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 2026 Sustainable Signals report, but at more modest growth rates than in 2025.
- • Only about 30% of asset owners and asset managers expect allocation increases of more than five percentage points, down from two-thirds in 2025; just 2% of asset owners and 4% of asset managers anticipate growth above ten percentage points, versus around one-fifth in 2025.
- • Data availability and consistency is now the top concern, cited as very significant by 64% of respondents, up from 47% in 2025.
- • 41% of externally managed sustainable assets held by asset owners sit in customized mandates or separately managed accounts, and 86% expect that share to rise over the next two years.
- • Climate adaptation and resilience (59%) leads as the most pursued sustainability theme, ahead of climate mitigation (52%), while almost 90% find physical climate impacts on assets difficult to assess.
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 the latest "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 signals that growth expectations remain positive but are more measured than in 2025.
The pace of expected growth has slowed. Roughly 30% of respondents anticipate increasing allocations by more than five percentage points, down from two-thirds in 2025. 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 a consistent picture has emerged across the Sustainable Signals series, with individuals, corporates and institutional investors showing continued commitment "at a more measured pace and with a sharper focus on managing risk."
Data availability and consistency is the most pressing challenge, with 64% of respondents citing it as a very significant concern, up from 47% in 2025. Concern levels on most other issues declined, including a sharp drop in significant concern about negative views of sustainable investing in the media or wider society, from 34% to 8%. Sixty-six percent of respondents consider responsible AI part of their sustainable investing strategy, with most focused 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 are held in customized mandates or separately managed accounts, and 86% expect that share to rise. More than 90% of respondents say sustainable investing options can help differentiate firms in mandate awards, and more than two-thirds cite portfolio risk reduction as a reason to invest sustainably, up from half in 2025. Nearly two-thirds engage with portfolio companies, with more than half of those favoring fewer, deeper interactions and viewing private, direct engagement as most impactful.
The pace of expected growth has slowed. Roughly 30% of respondents anticipate increasing allocations by more than five percentage points, down from two-thirds in 2025. 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 a consistent picture has emerged across the Sustainable Signals series, with individuals, corporates and institutional investors showing continued commitment "at a more measured pace and with a sharper focus on managing risk."
Data availability and consistency is the most pressing challenge, with 64% of respondents citing it as a very significant concern, up from 47% in 2025. Concern levels on most other issues declined, including a sharp drop in significant concern about negative views of sustainable investing in the media or wider society, from 34% to 8%. Sixty-six percent of respondents consider responsible AI part of their sustainable investing strategy, with most focused 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 are held in customized mandates or separately managed accounts, and 86% expect that share to rise. More than 90% of respondents say sustainable investing options can help differentiate firms in mandate awards, and more than two-thirds cite portfolio risk reduction as a reason to invest sustainably, up from half in 2025. Nearly two-thirds engage with portfolio companies, with more than half of those favoring fewer, deeper interactions and viewing private, direct engagement as most impactful.
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