UBS Asset Management has unveiled an exchange-traded commodity (ETC) providing physical exposure to EU carbon emissions allowances.
The UBS European Physical Carbon ETC (CO2E) is listed on the London Stock Exchange, Deutsche Boerse and Six Swiss Exchange with a total expense ratio (TER) of 0.75%.
CO2E is tied to the EU’s Emissions Trading System, where companies pay for carbon allowances which gives them the right to emit one tonne of greenhouse gases and are fined for non-compliance.
The total number of allowances is capped and reduced annually in line with the EU’s climate target.
It means industrial firms are unable to purchase the credits which they could use to pollute while driving up prices to the benefit of investors.
The increased cost of carbon allowances is also designed to push companies to transition to lower-emission production methods.
The ETC allows investors access to one of the world’s most traded carbon markets without having to set up a special registry account.
Andre Mueller, head of client coverage at UBS AM, said: “While absolute greenhouse gas cuts are needed, carbon markets support net-zero targets by encouraging businesses to reduce their emissions.
“CO2E provides investors with exposure to the EU carbon market in a simple and accessible way.”
In November last year, DWS launched the Xtrackers Physical Carbon EUA ETC Security (XEAL) with a TER of 0.79%, which has gone on to amass $6m assets under management (AUM).
The world's first physical carbon ETC, the SparkChange Physical Carbon EUA ETC (CO2), houses $198m with a TER of 0.89%.
WisdomTree also houses two carbon allowance ETCs, including the $163m WisdomTree Carbon ETP (CARB), which tracks the Solactive Carbon Emission Allowances Rolling Futures Total Return index with a TER of 0.35% and an additional daily swap fee of 0.001233%
Last year, the Swiss asset manager launched the UBS Carbon Compensated Gold ETF (GLDC02), a physically backed gold ETF holding gold bars certified as carbon neutral.
In March, the group expanded its ESG range with the launch of ultra-short bond ESG and S&P 500 climate transition ETFs as part of a triple launch.
