KraneShares Global Carbon ETF

In this Correction period for stocks, particularly technology and “innovation and disruption” stocks, carbon credits (KRBN) stand out as strong in comparison. Where I have discretion, I have added it to portfolios.

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On April 23, I made a general recommendation (text of that note is provided below as an addendum to this note) which you may want to consider. As always, anything I recommend, I also purchase. I have high confidence in the future of carbon credit pricing. My KRBN position is around 3%

KRBN is a way to invest in the global transition to a lower carbon economy without having to bet on which technologies or which companies will gain from the transition. It is a bet on whether the transition will be compelled to take place and not on any specific player.

KraneShares Global Carbon ETF (KRBN), which tracks the IHI Markit Global Carbon ETF, invests in futures contracts based on the carbon credits prices in Europe (inception 2005), 10 Northeastern states (inception 2009) and California (inception 2013). Learn more about credits in the addendum below.

KRBN trading volume was minimal until the current administration in Washington announced plans to rejoin the Paris Agreement on climate change. The volume picked up dramatically when the United States officially rejoined the Agreement. The carbon credits markets preceded the original Paris Agreement and proceeded uninterrupted during the last few years when the United States withdrew from the Agreement. The credits market is independent of the U.S. federal participation in the Agreement. Europe is committed to their carbon credits program, and the credits programs in the United States are operated by the States not the Federal government.

The world bank predicts a price of at least $50 per ton of emitted CO2 and perhaps $100 per ton if the CO2 targets are to be met by 2030. The most recent price of the credits is about $35. The price was $31.57 at the time of my April 23 recommendation.

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