KraneShares all colours of decarbonisation
KraneShares, the New York ETF firm majority owned by China International Capital Corporation, has listed an active ETF that buys companies making the most effort to decarbonise.
The KraneShares Global Carbon Transformation ETF (KGHG) aims to distinguish itself in this crowded niche by investing in any kind of company that shows real effort towards decarbonisation. And does so regardless of sector and regardless of emissions.
Thus ExxonMobil and Whitehaven Coal can be eligible for fund inclusion, so long as the portfolio managers believe that the companies are diversifying their businesses.
Specific datapoints that KraneShares looks for is companies that are repurposing existing assets, investing in green technology, and putting pressure on their suppliers and service providers to go green.
The logic for using active management, KraneShares says, is that it gives them more discretion on which companies get in the fund.
The fund charges 0.89%.
Bernie’s commentary – the many varieties of ESG
ESG ETFs are completely overcrowded. There are now thousands of them around the world, with no clear or standardised definitions. What is more, perhaps most of them are offer dubious improvements on existing index funds (they hug the index while making a few minor exclusions here and there). Regrettably it often comes with an aura of moral superiority.
What makes this launch different firstly is its openness and honesty about the fact that carbon emitters will be included. It also admits to being freewheeling –hence the active management. But best of all, it’s marketed as an alpha-generator (greening up as a source of returns) rather than as an exercise in woke capitalism.
Rummaging through the portfolio, it seems to be to be mostly interested in hydrogen. Reliance, India’s (and the world’s) largest oil refiner, Linde, the Anglo-German gas giant, Fortescue Metals, the Australian iron ore miner, are all among the top five holdings. What these all have in common is a commitment to producing hydrogen, for the energy transition.
This focus on hydrogen may annoy the environmentally minded. Hydrogen production is currently the source of 3% of the world’s carbon emissions as it is mostly sourced from methane. As such, many scientists have argued that the hydrogen economy is just a scam that allows big oil and gas companies to continue polluting. But then again, it’s not like woke ESG ETFs don’t annoy people either.