Global Carbon ETF (Synthetic) - Global X ETFs - Australia

GCO2


Global Carbon ETF (Synthetic)

Reasons to Consider GCO2

Access Global Carbon Allowance Markets

Exposure to the price of carbon as driven by the world’s biggest and most developed emission trading schemes.

Structural Tailwinds

Medium to long term growth potential backed by global initiatives and regulations to reach net-zero targets.

Unique Asset Class

Gain diversification with a unique asset class which is reasonably uncorrelated to other assets including oil prices.

Product Information As of 23 May 2024

Inception Date 12 Dec 2022
Management Costs (% p.a.) 0.45
Currency Hedged No
Domicile Australia
Legal Form Managed Investment Scheme
SMSF Eligible Yes

NAV Information As of 23 May 2024

NAV/Unit (A$) 8.88320000
Currency (NAV) AUD
Shares Outstanding 120,000
AUM (A$) 1,065,989.21
NAV History File View

Product Summary

GCO2 offers access to the world’s largest carbon markets covering the European Union Emissions Trading Scheme, Regional Greenhouse Gas Initiative, Western Climate Initiative (California cap and trade program) and the UK Emissions Trading Scheme.

Product Objective

The fund seeks to provide returns which correspond generally to the performance, before fees and expenses, of the ICE Global Carbon Futures Index (the “Index”). The fund is currently the lowest cost of its kind in Australia.

Trading Details

Ticker GCO2
Bloomberg Code GCO2 AU Equity
ISIN AU0000249096
Trading Hours 10:00AM – 4:00PM

Management & Administration

Issuer Global X Management (AUS) Limited
Custodian The Hongkong and Shanghai Banking Corporation Limited, Sydney Branch
Registrar Computershare Investor Services Pty Limited

Benchmark Information

Benchmark ICE Global Carbon Futures Index (AUD Total Return)
Provider ICE Data Indices, LLC
Ticker ICBNAUDT

Distributions

Distribution Frequency Annually
Distribution History View

Performance Table As of 23 May 2024

Total Return (Fund) Total Return (Benchmark) Tracking Difference Tracking Error
1 Month 11.41% 12.00% -0.59% 0.22%
3 Months 23.84% 25.18% -1.34% 0.56%
1 Year -4.62% -1.23% -3.39% 1.73%
3 Year p.a. -- -- -- --
5 Year p.a. -- -- -- --
10 Year p.a. -- -- -- --
Since Inception p.a. -7.86% -5.10% -2.76% 1.61%

Top Holdings As of 24 May 2024

Weight (%) Name Bloomberg Ticker Market Price (Local) Contracts Held Notional Value (A$)
46.48 ECX EMISSION Dec24 MOZ24 Comdty 75.81 4 495,476
24.02 UK Emiss Allow Fu Dec24 UKEZ4 Comdty 44.48 3 255,995
22.83 CA Carbon Allow 24Dec24 CDBZ24 Comdty 40.32 4 243,405
6.25 RGGI Vintage 24 Dec24 RJOZ24 Comdty 22.07 2 66,616
Holdings are subject to change.

Country/Region Breakdown As of 24 May 2024

Country/Region Weight (%)
European Union 46.5
United States 29.1
United Kingdom 24.0
Other/Cash 0.4

Research

FAQs

  • What are carbon futures?

    Carbon futures are derivatives whose values are connected to carbon emissions allowances, such as the European Union’s Emissions Trading Scheme (ETS) or the Western Climate Initiative. These futures are deliverable, meaning that on expiry the holder takes ownership of the carbon allowances that their futures are connected to.

    Carbon futures are traded on regulated exchanges, mostly by utilities companies and financial institutions. ETFs that hold these futures are required to sell their futures before expiry and buy new ones, in a process called “rolling”.
  • What can’t GCO2 trade carbon credits themselves?

    Carbon allowances exist as digital entries in government registers. They are illiquid and do not trade on exchange. Instead, they are traded in different places and different ways, often bilaterally between emitters. This can make them arguably less well-suited to investment by ETFs than futures contracts. ETFs need to hold liquid assets in order to ensure smooth and efficient trading and pricing.
  • How is GCO2 correlated to other traditional investments

    Carbon allowances exhibit low correlations to traditional Australian investments like shares, bonds, commodities, cash and property. Reasons for these low correlations include:
    • Non-economic players – like governments, which give allowances away for free – are major carbon market
    • Carbon markets are more centrally controlled with more idiosyncratic regulations.
    • Participants’ Carbon allowances have no cash flows, and therefore do not fit neatly into conventional valuation frameworks.
  • How does the tree planting initiative work?

