Institutional investors remain committed to sustainable investing, but their expectations for growth in allocations are becoming more measured, as eight in 10 asset owners and managers expect to increase their allocations to sustainable strategies over the next two years broadly consistent with 2025 and 2024, according to a recent survey.
And, while many concerns held by investors about sustainable investing have eased, they are focused on climate adaptation and responsible artificial intelligence ( AI ), finds the latest Sustainable Signals survey from the Morgan Stanley Institute for Sustainable Investing, which polled 900 institutional investors across North America, Europe and Asia-Pacific between August and October, all of whom practice or plan to practice sustainable investing.
Only 2% of asset owners and 4% of asset managers anticipate growth of more than 10 percentage points, compared with around one-fifth in 2025. As in prior years, very few investors expect their allocations to decrease.
Asset owners, the survey reveals, are also seeking more control over how their sustainable investments are managed. On average, 41% of their externally managed sustainable assets are held in customized investment mandates or separately managed accounts, and 86% expect that share to rise over the next two years.
These structures, asset owners say, give them greater control over their sustainable investment strategies and the timing of investment decisions.
Concerns ease, but data challenges grow
Institutional investors note lower levels of concern related to most of the issues covered in the survey. On average, 27% rate these concerns as very significant, down from 38% in 2025 and close to 2024 levels.
Concern about negative views of sustainable investing in the media or wider society, the survey reveals, fell sharply, from 34% to 8%.
However, data, the survey shares, is the clear exception. Almost two-thirds ( 64% ) of respondents cite data availability and consistency as a very significant concern, up from 47% in 2025, making it the most pressing challenge in this year’s survey.
At the same time, fewer investors view sustainability disclosures themselves as a burden for investors or corporates.
Despite these data challenges, sustainability, the survey reveals, remains important to institutional investment decisions. More than 90% of asset owners and managers say sustainable investing options are a key differentiator in awarding or winning mandates.
A similar share consider sustainability important to managing investment risk, while more than two-thirds cite portfolio risk reduction as a reason to invest sustainably, up from half in 2025.
Climate adaptation tops list
Climate adaptation and resilience, the survey states, has become the most commonly pursued sustainability theme among institutional investors globally, cited by 59% of respondents, compared with 52% for climate mitigation.
Interest in adaptation is highest in Europe, where 65% of investors say they aim to address the theme compared with 54% in North America and 59% in Asia-Pacific.
This focus comes as investors increasingly anticipate financial effects from physical climate change, but continue to face challenges assessing their exposure. Almost 90% say it is difficult to evaluate the potential impact on their assets, up from 66% in 2025, with access to high-quality, localized data cited as the leading barrier.
Even so, most expect physical climate risks to affect asset prices within the next five years, whether across the broader market or a more limited group of assets.
Responsible AI part of sustainable investing
The responsible development and use of AI is also becoming part of institutional investors’ evaluation of sustainability-related opportunities and risks.
Two-thirds of respondents consider responsible AI part of their sustainable investing strategy, including 72% in Europe and 59% in North America.
Most are focused on how companies oversee and govern their use of AI, rather than concentrating primarily on large language model providers or AI’s broader economic and social impacts.
“Our survey of institutional investors,” states Jessica Alsford, Morgan Stanley’s chief sustainability officer and the chair of its Institute for Sustainable Investing, “indicates that a majority expect to increase sustainable investment allocations in the coming years, recognizing growth opportunities and the rising materiality of sustainability-related risks.”
“In 2026, a consistent picture has emerged – with individuals, corporates and institutional investors all showing high levels of continued commitment to sustainability, yet at a more measured pace and with a sharper focus on managing risk.”
