TP Icap is teaming up with environmental risk management outfit Speedwell to launch an index that uses global weather data to track climate change thereby allowing financial risk related to the rate of change to be traded.
The partners say that the Climate Index will provide market participants with reliable data that help them make better informed investment and hedging decision and manage the risks associated with climate change.
Developed and maintained by Speedwell, the index takes a representation of the average global temperature based on data taken from 50 independent, national weather stations from around the world.
Nicholas Ernst, MD, weather markets, TP Icap, says: "The introduction of the Index has the ability to dramatically change how people calculate the financial impact of global climate change, providing comprehensive data to quantify the impact of future temperature changes for the first time.
"Climate change is a significant financial risk and quoting markets in this way is an important step in not only measuring that risk, but also understanding the cost of climate change as we move towards a low-carbon economy."