Sustainability is no longer just a reporting requirement or a reputational risk management exercise.

According to Morgan Stanley’s newly released Sustainable Signals: Corporates 2025 report, 88% of companies worldwide now view sustainability as a way to create long-term financial value. That figure is up from 85% in 2024, and it reflects a growing consensus that environmental and social goals are directly linked to future business performance.

Based on a survey of over 330 companies with annual revenues above $100 million across North America, Europe, and Asia-Pacific, the findings confirm a trend that has been building for several years: ESG is increasingly integrated into strategy, operations, and capital allocation.

Sustainability Is Strategy

Among the companies surveyed, over half (53%) now say they see sustainability primarily as a value creation opportunity. An additional 35% view it as both a value driver and a risk management tool. Only 12% see it mainly as a way to manage risk down from 15% the previous year.

This shift reflects a deeper alignment between sustainability and core business goals. Sustainability is no longer sitting outside the strategy room; it’s at the table, shaping decisions around innovation, investment, growth, and resilience.

Jessica Alsford, Chief Sustainability Officer at Morgan Stanley, explained the shift:
“The data suggest that sustainability remains central to long‑term value creation. Companies around the world report alignment between corporate strategies and sustainability priorities.

What’s Driving the Change?

1. Investor Expectations

Nearly 9 in 10 companies say growing interest from investors is influencing how they approach ESG. Companies are increasingly being asked to show how sustainability performance connects to long-term returns, not just compliance or brand image.

2. Climate Impacts on Operations

More than 57% of respondents said climate-related events affected their business operations in the past year. In Asia-Pacific, that number jumps to 73%. Events such as extreme heat, wildfires, and flooding have led to revenue loss, workforce disruptions, and increased operating costs.

3. Evolving Regulations

Companies are navigating a fast-changing regulatory landscape. From the European Union’s CSRD to new climate disclosure proposals in the US and Asia, expectations for transparency and accountability are rising. Rather than viewing this as a burden, many companies are using it as an opportunity to improve internal systems and strengthen stakeholder trust.

Regional Trends Show Momentum in North America and Europe

The report also highlights regional differences:

Europe leads globally, with 94% of companies viewing sustainability as a long-term value driver. That’s up 10 percentage points from last year.
North America saw a significant increase, jumping 9 percentage points to 89%. This suggests growing internal alignment and market confidence in the region’s ESG strategies.
In Asia-Pacific, while the overall numbers are strong, more companies are focusing on sustainability as a risk management function especially given the region’s higher exposure to physical climate events.

Sector Insights: Utilities, Real Estate, and Consumer Goods Lead the Way

Sector-level data shows different adoption curves:

Utilities saw the largest increase, with 78% now viewing sustainability primarily as value creation, up from 58% last year. This shift reflects growing investments in clean energy, grid modernization, and decarbonization strategies.
Consumer staples jumped from 59% to 68%, with companies integrating sustainability into product design, supply chain practices, and consumer engagement.
Real estate companies increased from 45% to 59%, citing benefits from green building upgrades, climate-resilient design, and operational efficiencies.
Consumer discretionary also showed strong growth, up from 42% to 58%.

Other sectors such as technology, industrials, and energy reported more balanced views, with many companies still seeing sustainability as both a risk and opportunity.

Measuring Impact: ROI on Sustainability Is Gaining Clarity

A critical development is how companies are now quantifying the value of their ESG investments. More than 80% of companies said they can measure return on investment (ROI) for sustainability-related capital projects, R&D, or operating costs.

This means ESG is increasingly being treated with the same rigor as traditional business investments. Companies are tracking ROI through:

Operational cost savings from energy efficiency
Increased access to capital through sustainability-linked financing
Revenue growth from ESG-aligned products or services
Improved customer loyalty and brand value
Reduced insurance premiums and exposure to climate-related risks

This level of tracking is helping sustainability teams gain internal support and access to capital, and it’s making ESG conversations more strategic.

Progress vs. Barriers

The data also shows more companies are delivering on their ESG goals. 65% of companies say they are meeting or exceeding expectations on executing sustainability strategies, up from 59% last year. This improvement was consistent across regions: 65% in North America, 69% in Europe, and 60% in Asia-Pacific.

Still, many companies face barriers:

Cost of implementation remains the top challenge, cited by 24% of respondents.
Political and macroeconomic uncertainty was next, cited by 17%.
Difficulty understanding internal ESG performance was mentioned by 16%.

These obstacles are especially relevant for firms operating across multiple countries with different reporting standards and policy signals. Internal alignment is another hurdle. Without full buy-in from finance, operations, and strategy teams, ESG plans often stall.

Climate Events Are Reshaping Business Strategy

Physical climate risk is now directly influencing business planning. In addition to the 57% of companies that reported climate-related disruptions in the past year, over 60% of respondents anticipate these risks will negatively affect their operations in the next five years.

Top climate-related impacts include:

Increased costs of goods and services
Direct damage to facilities and infrastructure
Workforce health and safety concerns
Changes in product demand or service delivery models

In response, over 80% of companies say they are prepared to increase investments in resilience. These include flood-proof infrastructure, climate data systems, diversified supply chains, and updated risk frameworks.

What This Means for Investors

The shift in how companies view and implement sustainability has clear implications for investors.

ESG is increasingly tied to long-term performance and resilience.
Companies that report measurable ESG ROI are more likely to secure favourable financing and stakeholder support.
As disclosure expectations rise, better ESG data will improve comparability and inform capital allocation.
Investors may find new opportunities in sectors that have moved beyond compliance to execution.

Put simply, ESG is no longer about exclusion or reputation. It is becoming an integral part of business value and risk management.

For Corporate Leaders and ESG Professionals

The report provides a useful roadmap for sustainability professionals and executives.

Make ESG part of financial decision-making
Treat ESG projects as capital investments. Use ROI frameworks to compare performance across business units.
Improve internal alignment
Ensure finance, operations, and sustainability teams share ownership of ESG goals. Joint planning and clear accountability are key.
Strengthen data systems
As regulatory demands increase, companies must improve the quality and consistency of their ESG data. This is essential for building trust with investors and customers.
Prepare for climate risk
Integrate resilience into both short-term operations and long-term planning. Use scenario analysis and forward-looking risk tools to stay ahead.

A Turning Point for Corporate Sustainability

Morgan Stanley’s 2025 Sustainable Signals survey offers one of the clearest signals yet that ESG is no longer on the sidelines. With 88% of global companies now linking sustainability to long-term value, the gap between commitment and execution is beginning to close.

Jessica Alsford captures it well:
“The narrative is shifting. It’s not just about doing good. It’s about doing smart business.”

Looking ahead, firms that treat ESG as central to their business model, rather than as a reporting obligation will likely gain strategic and financial advantage. And for sustainability professionals and investors, the opportunity lies in enabling that transition through better data, stronger systems, and focused execution.

The question is no longer whether ESG matters. It’s how well companies deliver and how quickly they can adapt to a rapidly changing world.

Link to the survey – Click Here

Link to the report - Click Here

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