Baringa sells Climate Change Scenario Model to BlackRock

24 June 2021 Consultancy.uk 3 min. read

Baringa Partners has agreed for BlackRock to acquire its Climate Change Scenario Model, which will be integrated into BlackRock’s Aladdin Climate technology. The combined solution is expected to significantly enhance BlackRock’s solution to help companies assess their climate impact.

The financial services industry is coming under increasing pressure to negate its climate impact in the coming decades, with over $300 trillion of infrastructure investment alone required by 2050. However, as well as representing a huge responsibility, this is a big commercial opportunity, as the value of assets held by financial institutions across a wide range of sectors changes rapidly.

At present, most financial institutions currently do not understand and cannot evidence the climate impact of their investments in this regard, or the climate-related risks of the assets that they hold. Baringa’s Climate Change Scenario Model looks to change that, and help firms recognise the potential opportunities and challenges in their portfolio. Built on 20 years of experience in advising governments, energy and financial services clients on the energy transition and climate change, the model is the only fully integrated transition and physical risk model of its kind that is fully configurable, allowing clients with assets totalling more than $15 trillion to do multiple bespoke scenarios.

Baringa sells Climate Change Scenario Model to BlackRock

The reallocation of capital to sustainable investment strategies is still growing, with over $2.3 trillion of assets under management in sustainability funds globally as of the first quarter of 2021, suggesting demand for the model will continue to spike in the years ahead. As this offering becomes increasingly attractive to the financial services world, multinational investment management corporation BlackRock has swooped to acquire Baringa’s Climate Change Scenario Model.

Colin Preston, Global Head of Climate Solutions at Baringa said, “Climate change is the number one challenge and opportunity of our generation. Having developed the leading Climate Change Scenario Model, we are excited to partner with BlackRock to accelerate the adoption of this solution by organisations across the globe.”

The new, long-term partnership is a significant milestone for both firms, as they collaborate to set the 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. The integration of Baringa’s Climate Change Scenario Model into BlackRock’s Aladdin platform will help inform the reallocation of capital via the latter’s clients across the global economy, possibly accelerating the transition to net zero in the process.

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.

Aladdin Climate is offered through the Aladdin platform and is used by BlackRock’s Financial Markets Advisory 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.

“Investors and companies are increasingly recognising that climate risk presents investment risk,” said Sudhir Nair, Global Head of the Aladdin Business at BlackRock. “Through this partnership with Baringa, we are raising the industry bar for climate analytics and risk management tools, so clients can build and customise more sustainable portfolios.”