The percentage of asset owners that have adopted sustainable investment practices rose to 80% in 2019 from 70% in 2017, results of a survey from Morgan Stanley Investment Management released Wednesday showed.
An additional 15% of the 110 institutional investors surveyed mid-October through mid-December said they are seriously considering adoption of sustainable investment practices.
"There is substantial demand for sustainable investing, more than I could have imagined five years ago. It's no longer regional. It's across the globe," said Theodore "Ted" Eliopoulos, vice chairman and head of strategic partnerships at MSIM, in an interview.
"We're seeing the convergence of long-term performance, risk consideration and mission alignment for asset owners. They stand side-by-side for investors, who are no longer substituting one of these factors for another," he said.
Survey results showed that the strongest driver of commitment to sustainable investment — 81% — was demand from investors, followed by the potential for good investment returns (78%); evolving policy and regulation (76%) and risk management (75%).
As for the efficacy of sustainable investing, 63% of respondents said the most important result of implementing sustainable investment strategies was the reputational benefit, while 49% said it helped with employee retention and 43% said the practice helped to improve environmental outcomes.
Despite asset owners' expectation of potential enhanced performance and risk management from sustainable investing practices, only 34% of survey respondents highlighted these factors as beneficial for their portfolios.
While 22% of respondents to the survey said they only invest with money managers using sustainable investment approaches, an additional 35% said they are considering doing so.
Within the spectrum of sustainable investment categories, 88% of investors surveyed said environmental issues, including climate change, water use and plastic waste reduction, mattered most.
Gender diversity and education were the top social issues, each attracting support of 67% of respondents.
MSIM's survey results predate the onslaught of the COVID-19 pandemic, but Mr. Eliopoulos said that he's seen renewed interest in ESG from institutional investors as they "focus more on science and health with added intensity on climate change," in the context of the pandemic.
"We'll be very interested in what investors say about the impacts of ESG and COVID-19 in the next survey two years from now," Mr. Eliopoulos said.
