Macquarie Climate Solutions Fund Q3 2025 Portfolio Performance

The Macquarie Climate Solutions Fund delivered positive absolute performance and outperformed its benchmark in Q3 2025, primarily driven by strong security selection in energy, industrials, and utilities. Key contributors included Neste Corp. due to robust sustainable aviation fuel sales, Cummins Inc. benefiting from AI-driven data center power demand, and AES Corp. on AI-related electricity needs and acquisition speculation. While First Solar Inc. also boosted performance amid favorable clean energy policies, the Fund's systematic underweight to the top-performing IT sector and underperformance in materials due to specific stock issues like West Fraser Timber were notable detractors.

Analysis

The Macquarie Climate Solutions Fund achieved positive absolute performance and outperformed its MSCI ACWI IMI benchmark in Q3 2025, primarily driven by robust security selection across energy, industrials, and utilities. Neste Corp. was the top individual performer, benefiting from soaring Sustainable Aviation Fuel sales, record renewable diesel volumes, and effective cost-cutting measures that led to beating core earnings expectations. This highlights strong fundamental performance within the renewable fuels segment.

Cummins Inc. (CMI) saw significant gains, propelled by the burgeoning AI buildout theme, which generated high demand for power solutions for data centers, boosting its Power Systems and Distribution segments. This re-evaluation of Cummins as an energy-infrastructure provider for the digital economy underscores a critical market shift. Similarly, AES Corp. (AES) contributed positively, capitalizing on the soaring demand for electric power from AI data centers and benefiting from a reported $38 billion acquisition offer from a BlackRock-owned infrastructure fund.

First Solar Inc. (FSLR) was the second-best performer, reflecting a broader rally in US solar stocks, which gained momentum from tax credit stability and less restrictive Treasury guidance on clean energy incentives. However, the Fund's systematic underweight to the top-performing IT and Communication Services sectors, both significantly driven by AI infrastructure, acted as a key detractor from overall performance.

Conversely, the Materials sector underperformed due to poor security selection, notably West Fraser Timber Co. (WFG), which was the weakest performer. This underperformance stemmed from lower commodity prices, increased operating costs, significant inventory write-downs, and persistent weakness in the North American housing market. The Fund also strategically exited its Amazon.com Inc. (AMZN) position in Consumer Discretionary, indicating a focused portfolio adjustment.

Key Decisions for Investors

• Consider increasing exposure to companies positioned to benefit from the AI infrastructure buildout, particularly those providing power solutions and energy infrastructure, as evidenced by Cummins' and AES's strong performance.
• Monitor policy and regulatory developments in the renewable energy sector, as favorable tax credit stability and guidance significantly influenced the strong rally in solar stocks like First Solar.
• Evaluate the strategic implications of systematic underweights to high-growth sectors such as IT and Communication Services, which, despite strong benchmark performance, can limit overall fund returns if not selectively managed.
• Exercise caution with companies exposed to cyclical industries and commodity price volatility, as demonstrated by West Fraser Timber's underperformance, and assess the impact of housing market conditions and trade policies on such holdings.