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  • UBS launches carbon-neutral gold ETF for climate-conscious investors

    Mon Mar 27 2023


    Gold is the new green metal, at least according to UBS, which launched a new gold-backed ETF that has a carbon-neutral investment footprint. The Swiss Bank's Carbon Compensated Gold ETF (GLDC02) was listed Wednesday on the Six Swiss Exchange with a total expense ratio of 0.30%. UBS partnered with precious metals refiner MKS PAMP to create its latest EFT for climate-conscious investors


    UBS said that it sees strong demand for gold as a portfolio diversifier and hedge against inflation and growing market risk.  "The 'Carbon Compensated Gold' is a high potential building block aligning to the Net Zero Asset Managers initiative," the Swiss Bank said in a statement.


    According to MKS, about 50% of the gold in its carbon-neutral bars comes from recycled gold, substantially reducing the environmental footprint. At the same time, as part of its carbon-neutral accreditation, the refiner is committed to reducing its carbon emission by 1% per year. The bullion bars are also refined in line with the London Bullion Market Association's (LMBA) responsible sourcing guidelines.


    Some analysts note that UBS's green gold ETF has a slight premium. The investment's firm regular gold-backed ETF has a total expense ratio of 0.23%.


    Gold's use as a carbon-neutral asset for investors looking to improve their portfolio ESG ratings has been growing steadily in the last five years. The World Gold Council started researching gold's carbon footprint in 2018 and published a comprehensive report in 2019, validating its initial findings.


    "Our key finding relating to gold is that it is likely to exhibit a relatively robust performance across all climate scenarios. Gold's resilience is, at least in part, likely a reflection of some of the structural factors regarding gold market dynamics and the diverse drivers of demand which underpin the wider investment case for gold. It also reflects the relative vulnerability of other assets classes and gold's negative correlation to them when they are under duress," WGC analysts said in their 2019 report.

    The WGC noted that most of gold's harmful emissions are created from mining production; however, they said that gold producers can limit their emissions by using green-renewable energy to run their mines and replacing their fleet of diesel vehicles with electric. UBS is not the first investment firm to launch a green gold ETF.

    In 2020 HANetf launched its Royal Mint Responsibly Sourced Physical Gold ETC (RMAU), which incorporates recycled gold as part of its holdings.

    Last year RMAU saw its assets under management surpass $850 million, growing 185%. In a recent comment to Kitco News, Tom Bailey, head of ETF research at NANetf, said that at the start of the year, the ETF has seen inflows of $9.41 million.