The growing complexity of the financial instruments exploiting the burgeoning global carbon market was underlined yesterday as investment bank UBS launched the first derivatives index designed to track the greenhouse effect.
The company said investors would be able to bet on the performance of the new UBS Greenhouse Index – which will climb as the price of carbon credits and global temperatures rise – in much the same way as they can buy exposure to, or short sell against, conventional indices such as FTSE or Dow Jones stock market indices.
The index will be based on a mix of UBS's existing global warming index, which uses weather derivative contracts traded on the Chicago Mercantile Exchange, and the price of carbon credits in the EU emissions trading scheme and the UN's clean development mechanism.
UBS said the goal of the index was to provide a simpler way of investing in a previously complicated area via a straightforward index.
"The carbon market is segmented and complex," said Llija Murisic, executive director of hybrid derivatives trading at UBS. "There are different types of markets traded on different exchanges and we have blended them together in a simple way."
The company said the index will go live on 23 January.
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