BlackRock is upgrading the Aladdin risk management system to calculate how much global warming its investments are causing, a function that will also be available to external fund manager clients controlling tens of trillions of dollars of assets.

The world’s largest fund manager, and rival firms that use Aladdin, will be able to see how much warming each equity or bond in their portfolios is on track to produce. They will also be able to aggregate the ratings of their holdings to create a temperature score, expressed in degrees Celsius, for their portfolios.

The score shows whether the funds are on track to limit global warming to “well below” 2°C—the goal of the Paris Agreement—or whether they will help push the planet’s temperature to levels that would trigger fatal heatwaves, ever more extreme weather and hasten the mass extinction of plant and animal species.

“We are developing the ability to show the implied temperature rise of the investments and therefore, when you aggregate it, to the implied temperature rise of the portfolio,” Antonio Silva, BlackRock’s head of analytics and modeling, said at a Risk.net conference on September 22.

Allowing asset managers to see how much each security contributes to climate change also lets them spot losers and pick winners from the transition to a low-carbon global economy.

“What we’re trying to do at BlackRock is, as these big economic changes take hold, we’re trying to give investors the tools they need to take part, understand the transition and gain in this historic investment opportunity,” Chris Weber told the same panel in his first public appearance as BlackRock’s new head of climate and sustainability research.

Weber joined BlackRock in May from Science-Based Targets Network, an organization that sets targets for reversing nature loss that are critical for slowing global warming. He is spearheading BlackRock’s efforts to radically improve its ability to quantify its investments’ contribution to climate change.

Few of the world’s biggest asset managers have calculated how much warming their portfolios produce. In February, it was reported that BlackRock was shopping for a methodology to use on its equity and bond funds.

BlackRock will publish its latest Task force on Climate-related Financial Disclosures report in December, a spokesman said. TCFD reports are the logical place for an asset manager to reveal its carbon emissions and aggregate contribution to global warming. BlackRock has yet to publish an implied temperature rise for its funds.

We’re trying to give investors the tools they need to take part, understand the transition and gain in this historic investment opportunity

Chris Weber, BlackRock

The Financial Stability Board formed the TCFD to improve firms’ climate disclosures, including their greenhouse gas emissions, which need to hit net-zero by 2050 if the world is to limit global warming to 1.5°C. The body offers a standardised way for companies to voluntarily disclose their own emissions and those from their investments, which are known as Scope 3 emissions. These would account for the majority of emissions related to a firm such as BlackRock, which manages $9.5 trillion.

Only a handful of companies have devised methodologies for an implied temperature rating. They include index providers MSCI and S&P Global, and non-governmental organizations such as the Science-Based Targets Initiative and the Transition Pathway Initiative.

BlackRock bought a climate change scenario model from Baringa—another methodology provider—earlier this year. Baringa devised its methodology in a two-and-a-half-year partnership with Legal & General. The insurer has since used the model to calculate the implied temperature ratings for £36 billion ($49.1 billion) of stocks and bonds.

L&G belongs to a select group of 18 institutional investors—mostly European insurance companies—that disclosed temperature ratings for their portfolios last year.

Aladdin is used by more than 200 institutions, according to its website, including BlackRock. Its clients include rival asset managers as well as insurers, pensions, corporations, banks and official institutions. The implied temperature rise scores will be available through Aladdin Climate, part of the wider Aladdin system.

BlackRock was slow to embrace climate disclosures—while it was a founding signatory of the TCFD, it only produced its first written report in 2020. The company does publish the weighted-average carbon intensity for $2 trillion of its holdings in exchange-traded funds and mutual funds, a fifth of its investments.

In January this year, chief executive Larry Fink set out a list of goals for the asset manager. BlackRock will publish emissions data on its public equity and bond funds where the data is available. And it will disclose the proportion of its assets under management that align with net-zero goals in 2030 and 2050.

Through its Aladdin climate platform, it pledged to track client investment portfolios towards net-zero goals. It also said it would launch investment products with temperature-alignment goals.