Morgan Stanley: Balancing Returns on Sustainable Investments

Greater Diversity of Sustainable Investing Strategies is a Key Trend Over Next Decade, Says Morgan Stanley
The Morgan Stanley Institute for Sustainable Investing Delivers Insights on Individual Intentions When it Comes to Impact Investing and Financial Returns

Formed back in 2013 when funding for environmental and social impact solutions was new, relatively unexplored territory, the Morgan Stanley Institute for Sustainable Investing was ahead of the curve.

That’s clear to see when you consider that assets under management (AUM) for sustainable funds reached a record high of 7.9% of total AUM globally in 2023, and that is only set to rise.

The Institute aims to deliver the best of both worlds – financial returns and positive impact. That is essential with individual investors demanding more transparency and accountability, especially Millennials.

When The institute celebrated its tenth anniversary in October 2023, it looked ahead to the next decade to predict the future direction of sustainable investing.

A startling insight came from one of The Institute's previous reports (from 2021) that showed that 99% of US-based Millennials said they were interested in sustainable investing, suggesting that the market will inevitably follow that money.

If that demographic follows through on its intention to invest, there will likely be a greater breadth of solutions across the market.

The Morgan Stanley Institute for Sustainable Investing identified the following key trends for the next 10 years:

  • Greater diversity of sustainable investing strategies, driven by growth among Millennial investors.
  • The net-zero transition will change approaches to land use, to satisfy demand for renewables, metals and minerals, and nature-based solutions.
  • Regulations and voluntary standards will reshape corporate strategies, disclosures, and availability of data.
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Morgan Stanley’s Sustainable Signals Survey Shows Desire for Impact Investments

The latest Sustainable Signals report from The Institute and Morgan Stanley Wealth Management provides an update on these predictions.

Some 2,820 active individual investors from the US, Europe and Japan were surveyed to understand where the opportunities and risks reside. The results were a positive affirmation of the belief that sustainability is good for business.

“Nearly 80% of individual investors believe that it is possible to balance market rate financial returns with a focus on sustainability,” said Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing.

"A majority of individual investors also express a desire for their investments to advance positive environmental and social impact, creating opportunities for finance professionals to meet these needs."

Unsurprisingly, perhaps, more than three quarters (77%) of investors said they were interested in investments that aim to achieve market-rate returns while considering positive social and/or environmental impact. You may think that figure could have been even higher.

What is encouraging is that 57% said their interest in these sustainable investments had increased in the last two years.

Digging deeper into the survey data, a lack of transparency and trust in sustainability reporting was highlighted by 63% of investors, while 61% were also concerned about greenwashing and say it could prevent them from investing.

More than half (52%) said they needed more guidance on how to invest sustainably, with 47% adding that more financial products are required.

READ the full results of the survey here.

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