Key Takeaways
- • Over 80% of institutional investors surveyed expect to increase sustainable investment allocations over the next two years, according to the Morgan Stanley Institute for Sustainable Investing's "Sustainable Signals" report, but at more modest growth rates than in 2025.
- • Only about 30% of asset owners and asset managers anticipate raising allocations by more than five percentage points, down from roughly two-thirds in 2025; just 2% of asset owners and 4% of asset managers expect growth above ten percentage points, versus around one-fifth in 2025.
- • Data availability and consistency is now the most pressing challenge, cited as a very significant concern by 64% of respondents, up from 47% in 2025.
- • 86% of asset owners expect the share of externally managed sustainable assets held in customized mandates or separately managed accounts to rise over the next two years from 41% today.
- • Climate adaptation and resilience is the most commonly pursued sustainability theme at 59%, while almost 90% say assessing the impact of physical climate change on their assets is difficult, up from 66% in 2025.
Summary
More than eight in ten asset owners and asset managers globally expect their sustainable investment allocations to grow over the next two years, according to a new "Sustainable Signals" report from the Morgan Stanley Institute for Sustainable Investing. The survey, conducted between August and October 2026, polled 900 institutional investors across North America, Europe and Asia Pacific, all of whom currently practice or plan to practice sustainable investing. The report characterizes the outlook as one of continued commitment at a more measured pace, with a sharper focus on managing risk.
Growth expectations have moderated relative to 2025. Roughly 30% of asset owners and asset managers anticipate increasing allocations by more than five percentage points, down from two-thirds in the prior year. Only 2% of asset owners and 4% of asset managers expect growth exceeding ten percentage points, compared with around one-fifth in 2025. Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley, said the survey shows a consistent picture across the Sustainable Signals series, with individuals, corporates and institutional investors all maintaining high levels of commitment.
Concerns about implementation are concentrated on data. Some 64% of respondents cite data availability and consistency as a very significant concern, up from 47% in 2025, making it the most pressing challenge. By contrast, concern levels on most other issues fell, including significant concern about negative views of sustainable investing in the media or wider society, which dropped from 34% to 8%. Two-thirds of respondents consider responsible AI part of their sustainable investing strategy, with a focus on how companies govern their AI use rather than on large language model providers or AI's broader economic and social effects.
On climate, adaptation and resilience is the most commonly pursued theme at 59%, ahead of mitigation at 52%. Most respondents expect physical climate risks to affect asset prices within five years, yet almost 90% say it is difficult to assess the impact of physical climate change on their assets, up from 66% in 2025. Asset owners are also seeking greater control: 41% of their externally managed sustainable assets sit in customized mandates or separately managed accounts, and 86% expect that share to rise over the next two years.
The report also finds that more than 90% of asset owners and asset managers say sustainable investing options can help differentiate firms when mandates are awarded, and a similar share view sustainability as important to managing investment risk. More than two-thirds cite portfolio risk reduction as a reason to invest sustainably, up from half in 2025. Nearly two-thirds of respondents engage with portfolio companies, and of those, 59% prioritize fewer, deeper interactions, with private, direct engagement seen as most impactful.
Growth expectations have moderated relative to 2025. Roughly 30% of asset owners and asset managers anticipate increasing allocations by more than five percentage points, down from two-thirds in the prior year. Only 2% of asset owners and 4% of asset managers expect growth exceeding ten percentage points, compared with around one-fifth in 2025. Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley, said the survey shows a consistent picture across the Sustainable Signals series, with individuals, corporates and institutional investors all maintaining high levels of commitment.
Concerns about implementation are concentrated on data. Some 64% of respondents cite data availability and consistency as a very significant concern, up from 47% in 2025, making it the most pressing challenge. By contrast, concern levels on most other issues fell, including significant concern about negative views of sustainable investing in the media or wider society, which dropped from 34% to 8%. Two-thirds of respondents consider responsible AI part of their sustainable investing strategy, with a focus on how companies govern their AI use rather than on large language model providers or AI's broader economic and social effects.
On climate, adaptation and resilience is the most commonly pursued theme at 59%, ahead of mitigation at 52%. Most respondents expect physical climate risks to affect asset prices within five years, yet almost 90% say it is difficult to assess the impact of physical climate change on their assets, up from 66% in 2025. Asset owners are also seeking greater control: 41% of their externally managed sustainable assets sit in customized mandates or separately managed accounts, and 86% expect that share to rise over the next two years.
The report also finds that more than 90% of asset owners and asset managers say sustainable investing options can help differentiate firms when mandates are awarded, and a similar share view sustainability as important to managing investment risk. More than two-thirds cite portfolio risk reduction as a reason to invest sustainably, up from half in 2025. Nearly two-thirds of respondents engage with portfolio companies, and of those, 59% prioritize fewer, deeper interactions, with private, direct engagement seen as most impactful.
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