Morgan Stanley’s Sustainable Signals Report Shows Growing Interest in Sustainability

Key Takeaways

• Sustainability Interest Remains Strong: 88% of global investors are interested in sustainable investing, with Gen Z and Millennials showing near unanimous interest (99% and 97%, respectively), despite political and regulatory challenges under the second Trump administration.
• Generational Shifts in Investment Priorities: Younger investors, especially Gen Z and Millennials, are allocating larger portions of their portfolios to sustainable investments and plan to increase these allocations in the coming year. However, they face barriers such as lack of knowledge, limited options, and insufficient financial advice.
• Corporate Responsibility is Key: Over 80% of investors believe companies should address environmental issues, with more than two-thirds also prioritizing social issues. This growing expectation calls for companies to ensure transparency, ethical practices, and measurable ESG actions.
• Clean Energy Investment on the Rise: Over 80% of investors view the energy transition as an opportunity to generate returns, with renewable energy and energy efficiency topping the list of sustainable investment priorities. Regulatory and market shifts in clean energy should be closely monitored by GRC professionals.
• Barriers to Growth: Greenwashing concerns and a lack of trust in reported data remain significant barriers for investors, underscoring the importance for companies to adopt robust ESG compliance frameworks and transparent reporting practices to build investor confidence.

Deep Dive

Amid claims that ESG (Environmental, Social, and Governance) and sustainable investing were set to fade into obscurity under a second Trump presidency, new data from Morgan Stanley suggests otherwise. Instead of waning interest, sustainable investing is experiencing a significant surge, driven particularly by younger generations who are not just interested in financial returns but also in aligning their investments with their values.

The findings from Morgan Stanley’s Sustainable Signals: Individual Investors 2025 report show that sustainable investing isn’t just surviving in the current political landscape, it’s thriving, with more investors than ever seeing it as a key avenue for future growth. Let’s dive into what this data reveals and how it challenges the narrative that sustainability is no longer a priority. The report demonstrates that ESG and sustainability considerations are still central to investor behavior and that financial returns are not seen as mutually exclusive from positive social or environmental outcomes.

88% of global investors express an interest in sustainable investing. Among younger generations (Gen Z and Millennials) interest is near unanimous, with 99% and 97% showing a keen interest in aligning their portfolios with sustainable options. This surge isn't just about caring for the planet, it’s a belief that sustainability can go hand-in-hand with competitive returns. Investors are starting to view sustainable investments not as a sacrifice but as a smart, future-facing strategy.

In North America and APAC, investors are motivated by a desire to achieve real-world outcomes. European investors, on the other hand, are more focused on the financial upside, with over 40% believing that sustainable investments could outperform traditional options. This regional variation speaks to the different priorities and challenges investors face, but the overarching trend is clear: sustainability is no longer a niche, it’s a mainstream investment priority.

Young Investors Leading the Charge

What’s particularly striking about the data is the generational divide. Gen Z and Millennials are not only more likely to invest in sustainable options, but they also have more of their portfolios allocated to sustainable investments. They’re more willing to increase their sustainable investments and prioritize a broader range of sustainability issues, from climate change to social justice. However, it’s not all smooth sailing, these younger investors also face barriers that older generations don't experience to the same degree. Lack of knowledge, limited product availability, and insufficient financial advice are top of mind.

But here’s the silver lining, Over 90% of younger investors say they’d choose an advisor or investment platform based on sustainable investing offerings. For financial advisors, this is an opportunity to stand out. The future of wealth management is increasingly green, and the demand for sustainable investing guidance is growing fast.

Investors are also looking at companies through a new lens. It’s not just about profit anymore; it’s about purpose. Over 80% of investors believe that companies should address environmental issues, while more than two-thirds think social issues should also be tackled. This sentiment has only grown in the last year, particularly in the U.S. and Europe.

Investors are no longer willing to turn a blind eye to corporate behavior. They want transparency, ethical business practices, and a company culture that aligns with their values. From emissions reduction to human rights, investors are paying attention to how companies are operating and factoring this into their decision-making.

The Undisputed Priority

When it comes to investment priorities, clean energy is leading the charge. Over 80% of investors see the energy transition as a key opportunity for generating returns. Renewable energy and energy efficiency top the list of priorities across all regions, but there are nuances. North American investors are particularly interested in healthcare innovation and plastic alternatives, while European and APAC investors are leaning into energy storage and regenerative agriculture.

The growing interest in carbon offsets is another trend to watch. As climate change becomes an ever-pressing issue, more investors are looking for ways to offset their carbon footprints, signaling a shift toward more comprehensive, climate-conscious portfolios.

Despite the enthusiasm, the path to fully embracing sustainable investing isn’t without hurdles. Concerns about greenwashing, the practice of misleading claims about a company’s environmental impact, are top of mind for nearly 70% of investors. In addition, trust in reported data remains a significant barrier. Investors want clearer, more reliable information about the true sustainability of the investments they’re making. This demonstrates the importance of implementing robust compliance frameworks to safeguard against greenwashing and ensure the accuracy of sustainability reporting. Companies will need to invest in better data collection, reporting tools, and verification processes to build trust with investors and regulators.

Performance concerns are also lingering. While investors are increasingly confident that sustainable options can deliver competitive returns, the skepticism around consistent performance persists. It’s clear that investors want proof, not just promises, and they need to feel secure in their decision to invest in sustainable assets.

Financial Returns and Social Impact

One of the most notable findings from the survey is that investors are no longer viewing financial returns and positive social impact as mutually exclusive. Over 80% of respondents agree that it’s possible to generate financial returns while also driving positive environmental and social outcomes. This sentiment is particularly strong in APAC, where investors express greater confidence in balancing financial gains with sustainability.

This shift in mindset is crucial for the future of sustainable investing. It suggests that investors are starting to see sustainability not as a trend but as an essential factor in their long-term financial strategies.While the barriers to entry, such as greenwashing and data transparency, still need to be addressed, the demand for sustainable options is undeniable. With younger generations leading the way, there’s a clear indication that sustainable investing will continue to evolve into a dominant force in the market.

This presents a crucial opportunity to align corporate strategies with investor demand for sustainable and socially responsible practices. As the demand for sustainable investments grows, companies will need to bolster their governance, risk, and compliance practices to manage the associated risks and capitalize on the opportunities.

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