A majority of global asset managers (78%) and asset owners (80%) expect sustainable investment to increase over the next two years, a new study by the Morgan Stanley Institute for Sustainable Investing has found.
According to the study, which polled more than 900 institutional investors across North America, Europe and Asia Pacific in July and August 2024, some 90% of institutional investors say that sustainable investment activity is being driven by client and external stakeholder demands.
The Sustainable Signals report also found that more than three quarters (78%) of asset managers expect assets under management in sustainable funds to increase over the next two years, while 80% of asset owners expect the the proportion of their assets allocated to sustainable investment options to increase during the same period.
A sizeable number of asset owners also agree that sustainable investing offerings influence their mandate decisions, with 80% requiring asset managers to have a sustainable investing policy or strategy in place.
‘Growth trajectory’
“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,” commented 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 sustainability as an opportunity for growth and value creation.”
The report also notes that challenges remain when it comes to sustainable business investment, including concerns about data availability, fluctuating regulatory guidance, and greenwashing.
Data availability was identified as the top challenge (71%) by respondents, followed by concerns about fluctuating regulations (69%) and greenwashing (68%).
Morgan Stanley’s study also indicates that nearly two-thirds of asset owners and managers have set net-zero targets, with most stating that they have plans in place to achieve these goals. However, just 2% of institutional investors report having already reached net zero.
Carbon offsetting
On the use of carbon offsetting in decarbonisation strategies, some 40% of respondents said that they currently use carbon offsets to mitigate portfolio emissions, while 31% offer clients offsets for specific products or aggregated emissions.
Around a third (32% of asset owners and 31% of asset managers) believe that carbon offsetting represents a valid approach to decarbonisation, while more than a quarter (28% of asset owners and 27% of asset managers) remain cautious about its effectiveness.
Morgan Stanley first launched the Sustainable Signals report series in 2015. Read more here.
