- Majority of global asset managers (78%) and asset owners (80%)
expect sustainable assets to increase over next two years
- Nearly 90% of institutional investors say sustainable investing
activities are driven by client and external stakeholder
demands
- Top challenges to sustainable investing include data
availability, political and regulatory environment, and
greenwashing
- Institutional investors have mixed views on use of carbon
offsets as part of investees’ decarbonization strategy
Most institutional investors expect assets in sustainable funds
to grow in the next two years, according to a new “Sustainable
Signals” report by the Morgan Stanley Institute for Sustainable
Investing. The survey, which polled more than 900 institutional
investors across North America, Europe and Asia Pacific in July and
August 2024, assesses attitudes of asset owners and asset managers
toward sustainable investing, as well as emerging trends in the
space.
The majority of asset managers (78%) expect AUM in sustainable
funds to increase over the next two years, driven by a combination
of new mandates and higher allocations from existing clients.
Similarly, 80% of asset owners expect the proportion of their
assets allocated to sustainable investment options to increase
during the same period. More than three-quarters of asset owners
“strongly” or “somewhat” agree that sustainable investing offerings
influence mandate decisions, with 80% requiring their asset
managers to have a sustainable investing policy or strategy in
place.
“Institutional investors see a growth trajectory for sustainable
assets globally in the coming years to meet increasing client and
stakeholder demands in a more mature sustainable investing market,”
said Jessica Alsford, Chief Sustainability Officer and Chair of the
Institute for Sustainable Investing at Morgan Stanley. “This year
the Institute has released Sustainable Signals reports with views
from individual investors, corporates and institutional investors,
with each group seeing sutainability as an opportunity for growth
and value creation.”
Other key survey findings include:
- Challenges and Concerns – The top reported challenge in
sustainable investing for both asset owners and managers is data
availability (71%), followed by fluctuating regulatory guidance
(69%) and greenwashing (68%). APAC investors cite challenges at
higher rates than European and North American counterparts, with
particular concerns around the burden of disclosure requirements
for investors (71%).
- Sustainable Investment Themes and Solutions – Globally,
institutional investors prioritize investments in healthcare (41%)
and financial inclusion (40%). Regional differences emerged when
asked about investment priorities for specific sustainable
solutions, with European investors ranking nature and biodiversity
solutions higher for example. Notably, climate adaptation solutions
are seen as one of the most underappreciated investment
opportunities across all regions.
- Net-Zero Targets – Close to two-thirds of asset owners
and managers have set a net-zero target, with almost all saying
they have a plan to deliver their target. About 2% of institutional
investors are reportedly already at net zero.
When it comes to assessing the use of carbon offsets,
institutional investors have mixed views. Nearly 40% of asset
owners currently use carbon offsets to mitigate portfolio
emissions, and 31% of asset managers offer clients offsets linked
to specific products or aggregated emissions. But while some
consider offsets a valid approach to decarbonization (32% of asset
owners, 31% of asset managers), others think they should only be
used for hard-to-abate emissions (21% of asset owners, 22% of asset
managers). Still others are cautious about the use of offsets and
are waiting for greater certainty (28% of asset owners, 27% of
asset managers).
The Sustainable Signals series was launched in 2015 and measures
the views of individual investors, instititutional investors and
corporates on sustainable investing. View the full results of the
latest survey here.
About Morgan Stanley
Morgan Stanley (NYSE: MS) is a leading global financial services
firm providing a wide range of investment banking, securities,
wealth management and investment management services. With offices
in 42 countries, the Firm’s employees serve clients worldwide
including corporations, governments, institutions and individuals.
For further information about Morgan Stanley, please visit
www.morganstanley.com.
About Morgan Stanley Institute for Sustainable
Investing
The Morgan Stanley Institute for Sustainable Investing (The
Institute) builds scalable finance solutions that seek to deliver
competitive financial returns while driving positive environmental
and social impact. The Institute creates innovative financial
products, thoughtful insights and capacity building programs that
help maximize capital to create a more sustainable future. For more
information about the Morgan Stanley Institute for Sustainable
Investing, visit www.morganstanley.com/sustainableinvesting.
Disclosures
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Because of their narrow focus, sector investments tend to be
more volatile than investments that diversify across many sectors
and companies.
Certain portfolios may include investment holdings that consider
one or more Environmental, Social and Governance (“ESG”) factors
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