KraneShares Adds Washington State Carbon Market to Global Carbon Strategy ETF (KRBN)

Krane Funds Advisors, LLC (“KraneShares”), an asset management firm known for its global exchange-traded funds (ETFs), announced that it added Washington state’s cap-and-trade carbon allowance market to the KraneShares Global Carbon Strategy ETF (Ticker: KRBN). Washington carbon allowance (WCA) futures now represent a 5% weight in KRBN.

The move to include Washington carbon allowances in KRBN follows a show of overwhelming voter support for these markets on November 5th 2024. A referendum to repeal Washington state’s Climate Commitment Act that established the state’s carbon markets was struck down by a margin of 62% to 38%1.

“KraneShares strives to be at the forefront of carbon market investing with our flagship KRBN ETF,” said Luke Oliver, Head of Climate Investments at KraneShares. “The development of Washington’s cap-and-trade market underscores the importance of regional markets in the sustainable-energy transition. As the adoption of cap-and-trade systems expands, we believe exposure to these markets is becoming an essential consideration within investors’ portfolios.”

The KraneShares Global Carbon Strategy ETF (KRBN) is benchmarked to the S&P Global Carbon Credit Index, which offers broad coverage of cap-and-trade carbon allowances by tracking the most traded carbon credit futures contracts. The index introduces a new measure for hedging risk and going long the price of carbon while supporting responsible investing.

In addition to its latest Washington holding, the index also covers the other major European and North American cap-and-trade programs: European Union Allowances (EUA), California Carbon Allowances (CCA), United Kingdom Allowances (UKA), and the Regional Greenhouse Gas Initiative (RGGI), which covers the Northeast US Power Market.

“Since the outset, Climate Finance Partners (CLIFI) and KraneShares worked with S&P to design KRBN’s index to evolve alongside the growing and dynamic global carbon markets,” said Eron Bloomgarden, co-founder and CEO of CLIFI. “The inclusion of Washington State within KRBN represents a significant step forward for price discovery in global carbon markets, which now cover over 25% of global emissions.3”

What are carbon allowances?

Compliance carbon allowances trade under cap-and-trade programs known as Emissions Trading Systems (ETS). These systems create transparent, liquid markets that are government-mandated and regulated. The value of these markets reached nearly one trillion USD in 2023.2 Carbon allowances are distinct from project-based carbon offsets and offer a market-based approach to regulating a region's emissions, with mandatory participation for specified industries. Carbon allowance supply is managed by government agencies and adjusted primarily through an annually declining cap. 

For more information on the KraneShares Global Carbon Strategy ETF (Ticker: KRBN), please visit https://kraneshares.com/krbn or consult your financial advisor.

Citations:

1. Kerber, Rosss, “Carbon markets give environmentalists hope after US elections,” Reuters. Nov 12, 2024.
2. Reuters, “Global carbon markets value hit record $909 bln last year,” Feb 7, 2023.
3. World Bank, “State and Trends of Carbon Pricing 2024,” May 21, 2024. Note, carbon

About KraneShares

KraneShares is a specialist investment manager focused on China, Climate, and Alternative Assets. KraneShares seeks to provide innovative, high-conviction, and first-to-market strategies based on the firm and its partners' deep investing knowledge. KraneShares identifies and delivers groundbreaking capital market opportunities and believes investors should have cost-effective and transparent tools for attaining exposure to various asset classes. The firm was founded in 2013 and serves institutions and financial professionals globally. The firm is a signatory of the United Nations-supported Principles for Responsible Investment (UN PRI).

About Climate Finance Partners

Climate Finance Partners delivers innovative climate finance solutions and investment products to scale capital into climate impact. CLIFI is an impact focused investment firm and is led by a team of professionals with deep experience in the fields of investment and environmental and climate finance.

Carefully consider the Funds’ investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds’ full and summary prospectus, which may be obtained by visiting: www.kraneshares.com/krbn. Read the prospectus carefully before investing.

Risk Disclosures:

Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated objectives. Indices are unmanaged and do not include the effect of fees. One cannot invest directly in an index.

This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change. Certain content represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results; material is as of the dates noted and is subject to change without notice.

