El Niño is back, and T. Rowe Price is not winging it. The firm has started using tailor-made models to guide decisions across its $165 billion emerging-market debt and equity portfolio. Preparations began when the previous El Niño was forming, said Aaron Gifford, the firm's research deputy overseeing global sovereigns, and he added that operations ramped up "the minute I saw news come up of another El Niño." As the Baltimore-based analyst put it, "We started realizing we could really benefit from much more rigor on the academic side."
The climate pattern, tied to warmer waters along the equatorial Pacific, is already reshuffling weather around the world. Since May, harvests of maize and beans in Honduras and El Salvador have been hit, while uneven rainfall in Asia is weighing on rice and palm oil. Analysts at Goldman Sachs Group Inc. are among those flagging the potential knock-on effects for global food prices.
Two years back, a team at Johns Hopkins University started developing tools for climate and weather analysis, which T. Rowe now overlays on its internal econometric framework. The backbone is a global vector auto-regressive model, or GVAR, a macro method for tracking how a shock in one place can propagate elsewhere. Blended with readings such as sea surface temperatures, the framework generates scenarios that feed directly into investment views. T. Rowe also taps JHU's country-focused research analysts.
At Johns Hopkins University, Ben Zaitchik, a professor in Earth and planetary sciences, collaborates with Takeru Igusa, a professor of civil and systems engineering, to advance these tools as they continue to evolve. Their work estimates El Niño's influence on temperature, precipitation, hydrology, and agriculture across 12 emerging markets in Latin America and Africa, plus south and Southeast Asia. This work forms one pillar of a four-part climate-analytics suite that incorporates foundation models from the National Aeronautics and Space Administration as well as econometric research.
The tools are available to T. Rowe's bond teams and to its equity stock pickers alike. A related chart notes El Niño strength probabilities "as of August 2026," calculated for overlapping three month periods and sourced to the US National Oceanic and Atmospheric Administration's Climate Prediction Center.
The practical output shows up in position sizing and policy analysis. "The size of the positions that we're taking is more moderate, just because of this super El Niño that we're expecting later in the year," Gifford said. He pointed to Colombia as a live case study.
The country is "highly impacted by El Niño drought conditions" given its reliance on hydroelectric power and agriculture, which filter through to inflation. Yet Bogota's central bank has "stopped short of the amount of interest rate hikes that we anticipated, or at least our analysts anticipated," he said. "And now we get to ask: Are they making a policy mistake?"
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T. Rowe is also preparing to use the models to shape climate resilience terms in loans to small island nations, including clauses that allow debt-service freezes after a natural disaster. According to Samy Muaddi, who leads emerging-markets within T. Rowe's fixed-income group, "We're going to be well positioned to be ahead of the market in understanding the option value embedded in climate-resilient debt clauses by having this type of partnership and research."
Other investors are building their own playbooks. Man Group Plc is working through possible contagion channels from El Niño. In London's Mayfair district, former Balyasny Asset Management trader Zulfiqar Ali says he is preparing for an "unusually alpha-rich environment" in Europe's power markets.
Based in Wilmington, Delaware, Moreton Capital Partners aims to raise $500 million to trade around anticipated food-price dislocations. And asset managers are rethinking how to measure company preparedness.
"The single biggest gap in all the models is that they measure the exposure, the hazards and how companies are exposed, but not how companies are managing, reducing and mitigating those risks," said Robeco climate and biodiversity strategist Lucian Peppelenbos. Robeco plans by the end of 2026 to roll out internal adaptation scores for MSCI ACWI Index members, ranking companies against industry peers on how they identify and adapt to physical climate risks to better inform equity analysts.
T. Rowe Price, which oversees $1.9 trillion in total, is trying to translate a fast changing climate signal into country-by-country portfolio moves. In the most exposed emerging markets, the focus is on deficits, power generation, farm output, and what policymakers do next. As Muaddi put it, "Anytime you have a country that has an existing fiscal or external vulnerability intersecting with underpriced market risk for tail events - underpriced tail risk - that's an intersection on the Venn diagram that we're trying to be very attuned to." And remember the scope here: in Zaitchik's words, "El Niño is the largest driver of inter-annual climate variability on Earth." That is a lot of weather to fit into a spreadsheet, which is why investors are increasingly pairing climate science with macro models and then dialing risk up or down in real time.
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