SUMMARY
Global equity markets moved sharply lower in March as geopolitical risk displaced the more constructive tone seen earlier in the quarter. Energy was the only sector to rise during the month, while utilities and other defensive sectors (not generally investable by the fund) outperformed more economically sensitive sectors such as industrials and materials. The Fund delivered a negative return of -5.9% over the month, underperforming the MSCI World’s -2.6% decline. At the thematic level, Cleaner Energy and Education were the better performing areas of the portfolio, while Resource Efficiency and Safety were the weakest. Unusually in the long history of the investment strategy, the Health theme only provided modest defensive cover.
COMMENTARY
Market Review
Global equity markets moved sharply lower in March as geopolitical risk displaced the more constructive tone seen earlier in the quarter. The escalation of conflict in the Middle East and disruption to energy flows through the Strait of Hormuz sent oil prices soaring and prompted investors to reassess inflation, growth and supply chain risks. After strong gains earlier in the year, Europe and Asia were among the weaker regions during the month.
Central banks reinforced the more cautious tone, keeping rates on hold and warning that the conflict was adding to upside inflation risks and downside growth risks through higher energy prices. In equity markets, that translated into a clear rotation. Energy was the only sector to rise during the month, while utilities and other defensive sectors outperformed more economically sensitive sectors such as industrials and materials.
The conflict also reinforced the importance of investment in the physical systems that underpin energy security, electrification and digitalisation. Even though conventional fossil energy producers were the clearest short-term beneficiaries of energy price moves, events highlighted how dependent economic resilience remains on grid investment, domestic power capacity and efficiency. This is only exacerbated by rising AI-related electricity demand, which continues to test existing infrastructure.
Against this backdrop, better, cleaner energy alternatives continue their steady growth path. IRENA’s annual renewable capacity statistics showed that renewables accounted for 86% of global power additions in 2025, with a record 692GW added over the year. Solar remained the dominant driver, contributing 510GW, while wind added a further 159GW. At year end, renewables represented 49% of installed power capacity worldwide. The data also highlighted how large the opportunity remains: China, the United States and the European Union accounted for 80% of new additions, while Africa contributed 2%, despite recording its strongest annual increase and reaching 82GW of installed renewable capacity. As prices continue to fall, adoption will spread.
Fund Review
The Fund delivered a negative return of -5.9% over the month, underperforming the MSCI World’s -2.6% decline, in a market where defensive areas (not generally investable by the fund) outperformed, and economic confidence took a sharp dip.
At the thematic level, Cleaner Energy and Education were the better-performing areas of the portfolio, while Resource Efficiency and Safety were the weakest. Unusually in the long history of the investment strategy, the Health theme only provided modest defensive cover. The healthcare sector remains out of favour with investors over concerns about unsustainable costs and technological uncertainty.
On the positive side, Vestas in the Cleaner Energy theme was one of the strongest contributors, benefiting from continued investor support for companies exposed to power infrastructure and longer-term electrification trends. NextPower also outperformed, with its contracted renewable power assets offering relatively defensive characteristics during a period of heightened geopolitical and macroeconomic uncertainty.
Grand Canyon Education performed well as the Education theme proved comparatively resilient over the month.
On the weaker side, Keyence in the Resource Efficiency theme underperformed as investor preference shifted away from high-quality automation and industrial technology names in Japan. Infineon Technologies in the Sustainable Transport theme was also weaker, reflecting softer sentiment towards semiconductor companies outside those areas seen as more directly linked to defence and energy security spending.
Bureau Veritas in the Safety theme also detracted from performance, reflecting both its exposure to the Middle East and broader weakness across quality industrial, testing and safety-related businesses.
Outlook
Markets are now being shaped by geopolitical risk, energy price volatility and uncertainty over inflation and interest rates, which has kept attention focused on near-term resilience and sentiment rather than fundamentals and longer-term growth. Sentiment towards sustainability initiatives has become even more cautious than in recent years.
Even so, many of the structural drivers behind our investment themes continue to strengthen. The rapid build out of artificial intelligence and digital infrastructure is increasing demand for electricity networks, cooling systems and water management. A more uncertain geopolitical environment is also reinforcing the importance of energy security, industrial efficiency and more resilient domestic infrastructure. At the same time, sustainability policy is evolving in a more pragmatic direction. In Europe, the focus has shifted towards simplification and competitiveness, while in China, support for the green transition remains embedded in broader economic planning.
We therefore continue to see strong long-term opportunities for companies helping to improve the efficiency of energy, water and materials use. Market leadership may remain unsettled in the near term, but the case for businesses providing solutions linked to efficiency, resilience and resource productivity remains compelling.