July in Focus

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Article Type
The Wider Lens
Topic
Opinion
Published
August 07, 2026
Read time
8 mins
Author
Aegon AM Responsible Investment Specialists
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Record ocean temperatures bring climate risks closer to home

 

Global ocean temperatures reached record highs in June, exceeding even the peaks recorded during the 2023–24 El Niño period. Average sea-surface temperatures are now close to 21°C, compared with around 19.6°C before industrialisation. With more than 90% of the excess heat generated by greenhouse gas emissions absorbed by the oceans, they have become a critical indicator of the pace and scale of climate change.

 

There is growing concern that a new El Niño event could emerge in the Pacific in the coming months. Historically, El Niño has acted as a catalyst for higher global temperatures and more frequent extreme weather events. Given the vast amount of heat already stored in the oceans, scientists warn that some of the most significant temperature impacts may still lie ahead, increasing the risk of further record-breaking global temperatures.


For investors, rising ocean temperatures matter because they amplify physical climate risks. Warmer seas can fuel stronger tropical storms, intensify rainfall and flooding, and contribute to more severe heatwaves. Europe is already experiencing unusually high temperatures, with parts of the Mediterranean reported to be as much as 6°C above seasonal norms.


The investment implications extend well beyond environmental concerns. Physical climate impacts are becoming more visible across the economy, affecting sectors such as insurance, utilities, agriculture and food production. Rising claims costs, infrastructure resilience requirements, water stress and supply-chain disruption all have the potential to influence corporate earnings and long-term asset values.


The latest ocean temperature data are a reminder that climate change is no longer solely a long-term sustainability issue. Increasingly, it is a near-term financial and economic risk that investors need to consider when assessing company resilience, risk exposure and future investment opportunities.

 

 

SBTi raises the bar on net-zero credibility

 

The Science Based Targets initiative (SBTi) has released Corporate Net-Zero Standard Version 2.0, marking an important evolution in how companies set, implement and report progress against climate targets. The updated framework places greater emphasis on credible implementation, transparency and evidence of progress, rather than target-setting alone.


A key feature of the revised standard is its stronger focus on climate governance and transition planning. Companies will be expected to demonstrate greater board-level accountability for climate-related risks and opportunities, alongside clearer plans for how targets will be delivered. The standard also strengthens expectations around reporting and progress assessment, with a focus on whether companies are taking credible steps towards implementation rather than simply making commitments.


Target-setting requirements have also been updated. Scope 3 expectations are more focused on material sources of value-chain emissions, with greater emphasis on supplier and customer alignment where relevant. At the same time, Scope 1 and Scope 2 emissions performance remains under scrutiny, including the quality of renewable electricity procurement and the use of low-carbon power.


The new standard will take effect from 1 February 2027, although companies will still be able to validate targets under the existing framework until the end of December 2027, providing a transition period for adoption.


From an investment perspective, the changes are a welcome development. As climate commitments become more common, investors are placing greater emphasis on the quality of governance, the credibility of transition plans and evidence of emissions reductions over time. The revised SBTi standard reflects this shift by helping investors assess the difference between companies making credible progress and those that remain primarily focused on target-setting. In doing so, it brings climate accountability more closely into line with broader expectations around corporate strategy, execution and long-term value creation.

 

 

EU drives circularity in the automotive sector

 

The EU has adopted new end-of-life vehicle (ELV) regulations that strengthen circular economy requirements across the automotive industry. The rules cover the full vehicle lifecycle and are designed to increase recycling, improve resource efficiency and reduce waste.


A key requirement is that recycled plastic must account for at least 15% of the plastic used in new vehicles six years after the regulation enters into force, rising to 25% after ten years. At least 20% of this recycled plastic must come from end-of-life vehicles, supporting the development of a more closed-loop recycling system for the automotive sector.


The regulation also expands producer responsibility, making vehicle manufacturers accountable for the collection and treatment of vehicles, including when they become waste. While this may increase compliance and operational costs for automakers, it could also strengthen demand for recycling, waste management and materials recovery companies.


Although the regulation has been adopted, most requirements will apply only after a transition period, giving manufacturers, suppliers and recyclers time to prepare for the new obligations.


