Hong Kong’s stock exchange on Tuesday added its first carbon futures exchange-traded fund (ETF) to its markets.
The CICC Carbon Futures ETF extends the coverage of Hong Kong-listed commodity ETFs to carbon credits, which the exchange described as “an important asset class in the global drive to achieving carbon neutrality”.
Managed by China International Capital Corporation Hong Kong, the new ETF tracks the ICE EUA Carbon Futures Index (Excess Return), which measures the performance of a long-only basket of European Union Allowance (EUA) futures contracts.
An EUA is the tradable unit of pollution permits in the European Union Emissions Trading Scheme. One EUA entitles the holder to emit one metric tonne of carbon dioxide or equivalent amounts of greenhouse gases.
“Climate change and decarbonisation have been areas of increasing focus for investors worldwide,” said Brian Roberts, head of exchange traded products at Hong Kong Exchanges and Clearing, which operates the stock exchange.
“The launch of a carbon strategy ETF in Hong Kong opens up new opportunities for investors to participate in the reduction of carbon emissions in a convenient and cost effective way, adding to the vibrancy of our ETF product ecosystem.”
Increasing investor awareness has been driving strong asset growth in Hong Kong-listed ETFs focused on environmental, social and governance (ESG) issues. Their market capitalisation of increased 84% in 2021 to $4.5 billion by year-end, while their average daily turnover registered $40.9 million in 2021, more than double that of 2020.
As of February 2022, 157 exchange traded products (ETPs) were listed on HKEX, with a market capitalisation of $423.5 billion.
Trading momentum in the ETP market has been strong with ADT growing 15% to $8.9 billion in the first two months of 2022 from $7.7 billion in the full year of 2021.
- George Russell
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