Over 75% of Asset Managers Bullish on Sustainable Funds — Evening Brief – 12.04.24
Global asset managers see growth in sustainable funds continuing for the next two years, notwithstanding political challenges stemming from U.S. election outcomes and resistance to ESG investing in various global regions, a new Morgan Stanley survey revealed.
The new Sustainable Signals report by the Morgan Stanley Institute for Sustainable Investing found that 78% of asset managers expect their assets under management in sustainable funds to increase through 2026.
The survey, which polled more than 900 institutional investors across North America, Europe and Asia Pacific in July and August 2024, assesses attitudes of asset owners and asset managers toward sustainable investing, as well as emerging trends in the space.
The managers observed that growth will be stimulated by a combination of new investment mandates and requests for increased sustainable allocations from existing clients. During the next two years, 80% of asset owners anticipate that the proportion of their assets allocated to sustainable investment options will increase, according to the survey.
More than three-quarters of asset owners “strongly” or “somewhat” agree that sustainable investing offerings influence mandate decisions, with 80% requiring their asset managers to have a sustainable investing policy or strategy in place.
“Institutional investors see a growth trajectory for sustainable assets globally in the coming years to meet increasing client and stakeholder demands in a more mature sustainable investing market,” said Jessica Alsford, chief sustainability officer and chair of the Institute for Sustainable Investing at Morgan Stanley.
The survey identified several key challenges, including data availability (71%), regulatory guidance fluctuations (69%), and greenwashing (68%). Healthcare (41%) and financial inclusion (40%) emerge as priority investment areas. Nearly two-thirds of investors have set net-zero targets, with almost all saying they have a plan to deliver their target. About 2% of institutional investors are reportedly already at net zero.
Institutional investors have mixed opinions regarding the utilization of carbon offsets. Currently, carbon offsets are employed by nearly 40% of asset owners to reduce portfolio emissions, and 31% of asset managers provide clients with offsets that are associated with specific products or aggregated emissions.
But while some consider offsets a valid approach to decarbonization (32% of asset owners, 31% of asset managers), others think they should only be used for hard-to-abate emissions (21% of asset owners, 22% of asset managers). Still others are cautious about the use of offsets and are waiting for greater certainty (28% of asset owners, 27% of asset managers).