Institutional appetite for sustainable investing is rising sharply, with more than 80% of global asset owners and managers planning to increase allocations over the next two years, according to Morgan Stanley’s new Sustainable Signals 2025 report. 

Surveyed investors overwhelmingly cited strong performance and the growing maturity of ESG strategies as the primary reasons behind their expanding commitments. Demand is also reshaping the competitive landscape, as roughly 9 in 10 asset owners now view sustainable investment options as a key differentiator when selecting or retaining managers. 

Top areas of focus include renewable energy, energy efficiency, and, surging in priority this year, climate adaptation, reflecting mounting concern about physical climate risks and their impact on asset prices. 

Finsum: ESG remains a long term play as the short run outlook appears clouded by regulatory changes.