Morgan Stanley Sustainable Signals: Global Survey Shows Institutional Investors Expect Modest Growth in Sustainable Investment Allocations

• More than 80% of asset owners and asset managers expect sustainable allocations to increase over the next two years, but at a lower pace than 2025

• Top drivers include growth opportunities and rising materiality of sustainability risks, with data availability the leading concern

• Two-thirds of institutional investors consider responsible AI to be part of their sustainable investing strategy

• Nearly all surveyed expect climate-related physical risks to affect asset prices, but find it difficult to assess the long-term impact

NEW YORK, October 22, 2026--More than eight in 10 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 by the Morgan Stanley Institute for Sustainable Investing. Conducted between August and October 2026, the survey polled 900 institutional investors across North America, Europe and Asia Pacific – all of whom currently practice or plan to practice sustainable investing – to assess attitudes, motivations and emerging trends in the space.

Over 80% of institutional investors expect to increase their sustainable investment allocations in the next two years, but at more modest rates of growth compared to 2025. Roughly 30% of asset owners and asset managers anticipate increasing their allocations by more than five percentage points, down from two-thirds in 2025. Only 2% of asset owners and 4% of asset managers anticipate growth of more than ten percentage points, compared with around one-fifth in 2025.

"Our annual survey of institutional investors indicates that a majority expect to increase sustainable investment allocations in the coming years, recognizing growth opportunities and the rising materiality of sustainability-related risks," said Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley. "In 2026, a consistent picture has emerged across our Sustainable Signals series – with individuals, corporates and institutional investors all showing high levels of continued commitment to sustainability, yet at a more measured pace and with a sharper focus on managing risk."

Notable survey findings include:

• Concerns – Almost two-thirds (64%) of respondents cite data availability and consistency as a very significant concern around sustainable investing, up from 47% in 2025, making it the most pressing challenge. At the same time, concern levels on most issues fell compared to 2025 – including a sharp decrease in significant concerns about negative views of sustainable investing in the media or wider society, from 34% to 8%.

• Responsible AI – Two-thirds (66%) of respondents consider responsible AI part of their sustainable investing strategy. Most are focused on how companies oversee and govern their use of AI, rather than concentrating primarily on large language model (LLM) providers or AI's broader economic and social impacts.

• Climate – Climate adaptation and resilience is the most commonly pursued sustainability theme, cited by 59% of respondents, ahead of climate mitigation at 52%. Most expect physical climate risks to affect asset prices within the next five years. But, almost 90% say it is difficult to assess the impact of physical climate change on their assets, up from 66% in 2025.

• Bespoke mandates – Asset owners are seeking more control over how their sustainable investments are managed. 41% of their externally managed sustainable assets are held in customized investment mandates or separately managed accounts, and 86% expect that share to rise over the next two years.

• Key differentiator – More than 90% of asset owners and asset managers say sustainable investing options can help differentiate firms when mandates are awarded or won. A similar share consider sustainability important to managing investment risk, and more than two-thirds cite portfolio risk reduction as a reason to invest sustainably, up from half in 2025.

• Shareholder engagement – Nearly two-thirds of respondents engage with portfolio companies. Of those, more than half (59%) say they allocate most time to fewer, deeper interactions , and private, direct engagement is seen as most impactful.