FX-Week UBS launches Greenhouse Index January ‘4th 2008 LONDON - UBS is set to launch UBS Greenhouse Index (UBS-GHI), a tradable investment benchmark tracking a combination of weather futures and greenhouse gas emissions credits, on January 23. “We came up with the idea for this index.after clients showed an interest in the connection between carbon emissions and climate change, so we created an index that combined assets linked to these,” said Ilia Murisic, executive director, hybrid derivatives trading, at UBS in London. The UBS-GHI is constructed using liquid, actively traded futures contracts. Weather exposure is derived from Heating Degree Day and Cooling Degree. Day futures contracts traded on the Chicago Mercantile Exchange (CME). Emissions exposure is provided by futures on carbon credits associated with the EU Emission Trading Scheme traded on the European Climate Exchange and the Kyoto Clean Development Mechanism traded on Nard Pool. When the index launches, itwill be weighted 50% weather and 50% carbon; of which 40% Is EU Allowances (EUA) credits and 10% Nord Pool Certified Emission Reductions (CER) credits. The governance committee for the index will meet annually to review the composition and weightings of the UBS-GHI and its family of sub-indexes, At the moment there are three sub-indexes tracking the performance of a weighted average of EUA and CER futures. The carbon futures contracts used in the indexes cover the entire Phase II Kyoto commitment period, from January 1, 2008 until the end of 2012, “We ensured the UBS-GHI and its sub-indexes can adapt to changes in the carbon trading markets. They are set up to continue past Phase ll and are able to include any other types of emissions credits, such as those from another national trading scheme outside the EU, if their markets are liquid enough,” said Murisic. The UBS-GH is the latest developmentin a trend of investment banks creating indexes with a climate change theme. Barclays Capital also has an index tracking carbon credits, called the Global Carbon Index, launched in December 2007. In May last year, UBS launched its Global Warming Index (UBS-GW)), which tracks temperature-linked futures contracts on 15 US cities traded on the Chicago Mercantile Exchange. Ryan Davidson