Morgan Stanley Finds 82% of Asset Owners Plan to Increase Sustainable Investments

Institutional investors remain committed to sustainable investing, with 82% of asset owners and 85% of asset managers expecting to increase their sustainable investment allocations over the next two years, according to Morgan Stanley's Sustainable Signals 2026 report. Published on 22 October 2026, the findings indicate that investors continue to see opportunities in sustainability-related strategies, although expectations for the scale of future allocation increases have moderated significantly compared with 2025.

The Morgan Stanley Institute for Sustainable Investing surveyed 900 institutional investors, comprising 600 asset owners and 300 asset managers, across North America, Europe and Asia-Pacific between August and October 2026. The research identifies climate adaptation, investment risk management, and responsible artificial intelligence (AI) as key priorities, while concerns about the availability and consistency of sustainability data have grown.

 

Sustainable Investment Allocations Expected to Rise at a Slower Pace

 

Although more than eight in ten respondents expect sustainable allocations to increase, fewer investors anticipate substantial changes. Only 2% of asset owners and 4% of asset managers expect their allocations to rise by more than ten percentage points, compared with approximately one-fifth in 2025. Most respondents instead expect smaller increases, suggesting a more gradual expansion of sustainable investment strategies.

Regional differences remain significant. More than 90% of European respondents expect sustainable allocations to increase, compared with more than three-quarters in North America and Asia-Pacific. Among asset owners anticipating growth, access to investment opportunities was the most frequently cited primary reason, followed by the increasing financial significance of sustainability-related risks. Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley, highlighted these factors as important drivers of continued institutional interest.

 

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ESG Data Quality Becomes the Largest Investor Concern

 

The survey found that many concerns associated with sustainable investing have eased over the past year. On average, 27% of respondents rated the issues examined as very significant, down from 38% in 2025. Concern about negative public and media perceptions of sustainable investing declined particularly sharply, from 34% to 8%. However, concerns about data availability and consistency moved in the opposite direction.

Approximately 64% of institutional investors identified sustainability data availability and consistency as a very significant concern, up from 47% in 2025. The findings suggest that although sustainable investing is becoming more established, investors still struggle to access reliable information to support portfolio analysis and risk assessment. More than 90% of asset owners and asset managers consider sustainability important for managing investment risk, while 66% of asset owners and 74% of asset managers cite portfolio risk reduction as a reason for pursuing sustainable strategies.

 

Climate Adaptation Overtakes Mitigation as a Leading Investment Theme

 

Climate adaptation and resilience emerged as the most widely pursued sustainability theme, selected by 59% of institutional investors, compared with 52% for climate mitigation. Europe showed the strongest emphasis on adaptation, with 65% of respondents identifying it as a priority, compared with 59% in Asia-Pacific and 54% in North America. Other frequently selected themes included circular economy and economic empowerment, each cited by 41% of respondents, followed by biodiversity and conservation at 38%.

The shift reflects growing attention to the financial consequences of physical climate risks, including extreme weather and changing environmental conditions. Almost 90% of respondents reported difficulty assessing the potential effects of physical climate change on their portfolios, compared with 66% in 2025. Access to high-quality, location-specific data was identified as a major obstacle. Most investors still expect physical climate risks to affect asset prices within the next five years, underscoring the need to incorporate climate resilience into investment decisions.

 

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Responsible AI Enters Institutional Sustainable Investing Strategies

 

Responsible AI is emerging as another important consideration for institutional investors. According to the report, 66% of respondents already incorporate responsible AI into their sustainable investment strategies, with participation reaching 72% in Europe, 66% in Asia-Pacific and 59% in North America. Investors are particularly focused on how companies govern and oversee their use of AI, including the management of associated operational, ethical and business risks.

The survey also found that responsible AI is generally viewed as part of broader sustainability considerations rather than an entirely separate investment theme. Among respondents incorporating responsible AI into their strategies, 94% associated it with other sustainability priorities. This reflects the growing relevance of AI governance as companies deploy advanced technologies across their operations and investors evaluate the potential financial implications of their use.

 

Asset Owners Seek Greater Control and Deeper Corporate Engagement

 

Institutional investors are also changing how they manage sustainable investment strategies. On average, 41% of asset owners' externally managed sustainable assets are held through customized mandates or separately managed accounts rather than pooled investment funds. Approximately 86% of asset owners expect this share to increase over the next two years, reflecting demand for greater control over investment decisions and portfolio management.

Corporate engagement remains an important part of sustainable investing, with almost 90% of respondents engaging directly with companies alongside considering sustainability factors in investment decisions. However, 59% prefer fewer, more substantial interactions over engaging with a larger number of companies. More than 60% of asset owners and asset managers consider private discussions with company management highly effective, indicating a preference for engagement that provides deeper insight into corporate strategy and risk management.

Morgan Stanley's findings point to a sustainable investment market characterized by continued institutional commitment but more measured growth expectations. Investors are placing greater emphasis on financial risk, climate resilience, data reliability and corporate governance as they refine their strategies.

The survey reflects the views of institutions already practicing or planning to practice sustainable investing, rather than the entire institutional investment market. Its results describe expectations and investment priorities, not confirmed future capital flows. Nevertheless, the findings show that sustainability information quality and its usefulness for investment decisions are becoming increasingly important, alongside commitments to increase sustainable allocations.

 

Source: Morgan Stanley