Significance Organisms adjust their lipid compositions to environmental conditions like temperature. Some adaptations involve changes in ratios between unique lipids, which can still be determined after millions of years. Analyzing such lipid ratios in ancient sediments can be used for climate reconstruction. One example is the Long chain Diol Index (LDI). The lipids, produced by unknown biological sources, occur ubiquitously in marine sediments, and the LDI correlates with temperature. However, LDI records often differ from other temperature reconstructions. We now show that a clade of eustigmatophyte algae produces these lipids, providing information on their evolutionary history. We further demonstrate that the LDI registers temperatures of the warmest months instead of annual mean temperatures, which is valuable information for climate research.