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We are excited to share breaking news today about our new capital partnership! Diffractive Managers Group, the asset management platform of 1251 Capital Group, is our newest capital partner to bring the SMART Climate UMA and SMART Investment Solutions suite to a wider audience and assist us with building new sustainable investing products. Diffractive’s niche delivers differentiated active strategies to investment professionals through a platform of boutique asset managers. Given our firm’s passion for climate investments, we like the aligned ecosystem of affiliate managers doing similar work like Greenbacker Capital, a market leader in direct investments of sustainable infrastructure and energy efficiency projects. With this new partnership, our current minority partner Merchant Investment Management LLC will remain in place, and is fully supportive of being aligned with another great shareholder that is uniquely positioned like Diffractive to drive the vision of Gitterman Asset Management forward. Our firm also retains independence and full control of the investment process and function, consistent with Diffractive’s policy of empowering management teams to build enduring businesses. With alignment and purpose set, a busy 2022 lies ahead as we move our new partnership with Diffractive. Read the full details in the press release.

Undervalued and Mispriced – Lack of Water Risk in Capital Markets TheIMPACT is back at the New York Stock Exchange! In this week’s show, Jeff interviews Thomas Schumann about the TSC Water Security Index, the world’s first benchmark index quantifying water risk in equities. “Water risk is embedded in all asset classes, in every investment decision, and every allocation.” 1 Defining water is critical. According to Schumann, water is not a commodity. It is a precious resource and a human right that is recognized by the United Nations. Mainstream media often speaks of commodification, monetization, and commercialization of water, which misaligns its value. Schumann believes water requires integrity, stewardship, and custody — qualities which led to the development of the Water Security Index. Neither MSCI, ACWI, S&P 500, nor the FTSE have considered climate risk in their benchmark indices. So, to date the risks have neither been recognized nor priced into the markets, which is a big problem. Watch the full episode to learn more about the first ever water footprint for capital markets. Upcoming Event: Join us on December 8th at 1:00 PM ET Climate Change Investment and Corporate Engagement Grow the New Energy Economy Paul Ellis, Host of The Sustainable Finance Podcast (SFP) & Panelists Investment experts to learn: -Why ESG investment strategies are outperforming -How asset managers are adapting to the increasing flow of ESG AUM -Where investors and advisors can learn more about ESG investment Panelists Include: Aisha Williams – Founder and CEO at ImpactVest, Certified Expert in Sustainable Finance, Harvard Business Review Advisory Council Jeff Gitterman – Co-Founding Partner and creator of Sustainable, Impact, and ESG Investing Services at Gitterman Wealth Management, LLC. Diana Glassman – Director-Engagement, EOS at Federated Hermes

Is your window for annual CE credits closing soon? If so, our ESG Practice Playbook is essential for any financial advisor integrating ESG strategies and climate solutions with their existing practice. Each session provides CFP / IWI / CFA CE credits. Complete all 5 sessions for a total of 8.5 CE credits accepted by all three boards. Remember to watch all 5 sessions and complete the corresponding tests to receive all 8.5 CE credits. Don’t miss session five of the series, Financial Advice in the Age of Climate Change. In this new edition, scientists at NASA Jet Propulsion Lab present evidence to demonstrate why climate change is a primary concern for investors. Discover how climate change and geopolitical events combined to impact key markets, along with innovative solutions to address infrastructure and our most precious resource, water management. This complimentary online webcast is available through our partners at RIA Channel and open to all financial professionals. After completing the course, share your feedback and ideas with us for new climate content in 2022.

