BlackRock and Baringa Partners announced their entry into a definitive agreement for BlackRock to acquire and integrate Baringa’s industry-leading Climate Change Scenario Model into BlackRock’s Aladdin Climate technology. The new long-term partnership is a step towards setting a standard for modelling the impacts of climate change and the transition to a low carbon economy on financial assets for investors, banks and other clients.
Baringa and BlackRock will bring together their expertise to develop climate risk models underpinning Aladdin Climate, as well as innovating other climate analytics solutions. Through the partnership, Baringa will use the core Aladdin Climate capabilities as part of its growing global consulting work in advising financial services, governments, regulatory bodies, and clients across all sectors on climate risk and developing net zero strategies.
While the reallocation of capital to sustainable investment strategies continues – with over $2.3 trillion of assets under management in sustainability funds globally as of the first quarter of 2021 – understanding the potential impacts of climate change and the transition to a low carbon economy on their portfolios remains a complex challenge for investors. With the number of governments and companies making commitments to achieve net-zero continuing to grow alongside increased regulatory requirements for climate-related disclosures, companies and investors alike are seeking solutions to help assess climate risk.
Sudhir Nair, global head of the Aladdin Business at BlackRock, said in a statement: “Investors and companies are increasingly recognising that climate risk presents investment risk. Through this partnership with Baringa, we are raising the industry bar for climate analytics and risk management tools, so clients can build and customize more sustainable portfolios. The integration of Baringa’s models and the ongoing collaboration between our firms will enhance Aladdin Climate’s capabilities, helping our clients understand transition risks in more sectors and regions than ever before.”
Colin Preston, global head of Climate Solutions at Baringa, said in a statement: “The integration of Baringa’s Climate Change Scenario Model into BlackRock’s Aladdin platform will inform the reallocation of capital across the global economy, accelerating the transition to net zero.”
Baringa developed its climate scenario modelling capabilities on 20 years of experience and is informing clients with assets totalling more than $15 trillion. The solutions support net zero commitments, TCFD (Task Force on Climate-related Financial Disclosures) reporting, regulatory reporting, investment and capital allocation strategies, as well as developing climate risk management capabilities.
BlackRock began developing Aladdin Climate to fill a void in climate risk analytics by creating technology to help clients better understand and mitigate the financial impacts associated with climate change on their portfolios. Aladdin Climate is offered through the Aladdin platform and is used by BlackRock’s Financial Markets Advisory (FMA) group to deliver sustainability advisory services to clients. It measures both the impacts of physical risks, like extreme weather events, and transition risks – such as policy changes, new technology, and energy supply – at the financial instrument and portfolio levels.