• Majority of global asset managers (78%) and asset owners (80%) expect sustainable assets to increase over next two years
  • Nearly 90% of institutional investors say sustainable investing activities are driven by client and external stakeholder demands
  • Top challenges to sustainable investing include data availability, political and regulatory environment, and greenwashing
  • Institutional investors have mixed views on use of carbon offsets as part of investees’ decarbonization strategy

Most institutional investors expect assets in sustainable funds to grow in the next two years, according to a new “Sustainable Signals” report by the Morgan Stanley Institute for Sustainable Investing. The survey, which polled more than 900 institutional investors across North America, Europe and Asia Pacific in July and August 2024, assesses attitudes of asset owners and asset managers toward sustainable investing, as well as emerging trends in the space.

The majority of asset managers (78%) expect AUM in sustainable funds to increase over the next two years, driven by a combination of new mandates and higher allocations from existing clients. Similarly, 80% of asset owners expect the proportion of their assets allocated to sustainable investment options to increase during the same period. More than three-quarters of asset owners “strongly” or “somewhat” agree that sustainable investing offerings influence mandate decisions, with 80% requiring their asset managers to have a sustainable investing policy or strategy in place.

“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,” said 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 sutainability as an opportunity for growth and value creation.”

Other key survey findings include:

  • Challenges and Concerns – The top reported challenge in sustainable investing for both asset owners and managers is data availability (71%), followed by fluctuating regulatory guidance (69%) and greenwashing (68%). APAC investors cite challenges at higher rates than European and North American counterparts, with particular concerns around the burden of disclosure requirements for investors (71%).
  • Sustainable Investment Themes and Solutions – Globally, institutional investors prioritize investments in healthcare (41%) and financial inclusion (40%). Regional differences emerged when asked about investment priorities for specific sustainable solutions, with European investors ranking nature and biodiversity solutions higher for example. Notably, climate adaptation solutions are seen as one of the most underappreciated investment opportunities across all regions.
  • Net-Zero Targets – Close to two-thirds of asset owners and managers have set a net-zero target, with almost all saying they have a plan to deliver their target. About 2% of institutional investors are reportedly already at net zero.

When it comes to assessing the use of carbon offsets, institutional investors have mixed views. Nearly 40% of asset owners currently use carbon offsets to mitigate portfolio emissions, and 31% of asset managers offer clients offsets linked to specific products or aggregated emissions. But while some consider offsets a valid approach to decarbonization (32% of asset owners, 31% of asset managers), others think they should only be used for hard-to-abate emissions (21% of asset owners, 22% of asset managers). Still others are cautious about the use of offsets and are waiting for greater certainty (28% of asset owners, 27% of asset managers).

The Sustainable Signals series was launched in 2015 and measures the views of individual investors, instititutional investors and corporates on sustainable investing. View the full results of the latest survey here.

About Morgan Stanley

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

About Morgan Stanley Institute for Sustainable Investing

The Morgan Stanley Institute for Sustainable Investing (The Institute) builds scalable finance solutions that seek to deliver competitive financial returns while driving positive environmental and social impact. The Institute creates innovative financial products, thoughtful insights and capacity building programs that help maximize capital to create a more sustainable future. For more information about the Morgan Stanley Institute for Sustainable Investing, visit www.morganstanley.com/sustainableinvesting.

Disclosures

This material was published in December 2024 and has been prepared for informational purposes only and is not a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy. This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Securities discussed in this material may not be appropriate for all investors. It should not be assumed that the securities transactions or holdings discussed were or will be profitable. Morgan Stanley recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a Financial Advisor.

This material contains forward-looking statements and there can be no guarantee that they will come to pass. Past performance is not a guarantee of future results or indicative of future performance.

Information contained in this material is based on data from multiple sources and Morgan Stanley makes no representation as to the accuracy or completeness of data from sources outside of Morgan Stanley.

Morgan Stanley makes every effort to use reliable, comprehensive information, but we make no guarantee that it is accurate or complete. We have no obligation to tell you when opinions or information in this material may change.

Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.

