UBS Investment Bank today announced the launch of the UBS greenhouse index (UBS-GHI).
The UBS-GHI is the first tradable investment benchmark tracking the Greenhouse Effect. It comprises a combination of weather and emissions asset classes and, as such, is the first integrated index that allows market participants to obtain an exposure to greenhouse gas emissions and their impact on the weather, recognized as the Greenhouse Effect.
The UBS-GHI is constructed using liquid, actively traded futures contracts. Weather exposure is derived from Heating Degree Day and Cooling Degree Day futures contracts traded on the Chicago Mercantile Exchange. Emissions exposure is provided by carbon credits associated with the EU Emission Trading Scheme traded on the European Climate Exchange and the Kyoto Clean Development Mechanism traded on Nord Pool.
The UBS-GHI governance committee will meet annually to determine the composition and the weighting of the UBS-GHI and its family of sub-indices. This currently comprises three sub-indices tracking the performance of a weighted average of EU Allowances and Certified Emission Reductions futures, reflecting the obligation of CO2 emitters to comply with their annual emission targets until 2012.
Ilija Murisic, executive director, hybrid derivatives trading at UBS, said: “For some time, scientists have recognized that there is a fundamental link between climatic changes and CO2. Companies that have exposure to emission markets are also potentially exposed to significant weather risk. Despite the explosive growth of their market, weather derivatives and carbon emission futures remain predominantly a hedging instrument for professionals and, because of the complexities of the weather markets and regulation intricacies of the Kyoto Protocol, are largely inaccessible to the broad investor community.”
In April 2007, UBS launched the UBS global warming index, a tradable benchmark for global investments in the weather derivative market.
“Following the success of the UBS global warming index, UBS’s clients have shown an increasing interest in environmental investments which are innovative and alternative, yet simple to access. We expect the UBS-GHI to be as successful a benchmark for the Greenhouse Effect as the UBS global warming index is for weather,” said Andy Felce, managing director, co-head of structured products at UBS.
UBS Investment Bank launches greenhouse index
Combination of weather and emissions asset classes make up new benchmark
- By: IE Staff
- January 10, 2008 January 10, 2008
- 14:10