From ESG Option to Core Strategy: What 2025 Investor Surveys Reveal

Recap of 2025 and outlook for 2026 | Opinions

by Alexandra Faciu

Montréal, Canada

2025 proved to be a defining year for sustainability and ESG. In its early months, many countries were preoccupied with the disruptive effects of new tariff policies introduced by the US Administration, which shifted immediate priorities toward economic resilience and survival, seemingly at the expense of climate and sustainability goals. Yet this proved temporary. As the year progressed and governments adjusted to the new landscape, sustainability reasserted itself as a central theme in both policy and investment discussions. By the latter half of 2025, ESG considerations were firmly back on the agenda, shaping strategies across industries and reinforcing their role as a cornerstone of long-term value creation. To illustrate this renewed momentum, I have drawn on two investor surveys, one spanning all asset classes and another focused specifically on real estate, that capture both the prevailing sentiment and the trajectory of sustainable investment in the years ahead.

The Morgan Stanley Institute for Sustainable Investing’s Sustainable Signals survey, published in late 2025, shows that 84% of institutional investors expect the proportion of sustainable assets under management to rise within two years. This is not a marginal uptick but a decisive shift, with asset owners in particular reporting a six-point increase in expectations compared to last year. North America leads the charge, with more than 90% of asset owners planning to expand allocations, while Europe and Asia-Pacific follow closely. Financial performance and a maturing track record are the primary drivers, underscoring that sustainability is now seen as a pathway to resilience and profitability rather than a branding exercise.

Yet optimism is tempered by growing concerns. More than one third of the respondents flagged challenges as “very significant,” up sharply from 25% in 2024. Data availability, regulatory uncertainty, and political volatility remain obstacles. Even so, more than 80% of investors view sustainability as integral to managing risk, with one-quarter citing portfolio risk reduction as their main motivation. Climate adaptation is rising rapidly on the agenda, moving from sixth to third place among investment priorities. Over 75% of investors expect physical climate risks to affect asset prices within five years, prompting capital flows into adaptation strategies such as water infrastructure, advanced analytics, and grid modernization. Half of global investors now embed climate resilience into their risk-return models, signaling a fundamental recalibration of investment logic.

Energy efficiency and renewable energy continue to dominate as the top two priorities, reflecting their dual appeal as financially viable and environmentally critical. Together with climate adaptation, they form the backbone of institutional strategies. The momentum is unmistakable: sustainability is being woven into the fabric of investment practice, not as a moral choice but as a financial imperative.

The Knight Frank ESG Property Investor Survey, published in June 2025, illustrates how these dynamics are playing out in real estate. With GB£300 billion (more than US$400 billion) in assets represented, the survey shows offices remain the dominant asset class, but logistics, retail, living sectors, and hotels are also significant. Financial performance again tops the list of motivators, with green-certified buildings commanding premiums of up to 18% in cities like London, Sydney, and Melbourne. Retrofitting has emerged as the leading ESG property strategy, with 76% of respondents prioritizing upgrades to existing assets. This reflects both necessity, 80% of today’s buildings will still be standing in 2050, and opportunity, as retrofits deliver higher rental values and exit premiums. Renewable adoption lags, with less than 10% of assets using renewable power, though regulatory changes in Europe are poised to accelerate uptake.

Net-zero commitments, cited by 69% of respondents, are shaping procurement and competitiveness, while ESG due diligence grows increasingly data-driven. Tools like CRREM are being deployed to assess stranding risks, and whole-building energy data is becoming standard. Social impact is gaining traction, though frameworks remain inconsistent, with only 48% of investors measuring it systematically. Aligning strategies and standardizing metrics will be crucial as social value becomes a mainstream expectation.

Taken together, these surveys reveal a decisive transformation. ESG is no longer optional in real estate or broader institutional portfolios. Financial performance, risk management, regulatory compliance, and stakeholder expectations are converging to embed sustainability at the core of investment practice. Retrofits, renewables, net-zero commitments, and climate resilience are not side projects but central pillars of strategy. The question is no longer whether sustainability matters, but how quickly and decisively investors can act to embed it into every decision.

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