Bache Commodities Group creates environmentally focused Green Index

By Devika Patel

Knoxville, Tenn., June 30 - Bache Commodities Group said it has launched an index designed to offer investors a tool to invest in commodities with an environmental focus.

The BCGI, or Green Index, is made up of two components: the Bache Biofuel Composite, at 60%, and Bache Clear Air Composite, at 40%.

The Bache Biofuel Composite includes agricultural commodities, such as corn and sugar used for ethanol production, along with oilseeds used for biodiesel production.

Sixty-five percent of the Bache Biofuels Composite is allocated to products used in ethanol production and 35% is allocated 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 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.

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.

"Bache's Green Index will allow investors to participate in the markets for these commodities, which are of growing importance in the global economy," Bache Commodities Group's senior vice president Stephen Ilnitzki said in a press release.

"Building on Bache's strength in commodity markets, the Bache Commodity Green Index focuses on commodities needed in the production of sustainable energy and the reduction of carbon emissions.

"Compared with other green indices, only the Bache Commodity Green Index holds a cross section of commodities from multiple market sectors and employs the unique dynamic asset allocation trading strategy used on the Bache Commodities Index."

"In light of the significant investments being made in green technology and a stronger regulatory environment that will require companies to participate in cap and trade schemes around the world, we expect this market will grow rapidly," Ilnitzki added.

"Following our initial focus on European markets, we expect to see growing interest in the Index in the U.S. and Asia as well as other international markets. As the demand and use of green commodities change, the index components will continue to evolve to reflect these changes."

With offices in New York and London, Bache is the commodities and financial derivatives business of Prudential Financial, Inc.

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