Institutional Investors Keep Raising Sustainable Allocations, but at a Slower Pace

Institutional investors still expect sustainable strategies to attract more capital, but their forecasts point to slower growth and tougher questions about data. Morgan Stanley’s 2026 survey found that 82% of asset owners and 85% of asset managers plan to raise sustainable allocations over the next two years. Nearly all respondents expect allocations to hold steady or rise.

The survey covered 900 investors across North America, Europe and Asia Pacific: 600 asset owners and 300 asset managers. The share planning to increase allocations was broadly in line with last year’s findings, though the expected pace has cooled. About half forecast allocation growth of up to 5%, excluding investment performance. Only around a third expect growth above 5%; last year, nearly two thirds anticipated increases at that level.

Growth opportunities move to the top

Investors’ reasons for increasing allocations have shifted. Exposure to growth opportunities now ranks first for both asset owners and asset managers, rising from third place last year. The growing materiality of sustainability risks ranks second, up from seventh. In 2025, respondents had put sustainable strategies’ financial performance and the maturation of sustainable investing at the top of the list.

Regional expectations vary. European investors are most likely to anticipate higher allocations, at 93%, followed by Asia Pacific at 80% and North America at 77%. For asset owners, existing clients are expected to account for most new sustainable investment assets: 75% identified increased allocations from current clients as the likeliest source. Fourteen percent pointed to new clients investing sustainably for the first time.

Demand also matters to manager selection. Among asset owners, 95% said sustainable investing options are a key factor in selecting and retaining asset managers, while more than 80% require external managers to have a sustainable investing policy or strategy.

Less social pressure, more data friction

Investors reported fewer intense concerns about sustainable investing than a year ago, including worries about greenwashing, disclosure burdens and the political environment. The steepest drop involved negative views in media and wider society: the share describing this as a significant concern fell from 34% in 2025 to 8% in 2026.

Data remains a pronounced obstacle. Sixty-four percent of respondents cited data availability and consistency as a “very significant” concern, up from 47% last year. That rise stands out against the broader easing of concerns and suggests that investors’ appetite for sustainable strategies is running ahead of the information they need to assess them.

Climate adaptation draws attention

Most surveyed investors address both social and environmental themes. Climate adaptation and resilience was the most commonly cited focus, at 59%, ahead of climate mitigation at 52%. Economic empowerment and the circular economy each drew 41%.

That emphasis on adaptation reflects concern about physical climate risks to portfolios. A third of investors expect those risks to have major pricing effects across the market within five years; 39% expect major effects on a limited number of assets, and 26% anticipate moderate effects across the market. Yet nearly 90% said assessing physical climate risk’s impact on their own assets is difficult, up from about a third last year.

Engagement is also part of the toolkit: more than 90% of investors use it alongside investment approaches to address sustainability themes. Most asset owners (58%) and asset managers (61%) said they spend the most time on fewer, deeper engagements with portfolio companies where they believe they can make the greatest difference.

Jessica Alsford, Morgan Stanley’s chief sustainability officer and chair of its Institute for Sustainable Investing, said the survey shows continued commitment alongside a more measured pace and a sharper focus on risk. The findings suggest the next phase of institutional sustainable investing will depend on whether investors can turn broad interest into allocations while improving their ability to measure the risks they see.

Click here to access the survey.