Over the last few years, the move to "go green" with everything from vehicles, homes, food, and beyond has also hit the financial markets. But it may be harder than you think to actually find green investments since so many of the green companies still have a large carbon footprint.
Take the wind and solar companies and all the talk about how much dirty energy is used to make a windmill. Or how the solar industry is much dirtier than most would imagine due to the way solar panels are made and all the toxic materials that are inside solar panels, which could cause an environmental issue if the panel breaks.
With that said, we may finally have a way to invest in green initiatives and know that what we are investing in truly is green and promoting a reduced carbon footprint without many hidden dirty secrets.
The new investment option I am speaking of is the KraneShares Global Carbon Offset Strategy ETF (KSET). Alright, I will admit this is a carbon offset strategy, not a green energy company or some firm that is actually working on lowering its carbon footprint. But hear me out before you write this ETF off.
First and foremost, this is not a carbon credit ETF, such as the iPath Series B Carbon ETN (GRN) or the KraneShares Global Carbon Strategy ETF (KRBN), which focus on the performance of emissions units, not actual carbon offset programs.
KSET is the first US-listed ETF to hold liquid contracts of Global Emissions Offset (GEO) and Nature-Based Global Emission Offset (N-GEO) futures that trade on the Chicago Mercantile Exchange.
These contracts are backed by carbon offsets issued by governments or regulatory bodies to projects that represent a reduction of emissions instead of what the emissions would be if the project were not built. Groups that are in charge of decarbonization projects can sell those registered offsets to people and companies, voluntarily reducing their net emissions.
The N-GEO contracts are for offsets issued from nature-based projects like reforestation, while the GEO contracts are backed by the CORSIA-compliant offsets, which are focused on offsetting the airline industry's carbon footprint.
The belief is that these carbon offset contracts will become more valuable over time as more firms attempt to buy them to help offset their own carbon footprint. However, right now, companies are really only feeling pressure to do so from their stakeholders. Still, some believe this will change in the future, and governments worldwide will begin requiring companies to partake in these types of programs.
If that does occur, the value of these contracts will go up. However, that may also mean that the number of firms working on this type of carbon offset project will also increase, thus leveling off the supply and demand for these contracts. But, that would, in the long run, be good for the environment, so there is that to also consider. Additionally, your investment in this fund would also essentially increase the funds' buying power, which could also increase demand for said carbon offsets in the short term and thus help move this whole process further down the road faster than it may otherwise move.
In all honesty, it is hard to say from an investment standpoint if buying shares of the KSET ETF is going to be a profitable one or not. But you could always just make the investment knowing that at the end of the day, you are attempting to contribute to a healthier, "greener" planet, even if it is in a small and obscure way.
As of this writing, Matt Thalman did not hold a position in any investment mentioned above. Follow him on Twitter at @mthalman5513.
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.