Bache Commodities Group launched the Bache Commodity Green IndexSM (BCGISM) to offer investors a tool to invest in commodities with an environmental focus.
Bache Commodities Group is the commodities and financial derivatives business of Prudential Financial, Inc. (NYSE: PRU).
The BCGI comprises two components–the Bache Biofuel Composite and Bache Clear Air Composite. The Bache Biofuel Composite includes agricultural commodities such as corn and sugar used for ethanol production, along with oilseeds used for biodiesel production. The Bache Biofuels Composite is allocated 65% to products used in ethanol production and 35% to oilseeds. The constituents and weights in the Bache Biofuels Composite will evolve to reflect changes in the mix of commodities used in renewable fuels.
The Bache Clean Air Composite comprises commodities directly related to reducing the effects of climate change. These include carbon emission credits and certain metals that are critical components in products such as catalytic converters that reduce emissions of pollutants and greenhouse gases. The Bache Clean Air Composite is currently weighted 70% in carbon credits and 30% in greenhouse metals. These weights are based on estimates of the relative liquidity of these components. Over time, the Bache Clean Air Composite is likely to add more commodities that play a role in reducing and controlling emissions.
The BCGI has an initial allocation of 60% to the Bache Biofuels Composite and 40% in the Bache Clean Air Composite. Biofuels are given a larger initial weight in the BCGI–because biofuel markets are currently larger and more developed. As more countries adopt carbon emissions caps, the BCGI may change its weighting to reflect the increased focus on carbon and pollution control markets.
“The Bache Commodity Green Index focuses on commodities needed in
the production of sustainable energy and the reduction of carbon
emissions,” Stephen Ilnitzki, senior vice president of Bache
Commodities Group, said.
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