COP26 is underway. Positive messages, with lots of fanfare, have been abundant. Doubt and mistrust, however, are also in plentiful supply. We’ve compiled a few interesting developments from the past week’s activities, along with some criticisms. Over the coming weeks, we’ll be watching what unfolds on each of the items below, as well as other activities arising from COP26. Consolidation of Standards and Frameworks The IFRS Foundation announced the creation of the International Sustainability Standards Board (ISSB), which will consolidate the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (which has already consolidated the Sustainability Accounting Standards Board (SASB) and the Integrated Reporting Framework). This drive towards global standards and principles, and away from fragmentation and confusion, has been a key theme for a while, but it is unclear to what level the U.S., which doesn’t use IFRS accounting standards, will participate. Clarity on optimal disclosures is important, but BlackRock’s Larry Fink pointed out that the pressure exerted on public companies and financial institutions also needs to be put on private companies. He called the inconsistency, “the biggest capital markets arbitrage in my lifetime.”[1] Declaration on Forests and Land Use On Tuesday, 131 countries, including the U.S., signed a pledge that commits them to “working collectively to halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation.”[2] In addition, “CEOs from more than 30 financial institutions with over $8.7 trillion of global assets – including Aviva, Schroders and Axa – committing to eliminate investment in activities linked to deforestation.”[3] National Geographic reports that “skepticism is warranted” given a history of prior unmet international pledges and that within two days, “Indonesia—one of the most heavily forested countries—seemed to walk back its commitment.”[4] The overarching statements are lofty, but clarity on how specific targets and objectives will be met is currently missing. Global Methane Pledge As we reported in our recent blog, “Climate Policy Matters (and Methane Policy Matters a Lot!),” multiple countries have signed up for collective goal of cutting methane emissions by 30%, based upon 2020 levels. Fulfilling this may be “the biggest single thing governments can do to keep alive the goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.”[5] However, China, Russia, India, which are presently the top three emitters, have not signed up. “1.5 is what we need to survive” The Prime Minister of Barbados, Mia Mottley, called on world leaders to “try harder,” stating that “national solutions to global problems do not work.” She noted that current Nationally Determined Contributions (NDCs) put the world on a pathway to a warming of 2.7°C, with some pledges relying on technology that is not currently operationalized. She called out the gaps in financing for mitigation and adaptation, noting that the central banks of the world’s richest countries had implemented $25 trillion of QE over last 13 years, $9 trillion of which was related to the pandemic. Had that $25 trillion been allocated to financing the energy transition and improving food systems, we could be on the way to keeping warming within the 1.5°C limit. “Simply put,” she asks, “when will leaders lead?” Similarly, the chair of the Least Developed Countries group, Sonam Phuntsho Wangdi, called the progress at COP26, “disappointing and in a way also frightening,”[6] and also urged for more financing. What has most resonated with you, or disappointed you, from COP26? – we’d love to hear your viewpoints and weave them into our future updates.

With so much focus on CO2, we often forget that there are several other greenhouse gases (GHGs) that are contributing to global warming! One particularly potent gas is methane (CH4). While it accounts for considerably fewer overall emissions, it is 25 times more efficient at trapping radiation over a 100-year period [1] compared to CO2, and more than 80 times more powerful over 20 years. [2] As a result, focusing emission reduction efforts on methane is a powerful means to mitigating global warming, especially over shorter time horizons. Source: EPA – https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks In fact, expediting methane abatement has been categorized as “the single most effective strategy to reduce near-term global warming to keep the goal of limiting warming to 1.5 degrees Celsius within reach.” [3] COP 26 will see the official launch of the Global Methane Pledge. Countries that commit to the pledge are signing up for “a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030 and moving towards using the best available inventory methodologies to quantify methane emissions, with a particular focus on high emission sources.”[4] Countries and jurisdictions already committed include Argentina, the European Union, Ghana, Indonesia, Iraq, Italy, Japan, Mexico, Pakistan, the U.K., and the U.S. Methane is an output of various natural and human activities including agriculture, fossil fuels, land use, natural wetlands, and waste management. However, each participating country has a different methane emissions profile. For example, the majority of Pakistan’s methane emissions are derived from agriculture while most of Indonesia’s methane output comes from waste. As part of its commitment, the U.S., via the Environmental Protection Agency (EPA), will be working to reduce oil, gas, and landfill methane emissions. The U.S. Department of Agriculture (USDA) is also engaged and will work with farmers and ranchers to “expand the voluntary adoption of climate-smart agriculture practices that will reduce methane emissions from key agriculture sources by incentivizing the deployment of improved manure management systems, anaerobic digesters, new livestock feeds, composting, and other practices.” [5] In support of the Global Methane Pledge, several major philanthropic organizations will contribute over $220 million. These funds will provide “expertise, financial resources, technical support, and best-in-class data to ensure methane reduction progress and accurate monitoring, verification, and reporting, including in the resource extraction and agriculture sectors.” [6] Philanthropic backing was key to the implementation of the Kigali Amendment to the Montreal Protocol, which has accelerated the removal of hydrofluorocarbons (HFCs). HFCs are another short-lived, but potent GHG. “Although HFCs do not reduce stratospheric ozone, they threaten to accelerate climate change because their global warming potential (GWP) is large—thousands of times higher than that of carbon dioxide.” [7] We look forward to the formal launch of the Global Methane Pledge and the broader agenda of COP 26. The Montreal Protocol has shown that global cooperation can lead to significant change in a short time and we hope to see even greater success as a result of these pledges. In our recent event, The Great Repricing: Financial Advice in the Age of Climate Change, Monique Aiken of The Investment Integration Project (TIIP) and Stephan Nicoleau of FullCycle spoke about prioritizing methane reductions in their session, The Possibilities of Infrastructure Justice. Beyond critical emissions abatements themselves, rethinking energy infrastructure and other industrial processes from a social perspective can lead to better health outcomes for communities presently located near high pollution sites. Watch their fireside chat here, and also check out the other sessions from the virtual conference that are now available free on demand.

