Sustainable Opportunities Funds: First Quartile Returns

Key drivers

AI remained a key driver of market performance, particularly in the US, as companies stepped up their investment plans in data centres, computing power and supporting infrastructure. While AI continues to dominate the headlines, the conversation is shifting from excitement about productivity gains to the resources required to power the technology. Data centres are becoming major consumers of electricity and water, increasing demand for grid infrastructure, renewable energy generation and energy storage.

Beyond AI, healthcare has also contributed positively following a period of weaker performance, supported by new product launches and attractive valuations. Market leadership has become broader, with Europe and Japan delivering strong returns alongside the US, thanks to improving corporate governance (particularly in Japan), fiscal support and more attractive valuations.

Tailwinds and headwinds

June brought mixed news for offshore wind. On the positive side, the UK and Japan are expected to agree a partnership worth more than £18bn, including up to £9bn of Japanese investment to support 5.9GW of floating offshore wind projects in the UK. In contrast, Shell is preparing to sell its offshore wind portfolio as it focuses on higher-return assets. This highlights the challenge of relying on traditional energy companies to drive the energy transition and reinforces our preference for a fossil fuel free investment strategy.

Looking ahead

While economic and political uncertainty remains, the backdrop for investors has generally been more supportive than many expected. We do not take this for granted, however, and as ever we continue to monitor markets closely so that we are able to identify not just emerging risks, but attractive opportunities that also meet our investment criteria too.