ICE EUA Carbon Futures Index which measures the performance of a long-only basket of European Union Allowance (EUA) contracts.
Each EUA is an entitlement to emit one metric tonne of carbon dioxide equivalent gas under the European Union Emissions Trading System.
“This new ETF will allow investors to access one of the largest, most liquid and most actively traded carbon markets in the world. Better still, as the carbon market exhibits low correlation with other assets, it is an excellent choice to deliver portfolio diversification,” said Ning Lin (pictured), managing director at CICC HKAM, to a media briefing.
The asset manager believes the carbon emission price is on the rise, because of the willingness for societies to use green energy, pay the price for carbon neutrality, and continue innovation in the green technology industry.
“The economic cost of using green energy is determined by the brown energy price, such as the oil price and coal price. So, if energy prices are high, the carbon emission price could be lower in the short term. Combined with recent geopolitical conflict, carbon prices are now at a low point. But the long-term trend is quite clear,” said Zhao Yang, Managing Director, CICC Global Institute.
“Due to what is happening to Ukraine, I think Europe will prepare for its energy independence from Russia’s fossil energy and [switch to] greater reliance on green energy as soon as possible to hasten their transition to a cleaner energy.”
Established in 2005, the European Union Emissions Trading System is the world’s largest carbon market, with a notional value of EUR683bn ($753bn) in 2021.
The new ETF allows investors to participate in the carbon market efficiently in the Asia Pacific time zone. Units of the ETF are traded on the Hong Kong stock exchange in Hong Kong dollars, renminbi, and US dollars.
The CICC Carbon Futures ETF is the fifth ETF under the unit trust CICC Fund Series.
Established in 2005, CICC HKAM is a wholly-owned subsidiary of China International Capital Corporation.
