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Morgan Stanley’s latest Sustainable Signals survey shows that institutional demand for sustainable investing is not just holding up; it’s set to grow. According to the 2025 report, 84% of institutional investors globally expect the proportion of sustainable assets in their portfolios to increase over the next two years, with 86% of asset owners and 79% of asset managers planning higher allocations.
This trend is truly global. More than 80% of investors in each major region anticipate raising their sustainable allocations, with North American asset owners actually the most likely to increase exposure, ahead of their peers in Europe and Asia Pacific. Strong financial performance and a now “mature” track record of sustainable strategies are key drivers behind this momentum, alongside growing recognition that sustainability is central to long-term risk management.
Risk is a major part of the story. Over four in five institutional investors see sustainability as important for managing investment risk, and around a quarter cite portfolio risk reduction as their primary motivation for sustainable investing. At the same time, more investors are flagging headwinds: 38% now view concerns such as data quality, shifting regulatory definitions, and political uncertainty as “very significant,” up from 25% in the previous survey.
Climate remains the dominant theme. Energy efficiency and renewable energy hold their positions as the top two priority areas for sustainable investment. However, the big mover is climate adaptation and resilience, which has jumped into third place as investors sharpen their focus on physical climate risks. More than 75% expect those risks to have at least some major impact on asset prices within the next five years, prompting growing interest in solutions such as climate data and analytics, resilient infrastructure, and grid modernization.
Taken together, the findings show that despite a tougher political and regulatory backdrop, institutional investors are doubling down on sustainability rather than backing away. Sustainable investing is increasingly viewed as a core part of conventional portfolio construction, driven by performance, risk, and a widening opportunity set in the transition and climate-resilience economy.
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