A majority of institutional asset owners are now pursuing sustainable investing to manage risk and drive returns, according to a new survey published today by the Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Investment Management. The new survey polled 118 public and corporate pensions, endowments, foundations, sovereign wealth entities, insurance companies and other large asset owners worldwide, 60% of which had total assets over $10 billion. The survey gathered insights about trends, motivations, challenges and implementation approaches in sustainable investing. By rounding out the sustainable investing landscape with the views of asset owners, this work builds on Morgan Stanley’s previous Sustainable Signals studies focused on individual investors and asset managers.
“As interest in sustainable investing continues to rise, we see investors pursuing a range of approaches with their assets,” said Rui de Figueiredo, Co-Head and CIO of the Solutions and Multi-Asset business at Morgan Stanley Investment Management and Head of the Division’s Sustainability Council. “The growing sophistication among asset owners about when and how to integrate ESG into the investment process creates opportunities to tailor strategies and provide customized portfolio solutions that help investors meet their financial and impact goals.”
Asset owners cite risk management and potential for returns as top drivers of interest in sustainable investing. But despite the recognition of these opportunities, asset owners still highlighted the need for better data and investment information as a challenge to greater uptake.
“The survey results identify a strong commitment to incorporating ESG criteria into investment strategies among asset owners. However, there is still a gap between interest and implementation – with investors citing access to quality ESG data as a top concern,” said Hilary Irby, Co-Head of Global Sustainable Finance at Morgan Stanley. “With this growing momentum in sustainable investing, third-party managers have an opportunity to increase implementation by improving reporting tools and education, and developing capabilities to align portfolios with owners’ unique objectives.”
Results from the survey identify sustainable investing trends reflecting the increasing growth in the impact investing sector as a whole. Key findings include:
· Momentum is high in sustainable investing
o 84% of asset owners are pursuing or actively considering pursuing ESG integration in their investment process
o Of those, 60% began implementing ESG strategies in the last four years and 37% within the last two years
o 70% of asset owners have already implemented ESG strategies; 49% of those have implemented ESG across their entire portfolio and 21% have implemented them in a portion of their portfolio
· Increased sophistication and adoption of multiple approaches
o 78% said risk management was an important factor driving sustainable investing at their organizations, and 77% said return potential was important
o Asset owners are pursuing multiple approaches to sustainable investing, led by ESG integration
o 78% seek to align their investments with the U.N. Sustainable Development goals or are considering doing so
· Still room to grow
o 77% of respondents agree they have a responsibility to address sustainability through their investments, yet;
o Proof of market-rate financial performance remains the top challenge
o Lack of tools and data is a barrier – only 42% feel they have adequate tools to assess
For more information, please see Sustainable Signals: Asset Owners Embrace Sustainability and report.
The Morgan Stanley Institute for Sustainable Investing
The Morgan Stanley Institute for Sustainable Investing builds scalable finance solutions that seek to deliver competitive financial returns while driving positive environmental and social impact. The Institute creates innovative financial products, thoughtful insights and capacity building programs that help maximize capital to create a more sustainable future. For more information about the Morgan Stanley Institute for Sustainable Investing, visit www.morganstanley.com/sustainableinvesting.
Morgan Stanley Investment Management
Morgan Stanley Investment Management, together with its investment advisory affiliates, has more than 581 investment professionals around the world and $469 billion in assets under management or supervision as of March 31, 2018. Morgan Stanley Investment Management strives to provide outstanding long-term investment performance, service and a comprehensive suite of investment management solutions to a diverse client base, which includes governments, institutions, corporations and individuals worldwide. For further information about Morgan Stanley Investment Management, please visit www.morganstanley.com/im
Morgan Stanley (NYSE: MS) is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals. For more information about Morgan Stanley, please visit www.morganstanley.com.
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1Poll commissioned by Morgan Stanley but independently conducted by Greenwald & Associates, November 3 – December 19, 2017
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The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.
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