$120M firm transitions to 100% ESG investing

$120M firm transitions to 100% ESG investing
Gitterman Wealth Management sees an opportunity for advisers to gain market share by tapping into the ESG space.
DEC 10, 2019
Three years ago, when Jeffrey Gitterman transitioned his $120 million advisory firm to be 100% focused on ESG investing, he said the key to getting clients on board was in the explanation. [More: Advisers should bring up ESG with clients, before they ask] Even though he admits that the Gitterman Wealth Management client base, made up mostly of college professors, was not a tough ESG sell, he wanted clients to focus on the investment advantages of incorporating environmental, social and governance issues when building their portfolios. "I moved $120 million in 18 months and didn't have any clients say no," Mr. Gitterman said at the InvestmentNews ESG & Impact Investing Forum on Dec. 5 at the United Nations in New York. About 200 financial advisers and investment managers gathered at the event to discuss the investment opportunities in this broad and growing market. Mr. Gitterman, co-founder and partner of the Edison, N.J.-based advisory firm, equates ESG investing to the GPS systems that have supplanted the old paper road maps that people used to rely on when driving cross country. "ESG is the GPS of investing," he said. "It's a richer data set about companies that we're investing in, and if you're a fiduciary today you have to be looking at it." He said the "trigger" for his transition to become a fully ESG advisory firm was the 2016 election of President Donald J. Trump. "I had clients calling up crying after the election thinking that the world was going to end," said Mr. Gitterman, who used that emotion and mood to steer his client base toward what he sees as a way to have a positive impact on the world. While Mr. Gitterman admits he is used to extreme emotions surrounding the presidential election as a trigger to transition to go fully ESG, it is the unemotional hard data that keeps him focused on this space. On the issue climate-related risks facing companies, for example, he cited the current challenges facing the reinsurance industry to try and reduce its exposure to natural disasters. "Find me one reinsurance company that's not hedging climate-related risks," he said. "It doesn't matter if you believe the science on climate change or if you believe it's man-made; just look at the numbers. The business opportunity is huge and it's the right thing for the planet."

Beware of 'greenwashing'

But just as Mr. Gitterman sees an opportunity for advisers to gain market share by tapping into the fast-growing ESG space, he warns against being lured by "greenwashed" investment opportunities that might be ESG in name only. "We have a 32-page due diligence questionnaire," he said, adding that the first place to start for any potential ESG investment is the prospectus to identify the ESG data guidelines. [More:Why aren't advisers warming up to ESG?] "You can almost knock people out of the box by checking their data provider," he said. "We ask if they have the data and what are they doing with it." True ESG investments, Mr. Gitterman believes, should be part of the corporate culture. "The first thing we do is meet with the company's ESG team, because I want to know what they're doing and where they sit at the company," he said. "Sometimes there is no ESG team, which is pretty telling." In addition to helping the world and pleasing his clients, Mr. Gitterman expects the ESG focus to add strength and longevity to his advisory firm. "If you want to attract good talent you will have to offer ESG and sustainable programs at your firm," he said. "In the next five years we'll see the effects of climate change exasperated every single year, and clients will come asking if their portfolio will survive." Other speakers at the ESG & Impact Forum echoed the point that the biggest risk when it comes to ESG investing might be ignoring the space. "If you're not using it, you will be at a disadvantage," said Brett Wayman, vice president of impact investing at Envestnet. Mr. Wayman, who participated in a panel discussion that focused on making sense of ESG ratings, said just because the ESG research data is not yet perfect, it's no reason to bypass it. [Recommended video: Advisers should discuss ESG with wealthy clients before someone else does] "Find a data set and know what each data provider and data set means," he said. Advisers can avoid becoming overwhelmed by all the non-correlated ESG data and ratings by thinking of it along the lines of traditional analyst ratings, Mr. Wayman said. "It's not the ratings agencies' responsibility to have consistencies. They're all doing their own research," he said. "It's each investor or investment firm's responsibility to comb through the ratings. The idea is to interpret it."

Latest News

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

iCapital secures $820M in latest funding, hits $7.5B
iCapital secures $820M in latest funding, hits $7.5B

The giant alt investments platform's latest financing led by T. Rowe Price and SurgoCap Partners, along with State Street, UBS, and BNY, will fuel additional growth on multiple fronts.

Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity
Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity

Some investors recently have seen million dollar plus decisions by FINRA arbitration panels involving complex products decisions go their way.

What does it take to feel 'financially comfortable' or 'wealthy' in 2025?
What does it take to feel 'financially comfortable' or 'wealthy' in 2025?

New report shines a light on how Americans view wealth today.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.