Curator: Alexandra Faciu
Montréal, Canada
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Why we recommend it: Drawing on the views of 900 institutional investors globally, this year’s Morgan Stanley’ Sustainable Signals survey captures an important evolution in sustainable investing. While most investors continue to expect allocations to sustainable investments to increase, growth expectations have moderated markedly, suggesting the market is entering a more mature phase. At the same time, the findings highlight a shift toward sustainability as a risk-management framework, with climate adaptation, physical climate risk, data quality, and responsible AI emerging as key priorities for capital allocation and investment decision-making.
Key takeaways:
- The 2026 edition of Morgan Stanley’ Sustainable Signals survey indicates that sustainable investing remains firmly embedded in institutional investment practice globally, although expectations for future growth have become more measured. Based on a survey of 900 institutional investors, including asset owners and asset managers across North America, Europe, and Asia-Pacific, the findings suggest that sustainable investing is moving from a period of rapid expansion toward a more mature phase characterized by integration, risk management, and implementation refinement.
- While enthusiasm remains strong, investors anticipate more gradual increases in sustainable allocations than in previous years. Eighty-two percent of asset owners and 85% of asset managers expect to increase sustainable investment allocations over the next two years. However, relatively few expect major allocation shifts, indicating that sustainable investing is increasingly viewed as a standard element of portfolio construction rather than a separate or emerging investment theme.
- A clear message from the survey is the growing importance of sustainability as a risk management framework. More than 90% of respondents believe sustainability considerations play an important role in managing investment risk, while approximately two-thirds identify risk reduction as a key motivation for sustainable investing. Investors are increasingly focused on understanding how environmental, social, governance, climate-related, and technological risks may affect long-term asset performance and valuations. Sustainable investment capabilities also continue to influence manager selection, with over 90% of respondents viewing them as an important differentiator when awarding or retaining mandates.
- The survey reports a notable decline in concerns surrounding sustainable investing. Compared with 2025, investors express lower levels of concern about political criticism, regulatory uncertainty, disclosure requirements, and reputational risks associated with ESG investing. The primary challenge that remains is the quality, consistency, and availability of sustainability-related data. Sixty-four percent of respondents identify data limitations as a significant concern, making it the most commonly cited obstacle to effective implementation and decision-making.
- One of the most important developments identified in the report is the rise of climate adaptation as an investment priority. For the first time, climate adaptation and resilience rank ahead of climate mitigation as the leading sustainability theme. Investors increasingly recognize that physical climate risks, including floods, wildfires, droughts, heat events, and infrastructure disruptions, are becoming financially material. Most respondents expect these risks to affect asset values within the next five years. At the same time, nearly 90% report challenges in assessing physical climate risk because of limitations in data, modelling capabilities, and analytical tools. This is driving growing interest in adaptation-related investment opportunities such as resilient infrastructure, water systems, grid modernization, and climate analytics.
- The report also highlights the emergence of responsible artificial intelligence as a major sustainability issue. Approximately two-thirds of investors have already incorporated responsible AI considerations into their investment processes. The focus is primarily on governance issues, including board oversight, risk management, cybersecurity, and organizational policies governing the development and deployment of AI technologies.
- Overall, the findings suggest that sustainable investing has entered a new phase. Rather than being driven primarily by values or thematic opportunities, it is increasingly being adopted as a practical framework for managing long-term investment risks and opportunities. Climate adaptation, resilience, data quality, and responsible AI are emerging as the defining priorities shaping institutional investment decisions in the years ahead.
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Alexandra is President of Alexandra Capital, an advisory firm providing consulting services in asset and portfolio management for real assets across Canada, the US and the UK. She is also the Founder of SAM Curated, the firm’s online sustainability and adaptability intelligence platform for the built environment. Alexandra and her practice combine practical experience with research‑based insights on sustainable investing, asset and portfolio management, valuation and next gen, drawing on current studies and on original research and content they publish regularly to deliver tailored advice to their clients. She is frequently invited to speak at industry conferences and sits on the RICS Governing Council.
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