Global markets infrastructure and data solutions provider TP ICAP Group has partnered with Speedwell, an environmental risk-management solution provider, to launch the ICAP-Speedwell Climate Index.
The index uses global weather data to track climate change thereby allowing financial risk related to the rate of climate change to be traded.
Its launch will provide a reliable data source from which market participants can make better informed investment and hedging decisions, which should in turn enable the market to better manage financial 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.
“At TP ICAP, we understand that many companies have significant and sometimes unquantified exposure to weather and climate risk,” said Nicholas Ernst, Managing Director for Weather Markets at TP ICAP.
“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,” he continued.
“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 lowcarbon 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.”
David Whitehead, Co-CEO at Speedwell Weather, also commented: “Speedwell has been involved in providing services to the environmental risk-transfer markets for over 20 years and so is delighted to now offer with TP ICAP a world-wide index that quantifies the direct impact of climate change on global temperatures.”
“As with all Speedwell products the Index has been designed specifically for financial transactions. Historical data will be made available for pricing and structuring; forward curves, market prices, and index forecasts will be available for managing risk, and certified Settlement Data for final settlement of open contracts.”
