UBS AG is teaming up with Diapason Commodities Management S.A to create an index for biological fuels.

The UBS Diapason Global Biofuel Index,launched today, is the first commodity-based index for biofuels, will cover a range of commodities used in the production of ethanol and biodiesel. The index will be published in U.S. dollars, euros, Swiss francs and Japanese yen.

The index is composed of various commodity futures. It is weighted to reflect the importance of each individual commodity used in the production of ethanol and biodiesel as well as the liquidity of the underlying futures.

“This innovative index adds a new dimension to the liquid commodities indices and can serve as a suitable basis for a variety of structured financial products,” UBS said. “Its launch means that investors will, for the very first time, have access to an efficient and liquid investment instrument that gives them exposure to the market performance of alternative fuels.”

The index is weighted to reflect the importance of different feedstocks used in the production of ethanol and biodiesel as well as the liquidity of the underlying futures contracts. It is composed of futures contracts on 10 physical commodities related to the global production of ethanol and biodiesel. At the launch, the two biofuel groups have respective weights of 83.01% for ethanol and 16.99% for biodiesel.

The index composition and weightings of all underlying commodities are, for ethanol: corn (30.00%), sugar #11 (29.26%), sugar #5 (3.71%), wheat (13.81%), barley (1.28%), rice (2.21%), and lumber (2.74%); and, for biodiesel: rapeseed (7.17%), canola (3.03%), and soybean oil (6.80%).

To help ensure a high level of diversification, the index relies on the rule that no single component may constitute more than 30% of the index as of the semiannual re-weightings in May and November.