    Global X is partnering with Carbon Neutral, a business specialising in reforestation, to plant and maintain trees in the Yarra Yarra biodiversity corridor in Western Australia. As part of this, Global X will contribute 10% of GCO2’s management fee each quarter to participate in Carbon Neutral’s Plant-a-Tree Program.

    The Plant-a-Tree Program is a reforestation project helping to reconnect small patches of remnant vegetation to create a 200km green corridor and protect plant and animal life.

    Global X will provide investors with a statement of the positive environmental impact management fee donations have provided at the end of each quarter. For more information please read out compliance policy located on the fund page.
  • Does GCO2 provide a carbon offset?

    GCO2 does not provide any carbon offset, nor does it invest in, hold or issue any carbon offsets. The fund invests exclusively in carbon allowances and specifically in futures contracts connected to them.

    Investors should be sure to understand the differences between carbon offsets – of the kind issued by Australian government’s Clean Energy Regulator – on the one hand. And carbon allowances – of the kind found in the European Union’s Emissions Trading Scheme – on the other hand.

    Carbon offsets are voluntary and mostly unregulated programmes. They allow business to theoretically offset their emissions and make “carbon neutral” products by doing things like renting forests. Carbon allowances by contrast are mandatory and highly regulated programs that require emitters to pay for their carbon dioxide emissions or face large fines.
  • How can I use GCO2 in a portfolio?

    GCO2 can be used to capture any potential rise in carbon prices. In order to incentivise an orderly transition to clean energy, global governments have steadily shrunk the supply of carbon allowances each year. This has helped send carbon prices higher over the past several years. However past performance does not guarantee future returns.

    GCO2 can also be used as a portfolio diversifier, as carbon allowances exhibit low correlations with other asset classes and have nothing of their kind available in Australia.

    Lastly, it can be used as an environmental allocation in a portfolio as carbon allowances are considered to be a practical instrument for curbing greenhouse gas emissions.
  • What carbon allowances are included in GCO2?

    GCO2 invests in four carbon markets: the European Union ETS, the California-based Western Climate Initiative (WCI), the New York-headquartered Regional Greenhouse Gas Initiative (RGGI) and, the UK ETS.

    The EU provides the largest carbon allowance market, constituting 50% of the fund’s weight at each rebalance. The EU’s carbon allowances are the major index component as its carbon market is the largest, most liquid, and most ambitious. All major emitters, including utilities companies, steel manufacturers, airlines and many more are required to participate.

    RGGI is a cooperative effort among the northeastern US states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virgini. It is narrower than the EU ETS and only applies to powerplants above a certain size. The weights of RGGI futures are floored at 5% in the index.

    The WCI includes California, and Washington state – but also the Canadian provinces of Quebec and Nova Scotia. It applies to oil refiners, power plant operators, and other large emitters.

    The UK ETS is very similar in its design to the EU ETS. It applies to the power generation sector, aviation, and energy intensive industries.

Global X Management (AUS) Limited (“Global X”) (Australian Financial Services Licence Number 466778, ACN 150 433 828) is the product issuer. Offers of interests in any retail product will only be made in, or accompanied by, a Product Disclosure Statement (PDS). In respect of each retail product, Global X has prepared a target market determination (TMD). Each PDS and TMD is available at www.globalxetfs.com.au. The information on this website is general in nature only and does not take into account your personal objectives, financial situations or needs. Before acting on any information, you should consider the appropriateness of the information having regard to your objectives, financial situation or needs and consider seeking independent financial, legal, tax and other relevant advice having regard to your particular circumstances. Any investment decision should only be made after obtaining and considering the relevant PDS and TMD. Investments in any product issued by Global X are subject to investment risk, including possible delays in repayment and loss of income and principal invested. The value or return of an investment will fluctuate and an investor may lose some or all of their investment. Past performance is not a reliable indicator of future performance.

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