How weather derivatives are important in Green financial products?

Companies with activities who are highly dependent on weather-related conditions are created by a range of derivative products to cope with revenues variability. It is offered by Goldman Sachs. The financial instruments are mainly used for risk reduction in association with unpredictability or uncertainty of weather conditions.

One of the similar instruments is wind power derivatives where wind power producers enable to hedge against unfavorable wind conditions. Wind producer gets the payments in case of revenues to fall below a predetermined level or a derivative provider if the performance is exceeding expectations. Some active players in the markets are ABN AMRO, Rabobank and Goldman Sachs.

“In formal ways, Financial instruments are defined as contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity.”

Source: — Jeffrey D. Sachs et al.

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