Dive Brief:
- Global investor interest in sustainable investments has continued to rise in the past few years, with 54% of investors anticipating increasing their sustainable investments portfolio in 2024, according to a Morgan Stanley survey.
- The survey, released Monday by Morgan Stanley’s Institute for Sustainable Investing, was conducted in October and includes representative samples from the United States, United Kingdom, France, Germany and Sweden, as well as an unrepresentative sample from Japan. The firm said it did not have enough information for the latter to match sample demographics to census data.
- Investors have credited new climate science and the performance of sustainable investments as key factors to this rising interest. However, more than 60% of respondents also expressed concerns about greenwashing and the lack of transparency and trust in reported ESG data.
Dive Insight:
Morgan Stanley’s investor survey found that interest in sustainable investments was even higher in the U.S. and Europe, with 84% and 85% of respondents from those regions, respectively, saying they are somewhat or very interested, compared to 77% globally. Generationally, interest in sustainable investing among U.S. investors is highest among millennials and Gen X, with 96% and 91% support, respectively.
More than three-quarter of investors — 77% — believe it is possible to balance financial gains with a sustainability focus, and that “companies or funds that seek to make a positive social or environmental impact can be profitable.”
“These investors express a desire for their investments to advance positive environmental and social impact, creating opportunities for finance professionals to meet these needs,” Jessica Alsford, Morgan Stanley’s chief sustainability officer and CEO of the institute, said in the release.
The survey also found nearly 80% of global investors consider a company’s reporting on its carbon footprint and commitment to reducing greenhouse gas emissions when making a new investment. However, 51% of respondents said they would consider investing in traditional energy companies, as long as they have robust plans to reduce their carbon footprint and address climate change.
The survey included responses from 1,002 U.S. investors, 1,025 European investors and 793 investors from Japan. Investors ranged in age from 18-80 and all — except Gen Z investors aged 18-26 — have over $100,000 in investable assets outside of retirement accounts or real estate. Gen Z investors were included in the survey if they said they were planning to open an account.
For now, the proportions of investment portfolios dedicated to sustainable investments remains low, and only 14% of investors have more than half of their portfolio dedicated to sustainable investments, with 8% of respondents having zero sustainable investments. A plurality of respondents — 33% — do not know how much of their portfolio is allocated for sustainable investments.
U.S. investors have slightly more of their portfolios allocated to sustainability, with 19% of respondents indicating more than half their portfolios are sustainable investments.
Investors have prioritized climate action as their top sustainable investment theme, according to the release, with 15% ranking it the top issue, followed by healthcare, water solutions and a circular economy — with 13%, 11% and 11%, respectively ranking it their top issue.
Investors are also looking for additional support, with 52% of respondents having limited knowledge about how to begin sustainable investing and 43% lacking the financial advice to do so.
The International Ethics Standards Board for Accountants released guidance earlier this week aimed at helping investors reach the levels of transparency they seek. IESBA’s standards lay out ethical principles all sustainability assurance experts should abide by and provide a guide for how to evaluate outside help.
“All users of sustainability disclosures have a vested interest in ensuring ethical choices by the preparers and assurers of such information,” IESBA Chair Gabriela Figueiredo Dias said in a release.
