Most institutional investors worldwide expect to increase their allocations to sustainable funds over the next two years, according to the latest Sustainable Signals report from the Morgan Stanley Institute for Sustainable Investing. The survey, conducted in August and September 2025, gathered insights from more than 900 asset owners and managers across North America, Europe and Asia Pacific, all of whom either currently practise or intend to pursue sustainable investing.
The findings show strong momentum: 86% of asset owners anticipate increasing the share of their portfolios dedicated to sustainable funds—a six-percentage-point rise from 2024. A similar trend emerged among asset managers, with 79% expecting their sustainable assets under management to grow. Asset owners attribute the expected increase primarily to the solid financial performance of sustainable investments and the sector’s proven track record. Asset managers, meanwhile, foresee growth driven largely by existing clients expanding their allocations, alongside opportunities from new mandates.
“In our latest global survey, the majority of institutional investors expect to increase allocations to sustainable funds, with financial performance and a maturing track record driving these decisions,” said Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley. “Consistent with individual investors and corporates surveyed this year, asset owners and managers anticipate the rising impact of climate risk and are adjusting their priorities accordingly.”
However, concerns about external pressures on sustainable investing are mounting. In 2025, 38% of respondents rated several challenges as “very significant,” up from 25% the previous year. Persistent issues include inconsistent or insufficient data, unclear regulatory guidance and political volatility.
Other insights from the survey include:
- Competitive advantage: More than 80% of asset owners and managers see sustainable investment capabilities as a key differentiator when awarding or securing mandates, with both groups viewing sustainability as integral to risk management.
- Climate risk: Over three-quarters of investors expect physical climate risks to exert a “major impact” on asset prices within five years. More than half now consider climate resilience central to their risk-return calculations.
- Investment priorities: Emissions-related solutions remain the primary focus, with energy efficiency and renewable energy ranked as the top global investment themes. Climate adaptation has risen sharply in priority, moving to third place from sixth in 2024.
Launched in 2015, the Sustainable Signals series tracks attitudes toward sustainable investing among institutional investors, corporates and individuals. The latest survey indicates accelerating commitment—despite ongoing challenges—as investors reposition their strategies to navigate climate-related and political risks.
