Explore the Thinking behind our investment approach

J.P. Morgan recently released a report titled, Building Resilience Through Climate Adaptation. The report notes that many climate investors are disproportionately focused on mitigation, which typically takes the form of emissions-cutting technologies and accounts for more than 90% of total climate finance globally. [1] In contrast, it points to research from sources like the World Economic Forum, indicating that climate adaptation investing, if done correctly, can deliver a return on investment in some sectors as high as $43 for every $1 spent. [1] Also according to the report, adaptation finance is currently on track to meet just a sixth of the expected need by 2030. [1] “There are very few times that I see a topic and I think, this is unbelievable. It’s a hugely investible idea, great returns, and [almost] no one is focused on it. No one is putting the narrative together, no one is putting the story together.” ~Aniket Shah, Managing Director at Jefferies

Much of the first quarter of 2025 has been dominated by global politics, tariffs, macroeconomic uncertainty, and the latest breakthroughs in artificial intelligence. But amid the noise, one critical lens has noticeably dimmed: climate and the broader set of structural investment themes connected to it: Download Full Q2 2025 Commentary *For Financial Professionals Only We believe this is a misstep, as climate adaptation and resilience remain two of the most investable forces shaping our economy today. Themes like water, transition metals, power grids, and distributed storage are the backbone of an emerging economic order. They reflect a future where geopolitical stability, supply chain control, and planetary constraints will shape value creation more than consumer trends or quarterly earnings. The winners of this new era won’t be defined solely by innovation at the surface—but by control of what sits underneath: the systems that scale, connect, and endure. For investors willing to look past short-term noise and into structural demand, the opportunities are not just intact, they’re accelerating.

The Trump administration has begun executing on what it calls the “3-3-3+” economic plan, a blend of fiscal, monetary, and trade policies designed to fundamentally reshape America’s economic trajectory by 2028. Proposed originally by Treasury Secretary Scott Bessent and later expanded by President Trump, this agenda centers around four primary objectives [1]: reducing the federal budget deficit to 3% of GDP sustaining 3% annual GDP growth increasing domestic oil production by 3 million barrels per day reshoring critical manufacturing sectors. While these goals may sound technocratic or abstract, the strategies used to achieve them, including a sweeping tariff regime, aggressive debt refinancing, spending cuts, and a push to revive U.S. industrial capacity are already reverberating across the markets, labor force, and the world:

Several weeks ago, Jeff spoke about the Allianz Risk Barometer and its top 10 risks for 2025, with the number 2, 3, and 5 spots attributed to business interruption, natural catastrophes, and climate change, respectively. The World Economic Forum also recently released the 20th edition of its Global Risks Report for 2025, with extreme weather events coming in at number two on their short-term list. As for the long-term, extreme weather events moves to number one, followed by ecosystem collapse, critical change to earth systems, and natural resource shortages to round out the top four. We believe that now is the time to begin to account for these risks, before these themes become mainstream and valuations rise, as insurance markets are already repricing risk, infrastructure is needing to be rebuilt, and businesses are continually adjusting to new climate realities. Would you like to learn more? “There are very few times that I see a topic and I think, this is unbelievable. It’s a hugely investible idea, great returns, and [almost] no one is focused on it. No one is putting the narrative together, no one is putting the story together.” ~Aniket Shah, Managing Director at Jefferies

Capital flows into water tech hit a record in 2024, with $1.16BN of equity investments. This is encouraging given water’s criticality to economic growth, but pretty low given the U.S. was behind by $91B in 2024 alone for necessary water infrastructure spending. Check out our latest piece for more detailed information: Gitterman Asset Management Water Thesis Climate change impacts are expressed through the hydrological cycle, whether via hurricanes, floods, or droughts. As climate adaptation and resilience gain greater focus, a lot more capital should start flowing to water investments. Beyond adapting to extreme weather, we will also likely need to manage increasing competition for water resources, as data centers and manufacturing are particularly water intensive and key growth drivers. And alongside traditional utilities, companies creating sensors, PFAS filtration systems, desalination solutions, and re-use technologies should also have growing markets in which to invest. At Gitterman Asset Management, water is one of our four key climate themes.

The recent Los Angeles wildfires have had a significant impact on the $4T dollar municipal bond market. According to VanEck, approximately $70B dollars of this market was exposed to the wildfires at the end of January. This exposure led Standard & Poor’s to lower its rating on the Los Angeles Department of Water and Power (LADPW), citing concerns about reserves, insurance coverage, and potential litigation, making this the first time such a down-grade has been tied to future climate risk. Municipal bonds have traditionally held up well given the back-up federal support they have had in the wake of natural disasters, but as the federal government considers backing off from FEMA support, municipalities will need to put more money into climate adaptation and resilience, as they will be less able to afford huge losses due to extreme weather events. Hear more from Jeff about the potential implications of this, also in the wake of the North and South Carolina wildfires, in his recent interview (7 min) from the NYSE: