Exploring a New Climate of Investing with Jeff Gitterman, CEO of Gitterman Asset Management
This transcript has been edited for clarity.
Dan Carreno: Thank you for tuning in to Rewilding Wall Street, where we provide insights and analysis into the ever-evolving world of sustainable investing. And I am Dan Carreno.
Brittany Damico: And I am Brittany Damico. And today we are joined by Jeff Gitterman, CEO of Gitterman Asset Management, a firm that functions as an Outsourced Chief Investment Officer and provides comprehensive portfolio solutions for wealth management firms who are seeking to build out their sustainable investment offerings. Jeff, thanks for joining us today. How are you doing?
Jeff Gitterman, Gitterman Asset Management: I'm great. Thanks for having me.
Brittany Damico: In this episode, we are breaching the topic of investment management and financial planning in the age of climate change. Jeff, over the years you've become a thought leader in the sustainable investing space. Can you tell us a bit about that journey and how you became so passionate about the intersection of climate change and capital markets?
Jeff Gitterman, Gitterman Asset Management: Around 2014, I was introduced to a group of people making a film called Planetary. In that film was an astronaut named Ron Garan, who had spent about six months on the International Space Station. He had flown in Iraq and was shot down behind enemy lines. Just a really interesting guy that I wound up becoming friendly with. And he spoke to me a lot about climate change. Bill McKibben, Paul Hawkin, Joanna Macy, and other knowledgeable people on climate change were also in the film, but listening to an astronaut was different. At the time, I had no foundation in climate change or thought much about it. Listening to him speak about what they could see from the International Space Station in terms of declining glaciers and other climate aspects made me incredibly curious. It didn't change my mind initially. It just made me curious to understand it. So, I went on a 10-year journey to wrap my head around climate change. Along the way, I found some great mentors and concluded that climate change would be the biggest impact to the capital markets and the world that we've ever endured as a civilization.
Brittany Damico: I have to say, having inspiration come from an astronaut is one of the more differentiated responses we've had on the podcast.
Dan Carreno: That’s a good point to pivot and talk a more specifically about your firm, Gitterman Asset Management. What problem is Gitterman Asset Management seeking to solve for the wealth management industry?
Jeff Gitterman, Gitterman Asset Management: That 10-year journey is what triggered our desire to embed climate risk into our portfolios. We met with reinsurers, asset managers, and climate scientists. Those were the three groups of people that I spent years with and where I built many great relationships. We heard the same thing from all three groups, that things were breaking down. And if you know anything about scientists, they are very siloed. Every scientist we spoke to, whether it was a glacial expert, an ocean temperature expert, or a soil expert, each one said the system is breaking out of the normal standard deviation of temperature ranges that we’ve become accustomed to. And Spencer Glennon, who has become my number one mentor in this space and was running quant research at Wellington, said that for 12,000 years we've had a stable climate, and it's allowed us to not think about climate in our business models because it's been a stable factor. When an architect designs a building, the architect doesn't have to think about climate because there are building codes to ensure the building is constructed within a range of variables that we've become accustomed to in the last 12,000 years. And this is not a political discussion. No matter what you believe about what's causing climate change, we are now breaking outside of those 12,000-year boundaries to the warmer side. And our buildings aren't built for that. Our roads aren't built for that. Our airplanes aren't built for that. Our cars aren't built for that. Our bodies aren't built for that. It's becoming evident across many different facets of business that it is a growing problem. And that's the challenge we wanted to overcome. It was not easy when we started out in 2015 because there wasn't a lot of data on physical climate risk. There was a lot of data on transition risk, what was going to happen in a world where we were transitioning away from fossil fuels, but there was very little data on the physical risks of climate change. That's what we were keyed in on. We also had a firm belief that politics would get in the way of addressing climate change. So, a transition economy would not occur as quickly as anyone was pricing in or trying to price in. And because of that, the physical risk side of climate change would accelerate faster than people were thinking back then. We were talking to reinsurance companies in 2018 who were saying they did not see any pathway to profitability on weather-related disaster claims. We were being told by people that know risk better than anyone else in the market, reinsurers, that they could no longer accurately price those risks in the marketplace. And what we know about markets is that they move very slowly and then all at once. We knew we would be early, but we knew we'd be right at some point. So, what we wanted to do is build a product that addressed the risks and the opportunities around a changing climate. We built a UMA because we wanted the end client to also be able to vote on things they might be concerned about. We thought there was a lot of risk inherent in what the SEC was going to do about naming functions. So, we took that out of the equation and left it in the hands of the end clients. In a UMA, the end clients own their own securities and own cost basis. You can take out sectors or specific stocks from a portfolio based on a client’s wishes. We designed it around core managers that were concerned about climate and who were taking it into consideration in their analysis of companies. That's how we addressed the risk side of climate change. And then, opportunistically, we started investing in things like water, sustainable infrastructure, and climate resiliency. All are themes that we unfortunately think are going to continue to grow in the marketplace. And the IRA bill is pushing a trillion dollars towards a lot of those sectors. That is the most money that a government has ever invested in an investment theme in the history of the world.
Dan Carreno: And from the perspective of a wealth manager, what benefits might they find in working with a firm that specializes in managing these risks?