Certain portfolios may include investment holdings that consider one or more Environmental, Social and Governance (“ESG”) factors (referred to as “ESG investments”). For reference, environmental ("E") factors can include, but are not limited to, climate change, water, waste, and biodiversity. Social ("S") factors can include, but not are not limited to, employees, diversity & inclusion, cyber security, data privacy, health & wellness, supply chains, product safety & security, community engagement, and human rights. Governance ("G") factors can include, but are not limited to, board structure & oversight, leadership composition, pay and incentive structures, corruption & bribery, ethics & business conduct, shareholder rights, accounting & audit practices, tax evasion, and risk management. You should carefully review an investment product's prospectus or other offering documents, disclosures and/or marketing material to learn more about how it incorporates ESG factors into its investment strategy.

ESG investments may also be referred to as sustainable investments, impact aware investments, socially responsible investments or diversity, equity, and inclusion (“DEI”) investments. It is important to understand that ESG definitions and criteria used within the industry can vary, and ESG ratings of the same subject companies and/or securities can vary among different ESG ratings providers for several reasons including, differences in definitions, methodologies, processes, data sources and subjectivity among ESG rating providers when determining a rating. Certain issuers of investments including, but not limited to, separately managed accounts (“SMAs”), mutual funds and exchange traded funds (“ETFs”) may have differing and inconsistent views concerning ESG criteria where the ESG claims made in offering documents or other literature may overstate ESG impact. Further, socially responsible norms vary by region, and an issuer’s ESG practices or Morgan Stanley’s assessment of an issuer’s ESG practices can change over time.

Portfolios that include investment holdings deemed ESG investments or that employ ESG screening criteria as part of an overall strategy may experience performance that is lower or higher than a portfolio not employing such practices. Portfolios with ESG restrictions and strategies as well as ESG investments may not be able to take advantage of the same opportunities or market trends as portfolios where ESG criteria is not applied. There is no assurance that an ESG investing strategy or techniques employed will be successful. Past performance is not a guarantee or a dependable measure of future results. For risks related to a specific fund, please refer to the fund's prospectus or summary prospectus.

Investment managers can have different approaches to ESG and can offer strategies that differ from the strategies offered by other investment managers with respect to the same theme or topic. Additionally, when evaluating investments, an investment manager is dependent upon information and data that may be incomplete, inaccurate, or unavailable, which could cause the manager to incorrectly assess an investment’s ESG characteristics or performance. Such data or information may be obtained through voluntary or third-party reporting. Morgan Stanley does not verify that such information and data is accurate and makes no representation or warranty as to its accuracy, timeliness, or completeness when evaluating an issuer.

Morgan Stanley makes no representation as to the compliance or otherwise of any fund or portfolio with any laws or regulatory guidelines, recommendations, requirements or similar relating to the ESG characterization of any fund or portfolio, or in connection with or to meet any of your investing ESG objectives, metrics, or criteria.

The appropriateness of a particular ESG investment or strategy will depend on an investor’s individual circumstances and objectives. Principal value and return of an investment will fluctuate with changes in market conditions.

There is no assurance that an ESG investing strategy or techniques employed will be successful. Past performance is not a guarantee or a dependable measure of future results.

Information contained in the material is based on data from multiple sources and Morgan Stanley makes no representation as to the accuracy or completeness of data from sources outside of Morgan Stanley. References to third parties contained herein should not be considered a solicitation on behalf of or an endorsement of those entities by Morgan Stanley. Morgan Stanley is not responsible for the information contained on any third-party web site or your use of or inability to use such site, nor do we guarantee its accuracy or completeness. The terms, conditions, and privacy policy of any third-party web site may be different from those applicable to your use of any Morgan Stanley web site. The opinions expressed by the author of an article written by a third party are solely his/her own and do not necessarily reflect those of Morgan Stanley. The information and data provided by any third-party web site or publication is as of the date of the article when it was written and is subject to change without notice.

Artificial intelligence (AI) is subject to limitations, and you should be aware that any output from an IA-supported tool or service made available by the Firm for your use is subject to such limitations, including but not limited to inaccuracy, incompleteness, or embedded bias. You should always verify the results of any AI-generated output.

Morgan Stanley Wealth Management is a business of Morgan Stanley Smith Barney LLC.

© 2024 Morgan Stanley & Co. LLC and Morgan Stanley Smith Barney LLC. Members SIPC.

Media Relations: Carrie Hall Carrie.Hall@morganstanley.com

Morgan Stanley (NYSE:MS)
Historical Stock Chart
From Nov 2024 to Dec 2024 Click Here for more Morgan Stanley Charts.
Morgan Stanley (NYSE:MS)
Historical Stock Chart
From Dec 2023 to Dec 2024 Click Here for more Morgan Stanley Charts.