(Bloomberg) -- You’ve heard of ROE, EPS and EBIDTA. But what about ITR?

It’s one of the latest additions to the alphabet soup of modern finance, standing for implied temperature rise. It denotes an investment portfolio’s alignment with the 2015 Paris Agreement’s goal of limiting global warming to well below 2C of pre-industrial levels, and ideally below 1.5C (a goal that is almost out of reach).

Many of the giants of investment management, from BlackRock Inc. and State Street Global Advisors to the asset management arm of JPMorgan Chase & Co., now publish temperature scores for some of their funds—and what they’re reporting paints an overwhelmingly pessimistic outlook for global warming.

Take the Invesco High Yield Fund UK for example. The £331 million ($401 million) fund invests in bonds from the likes of Barclays Plc and Vodafone Group Plc and expects an ITR of 3.7C. And then there’s a recently-liquidated high yield fund from Fidelity International that in June recorded an ITR range of 3.2C to 6C.

An implied temperature rise is typically calculated based on projected future greenhouse gas emissions. It estimates the increase in global temperatures that would occur by 2100 if the whole economy were to overshoot its carbon budget to the same degree as a fund’s portfolio.

At 3C, scientists warn of mass extinctions of animal species, large parts of the planet becoming uninhabitable due to extreme heat, rising sea levels swallowing up coastal cities and lush rainforests turning into savannas.

Read More: The New Climate Anxiety for Fund Managers

Still, while few fund managers doubt the science of climate change, many question the accuracy and usefulness of ITRs.

Gabriel Wilson-Otto, head of sustainable investing strategy at Fidelity International, said ITRs should be considered alongside other climate indicators “given the level of assumptions and uncertainty that are inherent within the calculation.”

An Invesco Ltd. spokesperson said an ITR’s most effective application currently is as a precursor to more nuanced research, and the firm cautions against drawing definitive conclusions from an ITR in isolation. However, even though the methodologies and applications of ITR are evolving, its utility can’t be dismissed, the spokesperson said. Atlanta-based Invesco began publishing portfolio-level warming scores this year for some UK-based funds, in response to new climate disclosure regulations from the Financial Conduct Authority.

But some investors are less sanguine about the merits of ITRs. Baillie Gifford decided against providing such metrics for all of its portfolios. In a statement, the firm said “current methodologies don’t render them practicable for widespread use and potentially could lead to inaccurate or misleading disclosures, particularly when there are significant gaps in the underlying data.”

Aviva Investors said the methodologies are too complex and nascent to be relied on. In a statement, the asset manager said it isn’t “appropriate to publish this data, as it risks being potentially misleading and in any event would be heavily caveated.”

Invesco said the implied temperature rise for its high-yield fund was calculated using data from Planetrics, which covers 66% of the fund’s assets, excluding cash. The calculation considers each individual asset’s divergence from the expected decarbonization pathway of the sector and region in which it operates, and then is aggregated to a portfolio level based on a combination of median greenhouse gas intensity data for relevant sectors and asset weighting.

For all the complexity and criticism, ITR metrics have a key redeeming feature, according to Iancu Daramus, head of sustainability at Fulcrum Asset Management in London: They can’t easily be gamed to suggest improved carbon performance by fund managers.

“You can halve your portfolio’s emissions by kicking out just a few stocks, but you can’t halve your ITR that way,” Daramus explained. In other words, while a fund manager can drastically improve the carbon performance of a portfolio by simply divesting shares of the most carbon-intensive companies, an ITR can’t be cut so quickly since portfolio divestments have minimal impact on the warming trajectory of the real economy, he said.

And a warmer world portends not only more frequent and more extreme heat waves, floods and wildfires—but also a substantial hit to asset values.

“If aligning the global economy with the Paris Agreement is hard, there should be no shortcut for aligning portfolios,” Daramus said.

Sustainable finance in brief

Investors face a growing risk that the climate crisis will result in a sudden loss of value, according to Markus Müller, chief investment officer for ESG at Deutsche Bank. He says investors need to prepare themselves for the unanticipated consequences of “fat-tail” dangers associated with accelerating global warming. Though such events are deemed unlikely, their fallout can be catastrophic. “The temptation is to assume that the effects...will accumulate only gradually,” he said in a client note. “However, this isn’t guaranteed.”

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--With assistance from Zahra Hirji and Eric Roston.

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