BST Awards 2021: Best buy-side risk management initiative over the last 12 months—BlackRock

OVERVIEW

Aladdin Climate is an application designed to analyze climate risk and opportunities at the security level, and measure the impact of policy changes, technology and energy supply on investments. 

Typical user-firms: Aladdin Climate is built for asset managers and asset owners looking to integrate climate analytics into investment and risk management processes.

Aladdin employs more than 4,600 technologists. The Aladdin Sustainability team consists of over 60 people. The 2020 financials for Aladdin including Climate were $1.1 billion revenue, 17% revenue growth, and 12% annual contract value growth. Fifteen client accounts have gone live on Aladdin Climate since the December 2020 launch.

WHAT’S NEW

Aladdin Climate launched in December 2020. Key enhancements since then include the introduction of asset type-specific climate-adjusted values and scores, which assess the impacts of physical and transition risks on securities. These outputs quantify climate risk in financial terms for portfolio managers, combining climate science, economic impact, asset data and financial models. New front-end components were built to integrate climate analytics into the Aladdin platform, allowing users to stress-test investments to estimate how they might perform in different climate scenarios like those outlined in the Paris Agreement.

BlackRock unveiled Aladdin Sustainability Lab in early 2021 to work with clients and partners to develop and deliver capabilities to quantify the impact of climate change on financial assets. The Lab hosts the research and modeling, analytics, product management, design, and engineering teams involved in developing Aladdin Climate. The firm also acquired transition risk measurement models through a partnership with Baringa Partners. BlackRock owns and integrates Baringa’s Climate Change Scenario Model within Aladdin Climate. 

WHAT’S TO COME

BlackRock will release new transition risk and temperature alignment models over the next 12 months. These capabilities, a result of BlackRock’s partnership with Baringa Partners, will complement the current Aladdin Climate physical risk models with a picture of climate risks and opportunities. The firm is also developing custom scenario capabilities to allow Aladdin Climate users to input views on society’s transition to a lower-carbon economy and assess the impacts on securities and portfolios. These outputs can be compared with standard scenario outputs in Aladdin Climate.

WHY THEY WON

BlackRock wins this category on the back of its work around a topic at the forefront of most investors’ minds right now: environmental issues and climate risk. In December 2020, the firm launched Aladdin Climate to bridge the impact climate risk has on investments. Using research, tools, analytics, and partnerships, BlackRock is helping investors understand the risks and opportunities that climate issues have on their investments. BlackRock aims to release new transition risk and temperature alignment models within the next year.