TP ICAP launches index to trade pace of climate change By Reuters

By Simon Jessop

LONDON (Reuters) – TP ICAP (LON:), the world’s largest inter-dealer dealer, stated on Wednesday it had launched a climate data-backed index that might enable monetary dangers tied to the tempo of local weather change to be traded for the primary time.

Insurers and bankers already monitor particular, native climate occasions equivalent to rainfall close to espresso plantations, or hurricane dangers within the Gulf of Mexico, however TP ICAP stated it believed the index could be the primary to trace local weather change globally.

Whereas scientists have lengthy saved a watch on the info, the creation of an index permits the market to kind a view on the speed of temperature change and construct monetary merchandise to hedge the dangers.

Launched along with environmental information firm Speedwell, the ICAP-Speedwell Local weather Index could be based mostly on information collected from 50 impartial climate stations globally, it stated.

Utilizing a dataset that’s already 20 years previous and which will probably be up to date day by day, TP ICAP stated it anticipated a futures curve to be created that might enable counterparties to create monetary buildings with diversified payoffs over particular intervals of time.

“Many firms have vital and typically unquantified publicity to climate and local weather threat,” stated Nicholas Ernst, managing director, climate markets, at TP ICAP.

“The introduction of the index has the power to dramatically change how individuals calculate the monetary impression of world local weather change, offering complete information to quantify the impression of future temperature adjustments for the primary time,” Ernst stated in a press release.

The launch of the index comes forward of the following spherical of world local weather talks in Glasgow beginning Oct. 31, the place governments are being urged to speed up efforts to scale back planet-warming greenhouse gasoline emissions.