Krane Funds Advisors, LLC has announced the launch of the KraneShares MSCI China Clean Technology Index UCITS ETF (Ticker: KGRN) on the London Stock Exchange (LSE), Borsa Italiana, and Deutsche Börse Xetra.
KGRN is a passively managed fund that tracks the MSCI China IMI Environment 10/40 Index, which is based on four key Clean Technology environmental themes: Alternative Energy, Sustainable Water, Pollution Prevention, and Energy Efficiency.
KGRN has been classified as an Article 8 investment under the EU Sustainable Finance Disclosure Regulation (SFDR). The firm writes that China has emerged as a pre-eminent global leader in renewable technology, with a steadfast commitment to addressing its pollution challenges. Through concerted efforts to expand its renewable energy capacity and improve its environmental policies, China aims to hit peak emissions by 2030 and carbon neutrality by 2060. Going forward, China is expected to remain the global leader in renewable energy over the next five years, accounting for 43 per cent of renewable capacity growth worldwide.
KGRN provides exposure to the companies that stand to benefit from China’s increased focus and spending on clean energy technologies. Holdings include top lithium-ion battery manufacturer, Contemporary Amperex Technology (CATL), and several electric vehicle (EV) makers, namely NIO, XPeng, BYD, and Li Auto, which are expected to see strong growth potential from the widespread adoption of EVs.
The firm writes that China’s EV market is the largest in the world with more than four million EVs sold in 2022, the equivalent of five times that sold in the US. For decades, China has dominated the global market for rare earth metals, which provides an inherent supply chain advantage for domestic production.
Solar power technology is another area experiencing rapid growth in China. This year alone, China is expected to add an additional 30 per cent capacity, or 95 to 120 gigawatts (GW) of solar power. Moreover, China is home to some of the world’s largest solar panel manufacturers, including Xinyi Solar, which controls 30% of the global market share.
“We believe China is currently undergoing an environmental renaissance, pledging hundreds of billions of dollars to environmental protection projects and policies,” says Jonathan Krane, Chief Executive Officer of KraneShares. “Chinese companies focused on contributing to a more environmentally sustainable economy may potentially benefit from this focused initiative.”
“KGRN presents a compelling investment opportunity for those seeking to gain exposure to industries that are not only experiencing rapid growth, but are also actively addressing environmental challenges,” explains Dr Xiaolin Chen, Head of International at KraneShares. “By investing in China’s clean technology companies at the forefront of sustainable innovation, KGRN provides the potential to generate strong returns while aligning with investors’ values.”
“The MSCI China IMI Environment 10/40 Index is comprised of securities that derive at least 50 per cent of their revenues from environmentally beneficial products and services. Constituent selection is based on data from MSCI ESG Research,” explains Nicco Ferrarini, Managing Director at MSCI.
