CARB offers index-based exposure to European Union Carbon Credit Allowance Futures
TORONTO – February 7, 2022 – Horizons ETFs Management (Canada) Inc. (“Horizons ETFs” or the “Manager”) is pleased to announce the upcoming launch of the Horizons Carbon Credits ETF (“CARB” or the “ETF”). Shares of the ETF will begin trading on Thursday, February 10, 2022, on the Toronto Stock Exchange (“TSX”) under the ticker CARB:TSX.
CARB’s investment objective is to seek to replicate, to the extent possible and net of expenses, the performance of an index that seeks to provide exposure to investments in cap-and-trade carbon allowances. Currently, the ETF seeks to replicate the performance of the Horizons Carbon Credits Rolling Futures Index (Excess Return) (the “CARB Index”), net of expenses. The ETF seeks to hedge any non-Canadian dollar portfolio exposure back to the Canadian dollar at all times.
CARB will be Canada’s first ETF to provide exposure solely to carbon credits. Carbon credits are permits issued through a regulatory organization that provide a market-oriented mechanism designed to reduce mandated participants’ output by requiring the use of carbon credits to offset the emission of an amount of carbon dioxide or equivalent greenhouse gases (“GHG”).
The CARB Index is a proprietary index provided by the Manager and is designed to measure the performance of liquid carbon credit futures contracts listed on globally recognized developed market exchanges (the “Carbon Credit Futures”), that are based on the most liquid cap-and-trade carbon allowances. The CARB Index is initially comprised of, and calculated based on the daily returns of the settlement price of European Union Allowance (“EUA”) emission futures contracts. The CARB Index allows for the addition of other Carbon Credit Futures contracts that may become eligible for inclusion into the CARB Index subject to liquidity and market cap considerations.
Being long carbon credits can provide several key benefits to investors, including gaining exposure to an investment strategy which could help reduce pollution, providing a potential hedge against climate change and rising carbon costs, as well as potential diversification benefits in the form of non-correlated exposure to traditional asset classes. The price of carbon credits is likely to be supported by a trend toward tightening carbon emissions regulation globally, regularly decreasing supply consistent with climate neutrality objectives, as well as rising demand.
“In the increasingly crowded responsible investing landscape, CARB’s strategy sets it apart by offering unlevered index exposure to a distinct asset class that is tangibly involved in the reduction of carbon emissions. Our ETF becomes, for many investors, a way for them to gain exposure to the carbon credit market without having to buy futures directly,” said Steve Hawkins, President and CEO of Horizons ETFs. “Not only do we believe that carbon credits are an instrument that can help in the fight against climate change, we believe this asset class could provide a powerful investment opportunity for Canadian investors.”
In Europe, carbon credits are administered under the European Union’s (“EU”) Emissions Trading System (“ETS”), the world’s first cap-and-trade marketplace. Since its launch in 2005, the EU ETS has successfully helped reduce European emissions from power generation and energy-intensive industries by 42.8%¹. Initially, CARB will exclusively provide exposure to EUA futures contracts.
Free carbon credit allowances issued by the ETS have decreased from 80% in 2013 to 30% in 2020². Phase 4 plans currently contemplate further limitations on the free allocation of carbon credit allowances while seeking a 55% reduction target in GHG emissions by 2030³. According to Refinitiv, the EU ETS accounted for 90% of the global value of traded global markets for carbon dioxide in 2021, with a global value of 683 billion euros⁴.
“In creating the European Carbon Credit Allowance system, the EU created a proof-of-concept for the development of a market-based emissions reduction system, with a proven track record of reducing emissions that also makes it increasingly cost-prohibitive to pollute – a model other countries are now seeking to emulate,” said Mr. Hawkins. “With CARB, investors are able to support that system, while getting exposure to price change of those carbon credits in their own portfolio.”
The management fee for the ETF is 0.75% plus applicable sales taxes.
CARB will close its initial offering of shares to its designated broker in the morning of February 8, 2022, and will begin trading on Thursday, February 10, 2022, on the TSX.
For further information about CARB, please visit: www.HorizonsETFs.com/CARB
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has more than $21 billion of assets under management and 105 ETFs, including CARB, listed on major Canadian stock exchanges.
For all inquiries:
Please contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
¹ European Green Deal: Commission proposes transformation of EU economy and society to meet climate ambitions, 14 July 2021
² Allocation to industrial installations, European Commission, 14 July 2021
³ At least 55% below 1990 GHG levels. Source: European Climate Law
⁴ Global carbon markets value surged to record $851 billion last year-Refinitiv, January 31, 2022
Commissions, management fees and applicable sales taxes all may be associated with an investment in the Horizons Carbon Credits ETF managed by Horizons ETFs Management (Canada) Inc. (the “ETF”). The ETF is not guaranteed, its value changes frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing.
The CARB Index is calculated by an independent calculation agent, Solactive AG. The financial instrument is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade name or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade name for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
The ETF is an alternative mutual fund within the meaning of National Instrument 81-102 Investment Funds (“NI 81-102”), and is permitted to use strategies generally prohibited by conventional mutual funds, such as the ability to invest more than 10% of their net asset value in securities of a single issuer or the ability to borrow cash. While these strategies will only be used in accordance with the ETF’s investment objectives and strategies, during certain market conditions they may accelerate the risk that an investment in the ETF Shares decreases in value. The ETF will comply with all requirements of NI 81-102, as such requirements may be modified by exemptive relief obtained on behalf of the ETF.
The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.