Global interest in sustainable investing has risen four points to 92% among individual investors, a new report by Morgan Stanley has found.
Morgan Stanley’s Sustainable Signals report, which gathered responses from 2,250 active investors across North America, Europe and Asia Pacific, also found that while interest levels are up, portfolio allocation has shown a slight decline compared to last year (31% versus 33%).
Three quarters of individual investors already have some portfolio exposure to sustainable investments, it noted, of which half entered this space more than five years ago
At the same time, the slight drop in allocations points to a ‘potential disconnect between sentiment and behaviour’, Morgan Stanley noted.
‘Top driver’
“Our latest Sustainable Signals survey shows that performance continues to be the top driver of individual investors’ interest in sustainable investing, as they look to achieve both market-rate returns and real-world impacts,” commented Jessica Alsford, chief sustainability officer and chair of the Institute for Sustainable Investing at Morgan Stanley.
“Looking ahead, a majority of individual investors see greater opportunity for sustainable investments in private markets, especially for portfolio diversification and investing in innovation.”
Among those interested in sustainable investing, 85% said that their top motivation is either support for real-world outcomes alongside market-rate returns, or the expectation that such investments may outperform traditional options.
Confidence in performance
Of the close to two thirds (64%) that plan to increase allocations next year, confidence in performance was cited as the most common reason. At the same time, the 5% that said that they plan to decrease their allocation pointed to expectations about weaker returns.
Some 64% of respondents said that they see greater opportunity for sustainable investments in private versus public markets, citing diversification, access to new business models, and exposure to growth sectors.
Among the key priorities identified by those making sustainable investments were broad-based sustainability (25%), economic empowerment (15%), and health and wellness (15%). However, a growing proportion of respondents also reported an increase in barriers to sustainable investment.
Some 25% of respondents described these barriers as ‘significant’, compared to 21% last year. Close to a third (32%) raised concerns about greenwashing, followed by lack of transparency in data (30%) and limited knowledge (27%).
Elsewhere, four fifths of respondents (79%) said that they would select a financial advisor or platform based on its sustainable investment offerings, indicating the level to which sustainability has become a differentiating factor for wealth managers.
The survey included responses from the Middle East and North Africa (MENA) for the first time, and found that majority of investors (90%) are either ‘very’ or ‘somewhat’ interested in sustainable investing in this region. Read more here.
