SKN | Morgan Stanley Survey Signals Continued Growth in Sustainable Investing, but at a More Measured Pace

Key Takeaways:

• Morgan Stanley reports that more than 80% of surveyed asset owners and asset managers expect sustainable investment allocations to increase over the next two years, although growth is expected to be slower than in 2025.
• Growth opportunities and the increasing materiality of sustainability risks are key drivers, while data availability remains the leading concern.
• Two-thirds of surveyed institutional investors include responsible artificial intelligence in their sustainable-investing strategy, while nearly all expect physical climate risks to affect asset prices.

Morgan Stanley is highlighting a shift in institutional sustainable investing: allocations are expected to continue growing, but at a more measured pace. The bank’s Sustainable Signals survey indicates that more than 80% of participating asset owners and asset managers anticipate increasing sustainable investment allocations over the next two years, even as the expected pace moderates relative to 2025.

The findings suggest that sustainability remains relevant to institutional portfolio construction, but investors are increasingly focused on the practical challenges of implementation. For Morgan Stanley, the survey provides insight into how institutions are weighing potential growth opportunities against measurable risks, information gaps and the difficulty of assessing long-term outcomes.

Why Sustainable Allocations Remain on Institutional Agendas

The survey identifies growth opportunities and the rising materiality of sustainability risks as leading drivers of sustainable investment. This combination matters because institutions are considering sustainability not only as a values-based objective, but also as a factor that may affect financial performance and risk exposure.

However, expectations of slower allocation growth suggest a more deliberate approach. The survey does not indicate that institutional investors are abandoning sustainable strategies; rather, it points to continued interest alongside greater attention to implementation and evidence. For wealth managers and internationally diversified investors, the distinction is important: sustained interest does not mean every sustainable investment offers attractive pricing, reliable returns or comparable risk characteristics.

Data Availability Remains a Major Obstacle

Morgan Stanley identifies data availability as the leading concern among surveyed institutions. Inconsistent, incomplete or difficult-to-compare information can complicate the assessment of companies’ sustainability performance and the financial relevance of specific risks.

For investment professionals, this creates a due-diligence challenge. Portfolio decisions require a clear understanding of how sustainability factors are measured, which assumptions underpin the analysis and whether reported information supports meaningful comparisons. The survey highlights the importance of data quality, although the supplied findings do not quantify the financial impact of these information gaps.

Responsible AI and Climate Risk Enter the Investment Framework

Two-thirds of surveyed institutional investors consider responsible AI part of their sustainable-investing strategy. This finding indicates that governance and the responsible deployment of artificial intelligence are becoming relevant to how many institutions frame sustainability. It does not, by itself, establish a universal standard for evaluating AI-related investments.

Climate risk presents a related challenge. Nearly all surveyed investors expect physical climate risks to affect asset prices, yet they report difficulty assessing the long-term impact. This gap between recognizing a risk and quantifying its consequences is significant for investors with long investment horizons, including families managing multigenerational wealth.

What Morgan Stanley’s Findings Mean for Investors

The survey points to continued institutional interest in sustainable investing, accompanied by more measured allocation expectations and persistent analytical challenges. The practical priority is to distinguish credible, decision-useful evidence from broad sustainability claims and to evaluate how individual risks may affect valuations, cash flows and portfolio resilience.

Morgan Stanley’s findings suggest that sustainable investing is evolving toward more deliberate assessment rather than disappearing from institutional portfolios. For investors, data quality, responsible AI governance and climate-risk analysis remain important areas to examine as strategies develop. For a confidential discussion regarding your cross-border banking structure and global wealth management arrangements, contact our senior advisory team.