Morgan Stanley’s latest survey, titled “Sustainable Signals,” has highlighted significant trends in the sustainable investment sector.
According to ESG Today, surveying over 900 institutional investors across North America, Europe, and Asia Pacific—including 295 asset owners and 606 asset managers—the study found a strong optimism for growth in sustainable investments.
Specifically, 78% of asset managers and 80% of asset owners anticipate an increase in assets under management (AUM) allocated to sustainable funds over the next two years. Only a small fraction, 3% from each group, foresee a decrease in sustainable investment allocations.
The survey revealed that the primary driver for this expected growth is the attraction to growth opportunities provided by sustainable themes, acknowledged by nearly 90% of investors. Moreover, the established track record of sustainable investing strategies, recognized by over 80%, underscores its maturity as an investment approach.
A notable insight from the report is that a majority of both asset managers (79%) and asset owners (76%) now regard sustainable investing offerings as a key differentiator when deciding on investment mandates.
The survey highlights that increased AUM in sustainable investing is likely to come from a variety of sources: new mandates from asset owners, increased allocations from existing clients, and new investors adopting sustainable investing for the first time.
Regarding net zero investment targets, 65% of asset owners and 57% of asset managers have set such goals. Almost all participants with net zero targets have strategies in place to meet them, employing tactics such as tilting investment towards low emitters and shifting capital towards high emitters that are actively decarbonizing.
However, the survey also points to significant challenges. Data availability and consistency were reported as the most substantial barriers, with over 70% of respondents citing it as a significant issue. This was closely followed by concerns over fluctuating regulatory guidance and risks of greenwashing.
On the topic of carbon offsets, the report shows mixed attitudes. Nearly two-thirds of asset owners are currently purchasing or planning to purchase carbon offsets to mitigate their portfolio emissions over the next two years. Meanwhile, the survey indicates a cautious approach towards the use of offsets, with about 30% considering them a valid part of a broader decarbonization strategy.
Morgan Stanley’s Chief Sustainability Officer and Chair of the Institute for Sustainable Investing, Jessica Alsford, highlighted the growth potential in the sustainable investment sector:
“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. 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.”
Keep up with all the latest FinTech news here
Copyright © 2024 FinTech Global
