TP ICAP Group and Speedwell have launched the ICAP-Speedwell Climate Index.
The index aims to use global weather data to track climate change thereby allowing financial risk related to the rate of climate change to be traded.
Developed 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. Designed to meet the needs of financial risk transfer, it provides the underlying data necessary for market participants to transact, tailored structures relating to climate change using over-the-counter futures and options. These transactions will enable the index to provide a correlation between the global temperature change and financial risk appetite.
Nicholas Ernst, Managing Director, Weather Markets, TP ICAP says: “At TP ICAP, we understand that many companies have significant and sometimes unquantified exposure to weather and climate risk. The first step in managing these exposures is to identify an index which can be used to quantify and then hedge these risks. This innovation is key in being able to develop hedging strategies relating to climate change”.
“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. At TP ICAP, we apply our unique capabilities to provide clients with the tools they need to meet their sustainability objectives. We aim to be the leading broker for the transition to an inclusive and low-carbon economy; the launch of this Index marks a step forward in this ambition.”