July Report

Market Review 

While sentiment in June was buoyed by prospects for peace, July was defined by a re-escalation of the US-Iran conflict, a surge and subsequent retreat in oil prices, and a reversal in the AI trade.

The June memorandum of understanding between Iran and the USA collapsed in early July, leading to an escalation in the conflict. Attacks on vessels led to a new closure of the Strait of Hormuz which caused a sharp rebound in oil prices. However, later in the month prices began to retreat following reports of a potential 60-day truce.  Even with the threat to inflation, all three major central banks (the U.S. Federal Reserve, Bank of England, European Central Bank) all voted to keep interest rates unchanged in meetings in the month, although there was a more hawkish tone to much of their commentary.

The AI investment theme, which has driven market gains for most of 2026 faced a reversal in July. Investors pivoted away from semiconductor and hardware stocks due to scepticism regarding the timing and scale of returns on huge capital expenditure commitments.

In July the European Commission proposed to revise the Emission Trading Scheme (ETS). The proposal represents a softening from a climate-mitigation perspective by allowing a more gradual decline of emissions, increasing the cumulative emissions over the next decade. Additionally, it could discourage the reduction of avoidable emissions through the purchase of removals. On the positive side, the proposal mobilises EUR100bn for projects such as industrial electrification, low-carbon production processes and other technologies that reduce emissions. The scope of coverage has also been expanded with the inclusion of municipal waste incineration and further coverage for aviation and maritime activity.

Fund Review 

The Fund delivered a return of -0.6% over the month, outperforming the MSCI World Index, which returned -0.9%.

In a reversal from June, Autodesk, a design and engineering software company in the Resource Efficiency theme, was the largest positive contributor to return. Investors were encouraged by strong adoption of the Autodesk Construction Cloud, which grew over 20%. Additionally, investor sentiment was bolstered by a strategic collaboration with Amazon Web Services (AWS) to offer its product through the AWS Marketplace.

Life sciences and diagnostics company, Thermo Fisher, was the second largest contributor after a positive results announcement. Revenue increased 10% for the quarter compared with the same quarter last year, and EPS increased 13%, both exceeding consensus estimates. The company subsequently raised full-year revenue and earnings guidance due to strong demand across pharmaceutical and biotech end markets.

Infineon, a provider of semiconductors to the automotive, industrial and IoT sector, was the main detractor to performance. Despite raising its guidance for the year after a record quarter, the stock pulled back from its recent peaks. The decline was driven by a broader market rotation away from AI-related stocks.  Infineon, with its market leading power semiconductor portfolio, is in that group of stocks.

UK pharmaceutical company, AstraZeneca was another detractor in July. Investor sentiment was knocked early in the month after the company announced a surprising failure during the Phase III trial of Wainua, a treatment for a rare and progressive heart disease.

Outlook 

July 2026 should serve as a wake-up call for policymakers, investors and citizens. Extreme heat, drought and devastating floods around the world have caused hundreds of deaths, destroyed ecosystems and resulted in billions of dollars of damage. Climate mitigation remains essential, but there is now an equally urgent need to invest in adaptation, including resilient infrastructure, stronger water and agricultural systems, and urban cooling. These investments can improve public health, protect ecosystems and enhance quality of life.

This escalating climate crisis is reinforcing the long-term structural drivers underpinning our investment strategy. We continue to see significant opportunities for companies whose products and services address the need for more efficient, resilient and sustainable systems. Demographic pressures are also strengthening the long-term case for healthcare investment, as ageing populations and rising disease burdens increase demand for essential medical services and infrastructure.

As we move into August, we anticipate continued market volatility fuelled by geopolitical tensions and the ongoing earnings season. Despite this turbulent environment, our investment approach remains unchanged, focusing on resilient companies that provide the critical solutions needed for a healthy planet and society.