SparkChange Physical Carbon EUA ETC (Ticker: CO2, an ETC backed by physical EU carbon allowances, has surpassed USD250 million in assets since its launch on the London Stock Exchange in November 2021.
The firm writes that, as a result, over 2.5 million tonnes of CO2 permits are being withheld from polluters in Europe, creating positive environmental impact.
The firm writes that with 10s of trillions of pounds committed to net zero pledges – far greater than today’s available market of net zero investment opportunities – investors are buying carbon as an interim measure to start tackling their climate-related objectives.
Investing in physical carbon allowances directly impacts emission levels in a material way. In three months of trading, SparkChange CO2 has withheld 2.5 million tonnes of CO2 permits. This is equivalent to twice the carbon footprint of the Winter Olympics , or 8 per cent of London’s annual emissions.
The ETC offers investors an easier way to invest in physical EU carbon allowances, also known as “permits to pollute”. Companies classified as polluters by the EU are required to hold and redeem these permits in line with the amount of pollution they emit. Holders of these permits have the right to emit one tonne of carbon dioxide (CO2).
While other funds have tracked the price of carbon allowances using futures contracts, CO2 is the world’s first physically-replicated carbon allowance ETC, the firm says. “This means that when investors buy SparkChange Physical Carbon EUA ETC (Ticker: CO2) they are physically withholding permits from polluters which can lead to the permanent prevention of emissions from entering the earth’s atmosphere. Withholding allowances triggers an EU law that results in additional allowances being cancelled in future years, with irreversible effect.
“Increasing scarcity and investor demand can result in higher carbon prices, too. This makes carbon emissions more expensive, encouraging polluters to invest in more sustainable alternatives, and accelerating technological adoption.”
Commenting on the news, Hector McNeil, co-CEO of HANetf says: “Given the nature of the climate crisis, it’s little wonder so many investors have taken to SparkChange Physical Carbon EUA ETC. While investors are no doubt attracted to carbon allowances as an alternative asset class, the physical replication of the fund is also highly appealing to those looking to align their values and investment portfolios.
“Investing in the ETC reduces the cap on Europe’s pollution levels. I cannot think of many more direct ways investors can help facilitate the much-needed transition to a decarbonised economy than the SparkChange Physical Carbon EUA ETC.”
Elliot Waxman, CEO of SparkChange says: “Response to the SparkChange CO2 ETC has been overwhelmingly positive from investors seeking to adapt to the climate emergency; either by creating impact to help transition their portfolios to net zero, hedging their carbon price risk, or looking to generate returns from this exciting asset class. Meeting our climate goals currently requires a drastic cut to emissions in the future – double the reductions seen during Covid. Acting sooner creates environmental and economic benefits, so we’re delighted to make our impact felt.”
