Explore the Thinking behind our investment approach

Natural catastrophes caused global insured losses of $154 billion in 2024, a number that’s 27% above the 10-year average, while the California fires of 2025 have projected losses between $28 to $45 billion. As the climate changes and insurance markets continue to crack, insurers are pulling out of high-risk areas and driving up premiums, even in unaffected areas, to cover their losses. The capital markets will inevitably need to adjust to these changes. As insurance becomes more expensive, or unavailable, and property values decline in high-risk areas, wider financial impacts will be triggered on mortgage markets and real estate-backed securities. In addition, companies in affected regions will struggle with higher costs and capital constraints, leading to repricing in the stock and bond markets. All of these factors lead us to a conclusion: capital will increasingly flow toward climate adaptation and resilience, and the markets will reward the companies that are best positioned to respond to the structural shift that is taking place. We believe that the time to position capital is now, before these themes become mainstream and valuations rise. 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 Climate adaptation involves many sectors, such as construction, industrial, energy, insurance, water, and many others. Yet, for advisors trained in modern portfolio theory, each sector is often seen within its own separate box. So, how do you take a fund that is multi-classed, or multi-sized, and position that in your portfolio, or even talk about it? Jeff recently sat down at the NYSE with Aniket Shah, Managing Director at Jefferies, for an in-depth conversation about climate adaptation and resilience, the research that Jefferies has been doing for the past several years, and why Aniket feels that adaptation and resilience are very investible themes at this time: Aniket sees heat stress as the number one issue to focus on, and also notes that the current political tailwinds are very supportive of climate adaptation at this time, so why not invest behind them? Would you like to learn more about how we do this? Please feel free to reach out any time:

The Allianz Risk Barometer tracks the most important corporate concerns for the year ahead, as voted for by 3,700+ risk management experts from 106 countries and territories. After the top concern of cyber security, the number 2, 3, and 5 spots are attributed to business interruption, natural catastrophes, and climate change, respectively. The results of this survey fall directly in line with why we feel that climate adaptation and resilience strategies are so important currently, and why we strongly believe that now is the time to begin to account for these risks. Hear Jeff’s thoughts about this study in his latest interview (6 mins) from the floor of the NYSE, as well as some additional thoughts on tariffs, DeepSeek, and climate risk: Would you like to learn more about our climate adaptation and resilience strategies or research service options?

The commentary highlights the growing appeal of thematic investing, which focuses on opportunities in areas like climate adaptation, energy efficiency, and resource scarcity. Unlike traditional investments such as the S&P 500, which emphasize large and expensive companies, thematic strategies aim to capture emerging trends driven by innovation, legislation, and the direction of global investment dollars: Download Full Q1 2025 Market Outlook Commentary *For financial professionals only In 2025, we have identified four major trends that we believe are driving thematic opportunities: 1) Persistently high interest rates 2) De-globalization driven by national security concerns and the desire for strategic autonomy 3) The urgent need to adapt to a changing climate and to build up our resilience to climate events 4) The energy demand revolution driven by AI, and electrification. These trends position thematic strategies as a forward-looking alternative to S&P500 investments with compelling risk/return opportunities The commentary also explains why standard investment approaches like the traditional asset allocation portfolio, which performed well in the past, may struggle in today’s environment with rising inflation risks, higher interest rates, and heavy reliance on a few dominant companies. In our opinion, this makes thematic investments not just a complement, but a critical evolution in portfolio construction for forward-thinking investors.

2024 will be remembered as the first-year global temperatures consistently surpassed the 1.5°C threshold above pre-industrial levels. This milestone signals a new era of climatic volatility, where we believe increasing extreme weather events will test aging infrastructure and place immense strain on the economy. Climate risk touches multiple sectors: real estate in hurricane and fire-prone regions, agriculture facing drought, insurance markets, municipal bonds, sovereign debt, and corporate valuations are all undergoing re-evaluation. We believe that this evolving landscape demands a proactive approach: identifying assets vulnerable to re-pricing, mitigating risks, and capitalizing on opportunities in sectors poised to thrive in a changing climate. Our climate adaptation and resilience strategies capitalize on structural trends in infrastructure, water resources, agriculture, and energy systems, all of which we feel are positioned for significant investment and innovation. Unlike traditional portfolios, our strategies offer lower correlation to the S&P 500 and invest in companies that we believe will become more profitable as the world warms by helping society adapt to physical climate disruptions. We invite you to join us for our next Market Outlook Webinar, as we elaborate on our current climate adaptation and resilience investment theses and highlight the most important current events and economic indicators influencing our view on the economy, markets, and sustainability issues:

Traditional portfolios may face increasing challenges in 2025. Strong multi-year returns have pulled forward a great deal of alpha, but may temper future growth. Additionally, the concentration in mega-cap stocks and limited diversification from small-cap and international equities suggest a potential need for new, less-correlated sources of alpha. The strength of the current bull market, while impressive, may now call for proactive portfolio management to address concentrated risks. Thematic asset allocation portfolios present a compelling alternative, leveraging structural growth opportunities while addressing issues like high valuations and regulatory uncertainty. Unlike broad diversification, thematic strategies focus on macro trends that can potentially generate less-correlated alpha, offering diversification benefits tailored to today’s market conditions. By adopting these strategies, advisors can better position portfolios for potential outperformance in 2025 and beyond.