For investors, the regulation is another sign that the EU is embedding circularity directly into industrial policy. This should support long-term demand for recycled materials and resource recovery, while potentially paving the way for similar requirements covering steel, aluminium and critical minerals in the future. 

 

 

Shareholder activism broadens beyond M&A


Shareholder activism remained robust during the first half of 2026, but the focus of campaigns continues to evolve. While activists were once primarily associated with strategic transactions and M&A activity, increasing attention is now being directed towards operational performance, governance and board effectiveness.


A notable trend is the growing emphasis on board accountability. Management changes are not always viewed as sufficient responses to prolonged underperformance, with activists increasingly holding directors responsible for oversight failures and weak execution. Recent campaigns at companies including Lululemon, Norwegian Cruise Line and CarMax point to continued scrutiny of board effectiveness, even where leadership changes have already been made.


The governance backdrop is also shifting. Potential regulatory changes in the US could affect certain disclosure and voting requirements, which may influence the information available to investors. At the same time, governance concerns continue to surround some prospective high-profile IPOs, particularly where dual-class share structures concentrate voting power in the hands of founders.


Shareholder engagement is also becoming more technology-driven. Companies, activists and institutional investors are making greater use of digital engagement tools, while some large financial institutions are developing proprietary stewardship and voting platforms, with AI-supported analysis increasingly being explored as part of this process.


For investors, these developments underline the growing importance of governance quality and board oversight as drivers of long-term value creation. They also highlight how technology is reshaping stewardship, engagement and proxy voting across the investment industry. 

 

 

EU ETS: A slow and steady rapid decarbonisation

 

The European Commission has proposed recalibrating the EU Emissions Trading System to balance Europe’s decarbonisation ambitions with ongoing concerns over the industrial competitiveness and carbon leakage. While the emissions cap would decline more gradually under the proposal, the Commission has reiterated that carbon pricing remains central to EU climate policy and industrial investment.


The proposed changes would extend the phase-out of free allowances for sectors covered by the Carbon Border Adjustment Mechanism to 2038, giving carbon-intensive industries more time to transition. There is, of course, a certain irony in extending free emissions allowances to the industries most urgently in need of rapid decarbonisation.


The proposal also includes additional funding for industrial decarbonisation, including a new Industrial Decarbonisation Bank and an estimated €30 billion Investment Booster funded through the sale of ETS allowances. This support is intended to help accelerate investment in lower-carbon technologies and industrial transition projects across Europe.


The review is therefore better understood as a more gradual pathway for emissions trading rather than a retreat from carbon pricing. For sectors such as cement and steel, companies with investment-ready projects in carbon capture, lower-carbon production, electrification and energy efficiency may be better positioned to access policy support. Over time, the changes could place greater emphasis on capital expenditure, execution and verified emissions reductions, highlighting differences in transition preparedness across sectors and companies.

 

 

Regulatory scrutiny intensifies for Meta and social media platforms

 

Meta is facing renewed regulatory scrutiny in Europe over concerns that certain platform features may contribute to excessive use among children and teenagers. Preliminary findings under the Digital Services Act have focused on features including infinite scroll, autoplay, push notifications and recommendation algorithms. The European Commission’s preliminary findings indicate that Meta may not have adequately assessed the risks associated with these design features for the wellbeing of users, including minors and vulnerable adults.

 

If the findings are confirmed, Meta could face fines of up to 6% of global annual turnover. Meta has the right to respond to the Commission’s preliminary findings before any final decision is made. In addition to any potential financial penalty, regulatory requirements could result in changes to engagement and personalisation tools that support user growth and advertising revenues. Such measures could affect the volume of content consumed, the effectiveness of targeted advertising and the value generated from each user, although the scale and timing of any financial impact remain uncertain.

 

The broader regulatory direction also points to greater scrutiny of child safety across social media platforms. Following the Report from the Special Panel on Child Safety Online, the European Commission is expected to consider further measures on age-appropriate access and safer platform design. Potential restrictions for younger users, alongside stronger safety-by-design requirements, could influence user engagement patterns and compliance costs across the sector. For investors, these developments underline the need to assess how regulatory intervention may affect engagement-led business models, advertising effectiveness and long-term platform resilience.

 

 

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Aegon AM Responsible Investment Specialists
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