By Simon Jessop

LONDON (Reuters), TP ICAP, the largest international inter-dealer broker said Wednesday that it launched a weather-backed index which would enable financial risks related to climate change to trade for the first-time.

Although bankers and insurers already monitor specific weather conditions, such as rain near coffee plants or hurricane risk in the Gulf of Mexico Gulf, TP ICAP stated that it believes the index will be the first one to measure climate change worldwide.

Scientists have been keeping an eye on data for a long time. However, an index gives the market the ability to view the temperature and create financial products that hedge against the risk.

Speedwell and ICAP launched the ICAP Speedwell Climate Index. The index was based upon data from fifty independent weather stations worldwide, Speedwell said.

TP ICAP used a 20-year-old dataset and will keep it updated every day. It said that it expects a futures curve that would enable counterparties to set up financial structures that have different payoffs for specific times.

Nicholas Ernst (Managing Director Weather Markets, TP ICAP) stated, “Many businesses have significant and often unquantified exposure weather and climate risk.”

Ernst released a statement saying that “the introduction of this index has the potential to dramatically change the way people calculate the financial effect of global climate changes, providing detailed data to quantify future temperature rises for the first-time.”

The index’s launch is ahead of next round of international climate talks, which will begin Oct. 31, in Glasgow. There governments are being asked to increase efforts to lower planet-warming emissions.