Morgan Stanley survey reveals rising investor focus on climate resilience and sustainability amid regulatory uncertainties

Morgan Stanley’s 2025 Sustainable Signals survey reveals a robust and growing commitment among institutional investors to increase allocations in sustainable assets, despite a more challenging operating environment marked by data limitations, regulatory uncertainty, and political volatility. Surveying over 900 asset owners and managers across North America, Europe, and Asia-Pacific, the report finds that 84% of investors expect sustainable assets under management (AUM) to rise in the next two years. This optimism is particularly pronounced among asset owners, with 86% anticipating growth, driven by a maturing investment landscape where sustainability is increasingly viewed as a performance-enhancing and risk-management strategy.

Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer and Chair of the Institute for Sustainable Investing, emphasises this shift: “The majority expect to increase their proportion of assets in sustainable funds – with financial performance and a maturing track record driving these allocations.” Asset owners cited these stronger performance histories and established track records as key reasons for their optimistic outlook, reflecting a transition from early thematic interest to integration of sustainability within core investment frameworks.

Yet, the survey also highlights escalating challenges. Around 38% of respondents describe their concerns about sustainable investing as “very significant,” compared with 25% in the previous year. Key hurdles include the reliability and availability of sustainability data, fluctuating regulatory guidance, and political uncertainty across major markets. Despite these issues, more than 80% view sustainability as essential for managing investment risk and as a critical differentiator in portfolio construction.

One notable development is the rise of climate adaptation and resilience as a mainstream investment priority. Over 75% of investors foresee physical climate risks impacting asset prices within five years, underlining the pressing nature of climate change’s financial implications. Adaptation efforts, such as investments in climate-resilient infrastructure, water systems, and modernised energy grids designed to withstand extreme weather, have jumped to become the third-highest priority sustainability solution, up from sixth in 2024. Energy efficiency and renewable energy remain the top two priorities, indicating that traditional climate mitigation efforts continue to dominate while adaptation gains urgency.

Investors are increasingly embedding climate resilience within their risk-return models, with half incorporating it as a core attribute in assessing physical assets like infrastructure and real estate, and 42% considering it selectively. However, gaps in policy frameworks, limited tools for evaluating adaptation performance, and insufficient physical risk modelling pose barriers to scaling adaptation finance and mobilising broader capital into resilience-building ventures.

These findings demonstrate a maturing phase in sustainable investing where the intersection of financial performance, risk mitigation, and climate resilience shapes strategies. The survey’s global reach underscores that, despite political contention and regulatory flux, institutional capital is aligning with the realities of climate risk and the necessary transition to a more sustainable economy.

For companies and policymakers, this trend signals the growing imperative for clear, consistent regulation and reliable sustainability data to unlock greater capital flows. It also highlights sustainability’s evolution from a discretionary overlay into a fundamental component of long-term investment risk management. As climate impacts increase in frequency and severity, the alignment of institutional investment with adaptation, resilience, and clean energy will play a decisive role in shaping infrastructure development, asset valuation, and supply chain stability across markets worldwide.

In parallel, Morgan Stanley’s broader Sustainable Signals research notes rising interest in sustainability among individual investors and corporates alike. Individual investors show strong enthusiasm for sustainable investments, with 77% expressing interest and over half planning to ramp up allocations in the coming year. Meanwhile, 88% of companies globally see sustainability as a driver of long-term value, with most able to measure returns on sustainability projects and preparing for increasing climate-related impacts.

In sum, despite mounting operational challenges, the global investment community is coalescing around sustainable finance as both a growth opportunity and a critical tool for managing escalating climate and societal risks. This evolving confidence, coupled with rising climate adaptation focus, marks a significant step toward mainstreaming sustainability in global financial markets.