All eyes are on the UN Climate Change Conference (COP26) in Glasgow next month. Our team, alongside climate activists and policymakers worldwide are fixated on Nationally Determined Contributions (NDCs), or global emission reduction plans, under the Paris Agreement, and specifically how the signatories will decide to transparently measure progress on the NDCs. The atmosphere is a global common-pool resource, meaning that if one country does not pull their weight in terms of emission reductions, all countries will pay the costs in terms of physical effects. Today, climate transparency and data gaps at the national and corporate level are being most successfully addressed by technology rather than regulatory disclosure requirements. We are also watching innovators explore the application of blockchain to the transparency of ESG practices. Already, we’ve seen agriculture and trade companies, such as Brazilian meat processor and the world’s second largest food producer JBS SA, use blockchain to track the supply chain of their cattle suppliers in all the geographical regions in which they operate.[1] Other technologies offer scalable access to real-time, accurate climate data that allow us to hold organizations and companies accountable to their climate commitments. Planet Labs Inc., an Earth imaging company based in San Francisco, holds part of the answer of how to hold the feet of countries to the fire on the emissions reduction commitments. Andrew Zolli, VP for Sustainability and Global Impact at Planet, presented current research findings at our conference, The Great Repricing: Financial Advice in the Age of Climate Change. His session, “The Really Big Picture: How Satellite Data Can Help Mitigate Climate Change” brought hope of radical transparency around GHG as he introduces us to Planet and their hundreds of deployed satellites. Unlike traditional earth observing satellites, these are the size of pieces of toast, rather than school buses. Each contain cameras that together collect a picture of every location on earth, tracking experienced changes and most importantly, pre-indicators of change. By obtaining a real-time, accurate view of Earth’s forests, agricultural fields, and supply chains, Zolli explains that they “allow much greater transparency about human activities on the Earth in ways that can allow us to encourage some and discourage others once we link this observational capacity to the financial system.” The satellites allow for tracking the movement of goods around the planet, monitor the operations of coal-fired power plants, and provide live imagery of carbon sequestering forests. They also may act as the verification method for payment of performance mechanisms like the UN-REDD + Program, in which wealthy countries pay forest asset holding countries to refrain from deforestation. This set of satellite data is also our key to getting independently verifiable information on climate warming gases in the atmosphere. The applications for COP26 are immense, particularly using this data to build artificial intelligence models to estimated carbon emissions. They can help policy makers hold countries accountable when they fail to meet their NCDs. It’s expected that COP26 will finalize the technical details of the Paris Agreement’s enhanced transparency framework to hold countries accountable for their climate emissions. We anticipate that Planet’s data could play a positive role at CO26 by helping countries build more ambitious plans and holding them to account when they fail. Andrew Zolli’s full presentation is now available on demand, along with 20 additional climate focused sessions at The Great Repricing: Advice in the Age of Climate Change.