Sustainable Opportunities Funds: Looking Beyond the Headlines

Investors appear increasingly focused on strong earnings growth and resilient economic data rather than geopolitical events. This is reflected in the modest declines in stocks and bonds despite Brent Crude oil, in July, rising over 20%, in US dollar terms. After briefly exceeding US$100 a barrel, Brent Crude fell below US$90 in early August as tensions in the Middle East eased.

Despite weaker markets, the Sustainable Opportunities Funds delivered a solid month driven by stock selection. Both Funds outperformed their peer groups and finishing the period in the first quartile. The Balanced Fund outperformed the IA Mixed Investment sector by 0.53%, while the Growth Fund outperformed the IA Flexible Investment sector by 0.26%.

Second quarter earnings season has been encouraging. By the end of July, according to FactSet, about two-thirds of companies in major US large cap indices had reported, with 86% delivering positive earnings surprises and 77% exceeding revenue expectations. AI remains a key market theme, although some cooling in the most crowded AI trades likely contributed more to July's market weakness than events in the Middle East.

Renewable energy remained in focus. In July, China released its 2026-2030 Renewable Energy Plan, targeting at least 370 GW of new wind and solar capacity and a more than 50% increase in generation by 2030, highlighting the strategic importance of renewables for energy security and independence. At home, prime minister Andy Burnham's decision to remove the 5% VAT on domestic electricity bills from 1 October supports the shift from fossil fuels to electricity, which should benefit renewable generation assets over the longer term.