This Carbon-Conscious Investment Just Outperformed Stocks, Bonds, Commodities, and Real Estate

0 | By Michael A. Robinson

If you had any doubt about the economic potential of the “zero-carbon” economy, consider the case of Saudi Arabia.

I say that because, at a production rate of 10 million gallons per day, the nation ranks as the world’s second-largest oil producer, just a bit behind Russia.

Put another way, one of out every 10 barrels of oil consumed in the world each day comes from Saudi Arabia.

And yet the oil-rich kingdom recently announced its targeting “net-zero” carbon emissions in its own country by 2060 as part of the effort to lessen climate changes.

I believe there’s a lot more going on here than a PR campaign by a leading fossil fuel producer. With nations around the world looking to reduce their carbon footprints, the market for renewable energy will be worth more than $1.9 trillion by 2030, says Allied Market Research.

Today I’m going to reveal a market-crushing investment that lets us profit from clean energy tech across the board…

The Quest for “Carbon Neutral”

Now then, I want to make sure we are communicating clearly. I don’t believe the world’s governments, no matter how hard they try, can wean us off fossil fuels completely in the next two decades.

Not for lack of trying. All the way back in 1992, 154 countries banded together to start negotiations on how to limit greenhouse gas emissions and limit climate change.

It was a slow and torturous process that culminated with the 2015 Paris Agreement. Signed by 193 countries, that deal’s goal is to limit the rise in global temperatures to below 2 degrees Celsius (compared to the pre-Industrial age).

Countries are also supposed to try to go even further and keep that increase below 1.5 degrees Celsius. But even after 23 years of negotiations, the Paris Agreement doesn’t have much bite to it.

The recent COP26 summit didn’t change much on that front, but several countries did pledge to reach “net-zero” in the next few decades, meaning that they on balance won’t emit more greenhouse gases than they absorb.

But these goals are again not binding, and few countries presented actual plans for how to make this happen.

The fact is, fossil fuels aren’t going anywhere soon. The oil company BP estimates that a whopping 84.3% of the world’s energy consumption is fueled by carbon-emitting fossil fuels.

And yet, the world’s commitment to phasing out fossil fuels helps explain why renewables are such a hot market. The estimated $1.9 trillion by 2026 represents more than double the $881 billion the sector was worth last year.

That’s why it’s worth mentioning that electric vehicles, which will allow renewable to fuel every car on the road, will be worth $700 billion as a sector by 2026.

And it’s also why Im glad to introduce you to the KraneShares Global Carbon ETF (KRBN). The fund is focused on this thriving “cap and trade” market in carbon credits.

Trading and Limiting

With how inescapable oil, natural gas, and even coal are, we need something else to get the world to “net zero.”

That something is a thriving market for carbon credits, which KraneShares participates in. In theory, this is quite simple. Every company that emits carbon into the atmosphere has to buy credits to do so from companies that remove carbon from the atmosphere.

There’s precedence here. The 1990 federal Clean Air Act set up a “cap and trade” system like this for sulfur dioxide. By 2007, sulfur dioxide emissions had dropped by 50% compared to 1980.

Including carbon dioxide and other greenhouse gases.

Currently, the company invests in three major carbon cap and trade programs: the EU’s, California’s, and the regional program run by states in New England and the Northeast.

KRBN’s investment model is simple. As the U.S. and other countries continue to push for limiting carbon emissions and to promote carbon offsets, the price of carbon credits is set to rise.

The current price for a ton of carbon dioxide, for example, is about $40.52. Meanwhile, estimates from the UN, the Bank of England, the White House, and Bloomberg New Energy Finance on what price it would take to achieve net zero carbon range from $100/ton to $147/ton.

Whichever one we pick, it’s clear that today’s price is only going to go up.

The Future of Carbon

What KRBN does is “go long” on these credits – it buys and holds carbon credit futures, making money as their price goes up. Between September 2014 and this past October, carbon credits have actually outperformed stocks, bonds, commodities, and real estate.

Now, this isn’t strictly speaking high tech. But it is the flip side of that coin as it provides vital support for high-tech leaders as we move to more renewables and other forms of clean energy.

Consider that Big Tech is now leading the way in getting to zero carbon as soon as 2030. That means buying carbon credits will become integral for their operations. Already, Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL), International Business Machines Corp. (IBM), and others buy carbon credits to offset the carbon emissions their operations generate.

Here’s the thing. For the average investor, directly getting involved in the carbon market is expensive and time-consuming, if even possible. Carbon future markets are hard to parse, require special clearances to trade, and you’d need a huge amount of money to get started.

It’s better to leave it to well-regulated experts, like KRBN.

And ironically, while many other green ETFs which invest directly in clean energy companies are now out of favor, by using a very targeted approach, the fund managers at KRBN have just crushed the market so far this year.

Their fund is up 77.6%, more than triple the S&P 500’s 23.7% return over the period.

Goes to show that investing in our green-tech-filled future can be very profitable.

Cheers and good investing,

Michael A. Robinson

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