KRBN Stock Explained by a Carbon Offset Company (The Truth)

KRBN stock is the first exchange-traded fund (ETF) launched in the United States that gives investors exposure to the carbon allowances futures market.²

In other words, KRBN fund purchases carbon credits, which have historically risen in price (quickly and a lot as regulations increase). The fund provides investors with ways to capitalize on cap-and-trade carbon permits.²

But, what’s the real truth behind this new stock and what can it really do to help the planet?

This guide explains how KRBN stock works and the truth about the benefits to the environment.

How Do KRBN Contracts Work?

KRBN shares represent futures contracts connected to the cap-and-trade program.

This means that companies in states (like California) that are allotted a specific amount of carbon emissions (based on the industry) can buy and sell these credits for profits. The more a company pollutes, the less credits they receive, so in order to do business, they have to buy them from another company that generates less emissions than they have credits for.

For example, if company ‘A’ receives 100 carbon credits, but only uses 15, they can sell the remaining 85 credits to company ‘B’ that generates more than it’s credited allowance.

Since KRBN invests in these credits (which are completely generated by the government), the futures contracts depend on government policy and the need for the credits.

Contracts with a December expiration date within the next year to two years are chosen and given a certain weight in the index if they fulfill certain criteria for trading volume and dollar value.

The index incorporates three of the most important cap-and-trade systems in the world. Ultrashort-term, investment-grade fixed income assets may be held as collateral by the fund, which also uses a Cayman Islands subsidiary. Every year, in November, they recalculate and rebalance everything.

KRBN Stock Price

The price of a single share of the KraneShares Global Carbon ETF [KRBN] is now $46.82. The fact that KRBN stock has a score of 52, which is higher by 4% than its historic median score of 50, indicates that the company has a much lower risk than average. KRBN’s current price places it in the place of the 50th to 60th percentile for its past Stock Score levels.

The present trend is positive, and KRBN is seeing a bit of buying pressure. This is because the share price is above its 5, 20, and 50-day exponential moving averages.

KRBN Markets

Per IHS Markit, the price of a ton of carbon dioxide globally was $51.45 as of 2021. The price of a carbon certificate is expected to rise to $147 per ton to keep global warming below 1.5 degrees Celsius.

According to IHS Markit’s Global Carbon Index, yearly trade volume on the four largest global carbon financial markets topped $683.9 billion by the close of 2021.

According to research published by The Financial Times in April 2019, E.U. and ETS carbon permits were the best-performing commodities in the world during the prior two years. China plans to create the world’s biggest carbon permit market, covering 3.3 billion CO₂ emissions.

KRBN ETF

Monitoring the most actively traded carbon credit futures contracts, the KraneShares Global Carbon Strategy ETF (KRBN) is linked against IHS Markit’s Global Carbon Index, which provides wide monitoring of cap-and-trade carbon allowances. To promote prudent investment and risk management, the index presents a new metric for going long on the cost of carbon. There are now four major cap-and-trade schemes represented in the index, including:

• European Union Allowances (EUA)
• California Carbon Allowances (CCA)
• Regional Greenhouse Gas Initiative (RGGI)
• United Kingdom Allowances (UKA)

Kraneshares Global Carbon ETF

Even while the fund plans to try to mimic the index closely, it and its subsidiary are not needed to do so. The fund may get carbon credit futures on a date that is not the same as the day on which the index is rebalanced, may invest in carbon credit futures with a maturity date that is not within the following two Decembers, and so on.¹ Fund assets could be invested in other instruments so long as they further the fund’s investment goal.

The fund may purchase exchange-traded or non-exchange-traded emission permits under a cap-and-trade system, as well as other futures contracts, choices on futures contracts, swap contracts, and other investment companies and notes.

Fixed-income stocks with maturities up to one year are among the debt instruments in which the fund proposes to participate indirectly through short-term bond funds and exchange-traded funds (“ETFs”). Money market funds and repurchase agreements are two examples of cash the fund may get.

Registered investment companies and their advisers may be regulated by the Commodity Futures Trading Commission (CFTC). That is if the certified investment company purchases more than a set rate of its net assets in CFTC-regulated futures, options, and swaps, or the registered investment company markets itself as giving financial exposure to such instruments.

Following its inception, the fund will be classified as a “commodity pool” under the Commodity Exchange Act. This is because it may invest in futures and swaps subject to CFTC control over the limitations set out in CFTC Rule 4.5.

The fund does not have a diverse portfolio. Fund investments (as measured by the notional value of any futures in which it participates) are supposed to mirror the index’s concentration in a given sector if possible.

Carbon Credit Investment Funds

The 26th United Nations Climate Change Conference began its proceedings in Glasgow, Scotland, on October 31, 2021. At this event, nations that ratified the Paris Agreement of 2015 will meet to discuss strategies for expanding and protecting the environment. Similarly, there were plans to reduce gas emissions contributing to the greenhouse effect and the acceleration of global warming.

(Image: Kelly⁴)

Carbon credits have been attracting an increasing amount of attention from investors recently. This is because environmental concerns have recently been at the forefront of international debates.³ Efforts have been undertaken by governments and corporations to conserve forests and lower greenhouse gas emissions.

Carbon credits are accepted digital assets on a global scale that can be acquired by refraining from the release of carbon into the environment. Specifically, every ton of CO₂ kept out of the environment is termed a “certified emissions reduction” (CER), and CERs may be traded on share prices or between companies.

