While over 90% of global sustainability leaders report that their companies are actively executing environmental and social strategies, confidence in meeting targets has dipped significantly over the past year. According to the 2026 “Sustainable Signals” report from the Morgan Stanley Institute for Sustainable Investing, 47% of executives now see room for improvement regarding their progress—a ten-point increase compared to 2025.
The survey, which polled 300 decision-makers across North America, Europe, and Asia Pacific, suggests a maturing but more cautious approach to sustainability as firms navigate a volatile global economy.
A primary shift identified in the 2026 data is how corporations categorise the impact of sustainability on long-term strategy. In 2025, a majority of firms (53%) viewed sustainability primarily as an opportunity for value creation. This year, that figure has plummeted to 22%.
Instead, 62% of respondents now view sustainability as a dual exercise in both value creation and risk management. This pivot indicates that while firms still seek growth through green initiatives, they are increasingly focused on protecting the business against climate, regulatory, and financial risks.
The report highlights that the external environment has become a formidable obstacle. Macroeconomic uncertainty was cited as a top barrier by 36% of leaders, more than double the 15% reported in 2025. Other significant challenges include the high level of investment required (39%) and persistent gaps in data (30%).
External pressures are also the primary drivers behind current strategies. Regulatory compliance and investor expectations have surged as motivators, cited by 49% and 42% of respondents respectively—roughly double the levels seen last year.
“Sustainability is becoming more integrated into core business strategies as macroeconomic uncertainty, rising costs, and regulatory and investor expectations increasingly shape decision-making,” said Jessica Alsford, Chief Sustainability Officer at Morgan Stanley.
Concerns regarding the physical impact of climate change are intensifying. On average, 78% of respondents anticipate negative operational effects from climate events over the next five years, up from 65% in 2025. These impacts include rising costs and increased investor scrutiny. Although 78% of firms claim they are prepared to meet these challenges, the number of executives who feel “very prepared” has fallen from 34% to 19%.
Despite the challenges, sustainability is becoming more deeply embedded in formal governance structures:
- Decision-making: 63% of firms now apply sustainability criteria to major business decisions such as R&D budgeting and M&A, up from 51% last year.
- Board oversight: 62% of companies report Board-level responsibility for sustainability, a significant increase from 42%.
- Cross-functional roles: 90% of sustainability leaders now operate across multiple functions, including finance and risk management, with 15% contributing to their organisation’s AI governance.
While the majority of firms (73%) maintain that measuring the return on investment (ROI) for sustainability is as straightforward as other business activities, the report concludes that the “easy wins” have likely been achieved, leaving firms to tackle more complex, cost-intensive phases of their transition plans.
