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%.
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