Given the increasing pressure to decarbonize the world’s economy, some nations and businesses have established reduction or compensation targets for their emissions. As a result, investing in emission credits has become a viable business chance, and it offers the potential for lucrative returns. On the other hand, direct investing is not available to regular investors; therefore, one chance is to invest collectively using investment funds, which professionals manage.

KRBN Stock Forecast

In July 2022, the RSI Oscillator for KRBN moved out of the oversold zone and into the neutral territory. This may be an indication that the stock is about to begin a new trend, one that is upward rather than downward. Investors could decide to purchase the shares or the call options.

Two different situations were analyzed in which the indicator exited oversold territory. The value of the stock increased in each of these instances. Because of this, the likelihood of relocation has increased to 90 percent.

Is KRBN a Good Investment? (Yes)

Reducing carbon prices might encourage environmentally friendly spending and help achieve ESG targets. Here are the benefits of investing in KRBN:

• The possibility exists that stricter emission regulations may act as a catalyst that will positively affect the functioning of the global carbon allowance market.
• According to IHS Markit’s Global Carbon Index, the four leading global carbon futures markets had a total of $683.9 billion as of 2021.
• KRBN is an option that should be considered by investors who are worried about the impact that rising carbon emissions costs would have on their holdings. KRBN usually comes ahead when the cost of carbon emissions increases, whereas businesses with large carbon footprints frequently come out on the losing end.

KRBN Dividend (KRBN ETF Price Chart)

The KRBN ETF price chart dividend yield is 0.53%, and the company has paid out $0.25 per share in dividends over the last year. The most recent day that did not include a dividend was December 29, 2021.

KRBN Stock News

This newest addition to KraneShares’ line of carbon market ETFs is the first in the United States to provide exposure to carbon offset futures. It indicates divergence from the traditional carbon credit funds that are already available.⁵

The KraneShares Global Carbon Offset Strategy ETF (KSET) debuted on the NYSE Arca. The cost ratio for this particular ETF is 0.79 percent. The GEO futures contracts are held by KSET, which makes it the first exchange-traded Fund (ETF) in the United States to do so.

The contracts are supported by carbon offsets, which are credits governments or regulatory companies give to projects that indicate a decrease in emissions compared to what the emissions would be if the project were not constructed.

The credits are awarded to projects that reduce emissions. Then, the companies in charge of the decarbonization project will be able to provide those registered offsets to individuals and businesses that have voluntarily reduced their net emissions.

Carbon offsets are not officially important for a firm to conduct business. Luke Oliver, in charge of climate investment at KraneShare, thinks that pressure from stakeholders will increase demand and profits for the contracts, even if they are unnecessary.

“It’s not as voluntary as you may think. He said that [companies] comply with this demand since it comes from their shareholders. The expansion of ESG, for example, serves as a good incentive for businesses to lessen their environmental impact by reducing their carbon footprint.”

KRBN Holdings

KRBN has an expense ratio of 0.78%.

GRN Vs KRBN

Many investors are reluctant to purchase personal commodities; nevertheless, exchange-traded funds (ETFs) make it possible for a broader spectrum of investors to enter this market. Commodities may be an effective hedge against inflation, and adding them to investment portfolios helps diversify holdings beyond the more traditional asset classes of equities and bonds.

In market instability, commodities such as silver and palladium are also considered safe havens. On the other hand, the demand for a commodity like copper may grow due to increased activity in the manufacturing and construction industries. Investing directly in a particular commodity comes with a certain level of inherent risk that may be mitigated using exchange-traded funds (ETFs) that focus on items.

GRN Fund Comparison

The Barclays Global Carbon II TR USD Index is what GRN, an ETN, is designed to mirror. Futures contracts on carbon emissions credits traded in the European Union (E.U.) Emissions Trading System and the Clean Development Mechanism established by the Kyoto Protocol are used to calculate the index and expose the carbon price.

• Performance over the last twelve months: 127.5%
• Expense Ratio: 0.75 percent
• Annual Dividend Yield: n/a
• Average of the Past Three Months: 109,338
• Assets Under Management: $166.6 million
• Date of Beginning: September 10, 2019
• Issuer: Barclays Capital

GRN might be seen as a pun on climate change. Most of GRN’s holdings are futures contracts on European Union carbon emissions credits, traded on the ICE Futures Europe platform.

KRBN

KRBN follows the most actively traded carbon credit futures contracts derived from IHS Markit’s Global Carbon Index, which provides coverage of cap-and-trade carbon allowances. The cap-and-trade schemes in Europe and North America are reflected in the index, as are the European Union Allowances (EUA), the California Carbon Allowances (CCA), and the Regional Greenhouse Gas Initiative (RGGI).

• Annualized Performance: 87.5%
• Rate of Expenditure: 0.78%
• Daily Average Volume over the Past Three Months: 814,181
• Annual Dividend Yield: n/a
• Asset Management: $1.8 Billion
• Effective Date: July 30, 2020
• Issuer: China International Capital Corp

Investments in this fund are promoted as “a new method for evading danger and maintaining the cost of carbon while helping ethical investment.” The growing price of carbon emissions and the regulation laws benefit KRBN. Like GRN above, most of KRBN’s assets are in European Union carbon emissions credit futures contracts.

Take note that the flow of natural gas has not stopped. In addition, the regulatory architecture of the market has not seen any good changes. Analysts anticipate a constrained KRBN stock market annually, and there is still a vital climate objective for 2030 to motivate long-term investment.

Frequently Asked Questions About KRBN Stock