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With an ever-growing number of investors looking to incorporate their environmental, social, and governance (ESG) principles into their portfolios, responsible investing is no longer a niche investment approach—it’s mainstream. By understanding the choices available, investors can meet two interrelated primary objectives for their ESG goals: trying to influence companies to behave better and controlling what kind of companies they own.

The reopening economy hasn’t come without drawbacks—but compared with last year’s headaches, bond investors can expect a much less dramatic second half of 2021.

Never have there been such interest in all things ESG. The pandemic hit a reset button and prompted people to focus on what they see as most important, especially climate change and diversity and inclusion. With this shift in mindset, the momentum demanding real action is gaining strength. But before real action can be witnessed, companies need to be able to quantify these issues and track their progress—that’s why so much effort is currently being spent on raising the bar when it comes to ESG disclosures.

The tailwinds that greeted commodities in 2021 have moderated, but they are not gone. Faced with strong economic growth and high inflation, the market expects the Fed to run down its balance sheet and begin hiking interest rates. In addition, a shift in consumer habits has left most commodity markets priced for a deficit, which may require an extended period of high prices and could lead to continued strength from the asset class.

In this segment of The Market in Five Charts, Chief Investment Officer Rick Pitcairn addresses the Ukraine crisis and its impact on capital markets through the following lens:

The ESG-labeled bond issuance has been significantly growing and is likely to persist, along with investor interest in this segment of the fixed income markets. What can responsible investors in this market expect in the year to come? Sustainable bonds should play an increasingly important role.

Investors rode the wave of strong equity returns in 2021. While public equity fueled impressive investment returns, private equity and venture capital performance took portfolios to the next level. Although there was a lot to celebrate with private capital funds, all was not rosy at the end of 2021, with two-thirds of IPOs trading below their IPO price. While the sell-off in equity markets in early 2022 dipped lower, the private equity allocations remain an important component of a diversified portfolio.

In this 12th annual survey, the focus was on the back office areas and internal fund operations. The results highlight other trends and key insights in the hedge fund industry: growth in assets and funds; an opportunity for smaller, newer managers; investors boosting their hedge fund allocations; how traditional hedge funds are coping with cryptocurrencies; and the fee models in a post-‘two and twenty’ world.

Overall, the results of the 2022 10-year capital market assumptions are mixed depending on the asset class when compared to last year’s assumptions as the global recovery gains traction. We see weaker equity market returns due to slowing growth rates and stretched valuations. Fixed income asset class returns will once again be extremely limited given how low global bond yields are today.

As outlined in the 2022 Capital Markets Assumptions, long-term return expectations for traditional assets remain muted. Alternative investment solutions may offer an opportunity to increase portfolio returns by taking advantage of the remarkable post-pandemic economic evolution in a targeted way through public and private markets.