Jeff Gitterman, Gitterman Asset Management: This is typically how we get an advisor as a client. They have one large client that gets the bug for climate or values investing. The advisor doesn’t want to lose a $5 million or $10 million client. They start hunting around for a solution because they don't have one. And you can't build a one-off solution compliantly. There's no way to do it, because you can't afford all the money and all the data needed for one account. The way we structure the UMA, the client pays all the fees. It costs the advisor nothing to use our service for that one at-risk client that you might have in your portfolio. There's no minimum relationship with us. We can be a plug and play solution at the last minute because there's a client that's at risk of exiting.
Brittany Damico: Perfect. I could ask many more questions, but we are coming up on time. So, Jeff, finally, if our listeners are curious to learn more, where should they go to learn about your firm?
Jeff Gitterman, Gitterman Asset Management: Yeah, they can go to www.gittermanasset.com. We have tons of information. We have a paper that we wrote with a bunch of large asset management firms in 2019 called The Great Repricing. It dives into the thesis around why we are building portfolios the way we are building them. We thought that the risks were going to start in 2030. The IPCC projected that 2050 would be the real onset of severe fiscal climate risk. However, those risks have all started to manifest in 2020, 30 years earlier than projected. And this is progressing geometrically. So, it might not be impacting you today, but unfortunately, you are going to see worse and worse impacts as the years go by. It's the reality that we weren't built for this. There's a strong reason why we were nomadic before 12,000 years ago. The climate was not stable before that. We're leaving a period of climate stability again.
Dan Carreno: Jeff, I really appreciate the insights and the perspective, and we will start wrapping it up there. But before we do, we'll take a few minutes to chat around the campfire. This is our usual segment where we go around the horn and briefly share something that we've come across recently in our lives that's been interesting, inspiring, or otherwise thought provoking. I'm feeling motivated today, so I'll go first. This evening I'll be toasting a drink to Voyager 1, which was the spacecraft that we launched in 1977 and was intended to do a fly-by of Jupiter and Saturn and collect data. Interestingly enough, that spacecraft continued to operate for almost 50 years, and it is now outside of our solar system. It's been sending data back to Earth this entire time. The articles that I've been reading about this say that the spacecraft has less computing power than your average car key fob. The fact that it's been going for this long is a miracle. It looks like this week; the systems are finally shutting down. So it's sad but also fun to think about how Voyager 1 will continue to travel through deep space for the next for the next 10,000 or 20,000 years. So, here's to you Voyager 1. Jeff, what do you have for us?
Jeff Gitterman, Gitterman Asset Management: I want to see Dune 2 this weekend, which looks like an incredible film. There's an entire section in the book about hydrological cycles and how to deal with water shortages, which is fascinating, and unfortunately, it didn't make it into the movie. I find it very interesting that lots of these big action movies, like Marvel’s End Game, focus on the fact that we have burned up too many resources. It's in the zeitgeist. We know that climate change is an issue, and it's bleeding into everything we do. And I think Dune is a good example of where we don't want to end up; a planet that's all desert with giant sand worms roaming around. So, let's all do what we can now.
Brittany Damico: Having grown up in Palm Springs, I do not want to see the entire world turn into a desert. Leading into my theme, I would like to highlight and celebrate a friend of mine, Gemma Barry, who is an author in London who recently published a book called “Periods Aren't Meant To Bloody Hurt.” Gemma has 15 years of nursing experience and over 20 years of holistic medicine experience. She's a trained abdominal massage therapist and mindfulness teacher. And she had her own challenges with her cycles, and when she went to the medical community, she was told that it’s normal and to just get used to it. And I can echo a similar story. This book is about teaching people how to investigate the reasons why a period may be painful, learning about the importance of hormones, how to talk about the taboos around periods, and different ways to approach the challenges that you're facing. I highly recommend checking out the book “Periods Aren't Meant to Bloody Hurt” by Gemma Barry.
Dan Carreno: Jeff and Brittany, thank you so much for sharing. We'll wrap it up there. For those that are interested in more information about O-Six Impact Partners, you can go to our website, which is www.osixpartners.com. Feel free to get in touch with us through the website. We are here to support your sustainable investing ambitions. Thank you for tuning in today and we'll be back soon with another episode of Rewilding Wall Street.
DISCLOSURE:
The opinions expressed herein are those of O-Six Impact Partners, LLC and are subject to change without notice. The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities product, service, or investment strategy. Investments involve risk, and past performance is not indicative of future results. Therefore, it should not be assumed that any specific investment or investment strategy made reference to directly or indirectly by O-Six Impact Partners, LLC will be profitable. Be sure to first consult with a qualified financial adviser, tax professional, or attorney before implementing any strategy or recommendation discussed herein.
O-Six Impact Partners, LLC specializes in providing outsourced sales and marketing services to investment managers and related financial entities. These services may include lead generation, client outreach, relationship management, and promotional activities aimed at enhancing the visibility and market presence of investment products. O-Six Impact Partners’ services are strictly limited to sales and marketing efforts. Under no circumstances should any communication, content, or action taken by O-Six Impact Partners be construed as investment advice or recommendations.
