Change Finance, a majority women-run asset manager, has announced that it has created the first and only Certified Carbon Neutral ETF.
In partnership with EthosESG, a FinTech platform that helps align investors with the causes they care about, the firm has created a carbon neutral certification process specifically geared toward asset managers, and uses their own proceeds to pay for 100 per cent of the carbon offsets.
As managers of an ETF (CHGX), Change Finance is a partial owner of the companies in the fund, which in turn means they become partial owners of their carbon footprint. Their commitment is to sequester 100 per cent of the carbon that their investment portfolio is responsible for. They partnered with Verity Platforms, a sustainable finance firm sourcing data from CDP, to help procure an accurate carbon footprint for each company, and then aggregated that across the fund to determine the portfolio-level carbon footprint for CHGX.
“The newest report from the Intergovernmental Panel on Climate Change (IPCC) confirmed what we had feared: it’s too late to stop the next 30 years of climate change, even if the economy was carbon neutral today. Hurricanes, heat domes, and wildfires are urgent signs that we must do better than NetZero targets five, 10, and 20 years out. That’s why we decided it was time to act and to create the first and only Certified Carbon Neutral ETF.” says Andrew Rodriguez, CEO and CIO of Change Finance. “Our hope is to inspire other asset managers to join us. The climate crisis requires full commitment from everyone – especially the financial services industry. We’re proud to have blazed a trail towards net-zero capital markets,” says Dorrit Lowsen, Change Finance’s President and COO.
The firm writes that the certification by EthosESG follows a rigorous methodology focused on independent analysis of a fund’s carbon footprint and carbon credits (offsets) to verify whether the fund is carbon neutral. The carbon footprint consists of verified Scope 1 emissions (direct emissions from a company’s owned or controlled sources, such as company vehicles or fuel combustion) and Scope 2 emissions (indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by a company) of every holding of the fund. Carbon credits require proof of purchase from an approved carbon credit provider. For the purposes of certifying carbon neutrality, Ethos defines the carbon footprint of a fund as the total tons of Scope 1 and Scope 2 CO2 emissions of its holdings multiplied by the fund’s percentage ownership of those holdings. Percentage ownership is based on the market value of the fund’s shares divided by the total market value of the holdings.
Not all carbon credits are created equal. Change Finance has partnered with Grassroots Carbon because it is an organisation dedicated to removing carbon from the atmosphere and placing it back into the soil through the practice of regenerative grazing. For every USD1 million invested in CHGX, seven tonnes of carbon is pulled from the atmosphere.
“We chose regenerative grazing because it is not only more productive in terms of the amount of carbon captured, but it also supports rural communities. Grassroots has a specific focus on marginalized groups such as women ranchers, ranchers of colour & indigenous peoples. Essentially, the rancher’s incomes increase, the land is replenished, and carbon is sequestered,” says Brittany Damico, Senior Business Development Manager.
Change Finance has forged this framework so that other asset managers can follow suit with the certification to take major steps toward industry-wide carbon neutral investing.
