Global warming index

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Investment bank UBS is trying to change weather investing by launching the first Global Warming Index (GWI). The first Global Warming index allows businesses most affected by the uncertainty of climate change – from ice-cream salesmen to makers of winter coats – to hedge their profits against it in a simple and transparent fashion . Retail and institutional investors will also be able to buy exposure to, or short sell, the index in much the same way they would with the FTSE or Dow Jones stock indices. If temperatures rise, so will the value of the index. The UBS index will initially be based on 15 US cities, including New York, Chicago, Atlanta and Las Vegas, because these are the ones most actively traded on the CME. However, as the market continued to grow, cities in other regions such as London, Tokyo and Paris were likely to be added.

UBS hopes the index will turn the complex business of investing in the world’s weather into a popular asset class, one that is entirely uncorrelated with returns in other assets such as stocks or bonds [1].

Methodology[edit]

The UBS-GWI is initially composed of weather monthly futures contracts (HDD, CDD) of 15 U.S cities, which are traded on the Chicago Mercantile Exchange (CME) and grouped in four U.S. regions:

  • Northeast (New York, Boston, Cincinnati, Philadelphia)
  • Midwest (Chicago, Des Moines, Kansas City, Minneapolis)
  • West (Las Vegas, Portland, Sacramento, Tucson)
  • South (Atlanta, Dallas, Houston). [2].

References[edit]

Resources[edit]

UBS Greenhouse Index