COtwo Advisors Physical European Carbon Allowance Trust Announces Q1 2026 Results: Net Asset Value Declines, Market Risks Remain High

Key Highlights from the Quarterly Report (Period Ended February 28, 2026)

• Net Asset Value (NAV) Per Share: The Trust reported a NAV per share of \$16.21 as of February 28, 2026, down from \$19.20 at November 30, 2025. This represents a substantial decrease of approximately 15.6% over the three-month period.
• Market Value Per Share: As of February 28, 2026, the market value per share stood at \$18.80, which is below the prior NAV but slightly above the end-of-period NAV, indicating some volatility or premium in market pricing.
• Total Shares Outstanding: The Trust maintained its total shares outstanding at 100,000 throughout the quarter. There were no creations or redemptions of shares during the period.
• Net Decrease in Net Assets: The Trust recorded a net decrease in net assets resulting from operations of (\$298,801) for the quarter, equivalent to (\$2.99) per share.
• Investment Holdings: The Trust’s primary holding continues to be European Union Allowances (EUAs), with a fair value of \$1,605,267 as of February 28, 2026, down from \$1,900,519 at the beginning of the quarter. Short-term investments were \$16,816, down from \$20,497.
• Unrealized Losses: Unrealized losses on investments in EUAs amounted to (\$295,252) for the quarter, driving the negative performance.
• Expense Ratio: The Trust reported an annualized expense ratio of 0.79% for the period, and an investment income (loss) ratio of 0.76% (not annualized).
• Accrued Liabilities: As of February 28, 2026, the Trust had an accrued payable to the Sponsor of \$1,053.

Important Updates and Potential Price-Sensitive Information

• Significant Decline in NAV: The sharp decrease in NAV per share and the fair value of EUAs held by the Trust is a critical development for shareholders. This decline is primarily due to unrealized losses on the Trust’s core asset, EUAs, reflecting adverse market conditions. This could impact investor sentiment and share price performance.
• No Share Issuance or Redemption Activity: The absence of new share creation or redemption may signal limited primary market activity and could affect liquidity and secondary market pricing.
• Concentration Risk: The Trust’s sole business activity is investment in EUAs, exposing shareholders to concentration risk. There is no diversification, and the price of EUAs is influenced by numerous external factors, including political, economic, regulatory, and market dynamics. This risk profile should be considered by investors, as it may cause the Trust’s share price to fluctuate substantially and could lead to further losses or gains.
• Emerging Growth Company Status: The Trust is an emerging growth company and a smaller reporting company, which may mean less stringent reporting requirements but also potentially higher risk and volatility.
• Internal Controls: The Trust’s officers have certified the effectiveness of disclosure controls and procedures as of the end of the quarter, and there have been no material changes in internal controls over financial reporting during the period.
• No Legal Proceedings or Defaults: The Trust reported no legal proceedings, defaults upon senior securities, or mine safety disclosures for the period.
• Subsequent Events: Management evaluated events up to the date of the report and found no items requiring adjustment or additional disclosure.

Market and Risk Considerations

• Volatility of EUAs: The value of the Trust is directly linked to the market price of EUAs, which is subject to volatility from a variety of factors, including regulatory changes, supply and demand dynamics, and broader economic or geopolitical events.
• Speculative Nature: Given the lack of diversification and the highly specialized nature of the Trust’s holdings, an investment in the Trust may be considered speculative. Investors should closely review the Trust’s objective, strategy, and risk disclosures.
• Expense Impact: The Trust’s operating expenses, though moderate, further reduce returns in periods of negative performance.

Summary Table: Key Financial Metrics

Conclusion

The latest quarterly results for COtwo Advisors Physical European Carbon Allowance Trust reveal a challenging period, with a significant drop in NAV and fair value of holdings. Investors should consider the Trust’s concentration risk, exposure to volatile EUA markets, and the absence of capital inflows or outflows during the quarter. While internal controls remain robust and there are no ongoing legal or regulatory concerns, the Trust’s performance is highly sensitive to the underlying EUA market, which could drive further volatility in share price.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with a financial advisor before making any investment decisions. The Trust’s performance is subject to risks that may result in losses, and past performance is not indicative of future results.

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