The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund’s gains or losses. A derivative (i.e., futures/forward contracts, swaps, and options) is a contract that derives its value from the performance of an underlying asset. The primary risk of derivatives is that changes in the asset’s market value and the derivative may not be proportionate, and some derivatives can have the potential for unlimited losses. Derivatives are also subject to liquidity and counterparty risk. The Fund is subject to liquidity risk, meaning that certain investments may become difficult to purchase or sell at a reasonable time and price. If a transaction for these securities is large, it may not be possible to initiate, which may cause the Fund to suffer losses. Counterparty risk is the risk of loss in the event that the counterparty to an agreement fails to make required payments or otherwise comply with the terms of the derivative.

The Fund relies on the existence of cap and trade regimes. There is no assurance that cap and trade regimes will continue to exist, or that they will prove to be an effective method of reduction in GHG emissions. Changes in U.S. law and related regulations may impact the way the Fund operates, increase Fund costs and/or change the competitive landscape. New technologies may arise that may diminish or eliminate the need for cap and trade markets. Ultimately, the cost of emissions credits is determined by the cost of actually reducing emissions levels. If the price of credits becomes too high, it will be more economical for companies to develop or invest in green technologies, thereby suppressing the demand for credits. Fluctuations in currency of foreign countries may have an adverse effect to domestic currency values. The use of futures contracts is subject to special risk considerations. The primary risks associated with the use of futures contracts include: (a) an imperfect correlation between the change in market value of the reference asset and the price of the futures contract; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the inability to predict correctly the direction of market prices, interest rates, currency exchange rates and other economic factors; and (e) if the Fund has insufficient cash, it may have to sell securities or financial instruments from its portfolio to meet daily variation margin requirements, which may lead to the Fund selling securities or financial instruments at a loss.

The Fund invests through a subsidiary, and is indirectly exposed to the risks associated with the Subsidiary’s investments. Since the Subsidiary is organized under the law of the Cayman Islands and is not registered with the SEC under the Investment Company Act of 1940, as such the Fund will not receive all of the protections offered to shareholders of registered investment companies. The Fund and the Subsidiary will be considered commodity pools upon commencement of operations, and each will be subject to regulation under the Commodity Exchange Act and CFTC rules. Commodity pools are subject to additional laws, regulations and enforcement policies, which may increase compliance costs and may affect the operations and performance of the Fund and the Subsidiary. Futures and other contracts may have to be liquidated at disadvantageous times or prices to prevent the Fund from exceeding any applicable position limits established by the CFTC. The value of a commodity-linked derivative investment typically is based upon the price movements of a physical commodity and may be affected by changes in overall market movements, volatility of the Index, changes in interest rates, or factors affecting a particular industry or commodity.

The Fund is subject to interest rate risk, which is the chance that bonds will decline in value as interest rates rise. Narrowly focused investments typically exhibit higher volatility. The Fund’s assets are expected to be concentrated in a sector, industry, market, or group of concentrations to the extent that the Underlying Index has such concentrations. The securities or futures in that concentration could react similarly to market developments. Thus, the Fund is subject to loss due to adverse occurrences that affect that concentration. KRBN is non-diversified.

ETF shares are bought and sold on an exchange at market price (not NAV) and are not individually redeemed from the Fund. However, shares may be redeemed at NAV directly by certain authorized broker-dealers (Authorized Participants) in very large creation/redemption units. The returns shown do not represent the returns you would receive if you traded shares at other times. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns. Beginning 12/23/2020, market price returns are based on the official closing price of an ETF share or, if the official closing price isn't available, the midpoint between the national best bid and national best offer (“NBBO”) as of the time the ETF calculates the current NAV per share. Prior to that date, market price returns were based on the midpoint between the Bid and Ask price. NAVs are calculated using prices as of 4:00 PM Eastern Time.

The KraneShares ETFs and KFA Funds ETFs are distributed by SEI Investments Distribution Company (SIDCO), 1 Freedom Valley Drive, Oaks, PA 19456, which is not affiliated with Krane Funds Advisors, LLC, the Investment Adviser for the Funds, or any sub-advisers for the Funds.

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