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WisdomTree brings back carbon ETF

WisdomTree is re-opening its carbon futures ETF, after it was closed late last year.

 

The WisdomTree Carbon ETF (CARB) will track an index of ICE Carbon Emission Allowances called the Solactive Carbon Emission Allowances Rolling Futures index. These futures (“Allowances”) are essentially a government license to emit carbon dioxide into the atmosphere. Their supply is limited by European governments, who wish to reduce Europe’s carbon footprint. While their price is set by financial markets, with the aim to encourage people to find ways of making there carbon emissions more efficient and thus cheaper.

 

CARB was originally launched in 2008. It used swaps from Shell’s oil trading division (Shell Trading Switzerland) to get access to carbon futures. The ETF traded in London for twelve years, gathering assets but was forced to close in June 2020 after Shell moved in a different direction.

 

The newly relaunched version is like the old model however it has three important differences. First, it tracks an index this time whereas previously it had a rules-based strategy but no index. Second, Citigroup and Merrill Lynch will be providing the swaps this time rather than Shell, making it harder to pull the plug. Third, the fund will offer more investor protection this time by buying enough collateral to cover the value of the swap.

 

CARB charges 0.35%.

 

Bernie’s commentary

It is interesting to see the resurgence of these products, effectively it looks as though the CARB product was ahead of its time, with the Carbon Futures price rising from 18 EUR to >60EUR  since Jan 2020.  This seems like a product whose time has come  and it has been relaunched with a more solid structure behind it.

 

Is carbon the new ESG?

 

 

 

 

I apologise, Yes, my head lines are tenuous at the best of times, but hey i am trying to create enthusiasm in index tracking products allow me to have my fun

 

 

 

 

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Bernie Thurston

Bernie Thurston is the founder and CEO of Ultumus, a leading provider of ETF and index data, calculation, and workflow solutions. With over 20 years of experience in financial technology, Bernie has been at the forefront of index and ETF innovation since 2003.

His finance career began at Markit, where as Managing Director for Equities he designed and developed products for index and ETF composition and dividend forecasting from 2003 to 2011. He then founded and led DeltaOne Solutions as Managing Director, building it into a global provider of index and ETF trading data and technology services. The company managed over 100,000 multi-asset class products before being acquired by Markit in 2015.

Following the acquisition, while working for an ETF issuer, Bernie identified fundamental issues in how index and ETF data was represented across the industry. This led him to found Ultumus in 2016, building solutions for ETF primary market operations. Under his leadership, Ultumus has grown into a market leader serving major financial institutions globally, with its ETF Order Management System (OMS) supporting create and redeem workflows worldwide and its PCF platform calculating and distributing portfolio composition files for ETF issuers across every major market.

Bernie sold Ultumus to SIX Group in 2021, where it continues to expand across Europe, North America, and Asia-Pacific. Known for building lasting teams and leveraging cutting-edge technology, Bernie is focused on establishing Ultumus as the backbone of the global index and ETF industry through standardisation and automation.

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