Goldman Sachs to Offer Weather-Related Hedges

Goldman Sachs will become the first Wall Street firm to offer contracts intended to protect companies against financial losses caused by unexpected changes in the weather.

Utilities such as Peoples Energy Corp. (PGL) in Chicago already use the $2.5-billion weather derivatives market, after deregulation left them vulnerable to weather-related risks. The contracts also might be attractive to clothing manufacturers and other businesses whose profits are dependent on the weather.

“Our customers are becoming more sophisticated in understanding the risks and how this weather product is useful,” said Greg Agran, managing director of Goldman’s fixed income, currencies and commodities division.

Goldman will begin selling the weather-related hedges in the next two months, focusing on North American clients, Agran said.