KraneShares has launched an actively managed global equity ETF targeting companies that are taking material steps to reduce their carbon footprint.
The ETF provides exposure to companies taking material steps to reduce their carbon footprint.
The KraneShares Global Carbon Transformation ETF (KGHG US) has been listed on NYSE Arca with an expense ratio of 0.89%.
According to KraneShares, the growing urgency of global decarbonization efforts, driven by political, strategic, and economic factors, could present one of the most disruptive and important investment opportunities of the next decade.
While an abundance of climate-focused ETFs are already available, including low-carbon, fossil fuel exclusion, and clean energy strategies, KraneShares’ latest offering pursues a relatively underexplored approach.
The ETF’s primary focus is on firms that are proactively transitioning their businesses to align with low-carbon objectives, regardless of that company’s current emissions profile. The fund may, therefore, have significant investment in firms from traditionally high carbon-emitting industries, such as energy or industrials, as long as these companies are leaders in decarbonization.
The thesis behind the strategy is that companies with a clear intention towards decarbonization may exhibit superior performance compared to their peers as their improving ESG profiles leads to a revaluation.
KraneShares employs a holistic approach to determine a company’s commitment to decarbonization. Its process seeks out companies that have displayed actionable steps such as repurposing existing operations, investing in new carbon-reduction technologies, or actively lobbying firms within their supply chain to reduce their carbon footprints.
Secondary indicators that KraneShares also takes into consideration include management incentives tied to decarbonization initiatives, the motivations of the shareholder base, and the extent to which mergers, acquisitions, or divestitures can accelerate decarbonization initiatives.
According to KraneShares, the ETF’s active management allows for dynamic exposure in an evolving universe. It also ensures the fund will invest only in firms that are considered able to maintain a competitive advantage during their decarbonization transition.
Luke Oliver, Head of Investment Strategy at KraneShares, said: “The climate crisis remains one of the most significant long-term challenges facing the global community. Investing in companies with the commitment to change and lead – not just the cleanest companies today —may be one the most impactful ways to rebuild a greener, more resilient economy.”
Roger Mortimer, Portfolio Manager of KGHG, added: “The recent tragic events in Ukraine have brought the risk of energy dependency into sharp focus. We expect that the critically strategic nature of Europe’s energy crisis will result in accelerated policy implementation and capital spending in energy transition and resiliency. These geopolitical concerns coupled with urgent climate objectives are increasing the awareness of the value of energy transition. KGHG will invest in companies around the world that are seeking to lead the race to decarbonize.”