Pensions investment outlook 2023: New realities, big decisions

Pension fund investors have endured a roller coaster two years. After a strong 2021, 2022 saw record losses on sovereign bonds and a major correction in equities.

Now, recessions are looming. In this environment, we see four trends that should define asset allocation decisions: ongoing efforts to invest more sustainably; the response to raised and sustained inflation; the need for more liquidity; and the normalisation of interest rates.

Active for sustainability

Since the 2015 Paris Agreement, pension funds have accelerated their shift toward net-zero-aligned assets. We have seen interest in impact portfolios that use the UN Sustainable Development Goals (SDGs) to target positive effects alongside financial returns. Portfolios with an orientation towards biodiversity and clean energy have also attracted particular attention.

Meanwhile, COVID-19 and the energy crisis sparked by war in Ukraine have pushed long-term investors to consider more closely how our economic development is vulnerable to social and environmental factors. And in the European Union (EU), the introduction of a new regulatory framework has required the classification of investment portfolios.

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