Individual investor interest in sustainable investing is high and rising, according to a new “Sustainable Signals” report by the Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Wealth Management.
“Nearly 80% of individual investors believe that it is possible to balance market rate financial returns with a focus on sustainability,” says 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.”
According to the survey, more than three quarters (77%) of individual investors globally are interested in investing in companies or funds that aim to achieve market-rate financial returns while considering positive social and/or environmental impact. In addition, more than half (57%) say their interest has increased in the last two years, while 54% say they anticipate boosting allocations to sustainable investments in the next year.
The findings also highlight key areas of interest and concern among investors. Climate action emerged as the top sustainable investing theme, with 15% of investors prioritizing it, followed by healthcare, water solutions, and the circular economy. Despite the shift towards sustainability, traditional energy companies remain in consideration for nearly 80% of investors, provided these companies demonstrate serious commitments to reducing their carbon footprint and addressing climate change.
However, challenges such as a lack of transparency and trust in sustainability reporting, alongside fears of greenwashing, are noted as significant barriers preventing investors from committing to sustainable investments. Many investors are also interested in social themes but are uncertain about how to engage effectively.
In addition, survey respondents cite a lack of transparency and trust in sustainability reporting (63%) and the potential for greenwashing (61%) as concerns that prevent them from making sustainable investments. They also express an interest in investing in social themes but uncertainty around where to begin.
The report concludes that investors could benefit from the guidance of investment professionals. More than half (52%) of respondents self-report limited knowledge about how to start investing sustainably, with 47% saying there is a lack of financial products available. These findings indicate increased opportunity for asset managers and investment platforms to help investors meet their sustainability goals; 58% of global investors would be likely to select a financial advisor or investment platform based on sustainable investment offerings.
The Sustainable Signals series was launched in 2015 and measures the views of individual investors, institutional investors and corporates on sustainable investing. The survey polled 2,820 active individual investors across the U.S., Europe and Japan to assess interest in sustainability and understand where investors see the most opportunity and potential risk.
View the full results of the Sustainable Signals survey here.
