Investors support sustainability criteria and transparent climate reporting

More than half of individual investors plan to increase allocations to sustainable funds and companies in the next year, but most are still worried about greenwashing and lack trust in sustainability reporting.

A Morgan Stanley survey of almost 3,000 individual investors in the US, Europe and Japan has shown that more than three-quarters (77%) believe companies should address environmental and social issues, and 54% plan to boost allocations to sustainable investments in the next year.

Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing, said: “A majority of individual investors also express a desire for their investments to advance positive environmental and social impact.”

ESG backlash goes against investor preferences

This support for sustainable investment comes right after the worst year in history for US ESG-focused funds, with US$13 billion of outflows. Conservative politicians in the country are fighting against financiers’ sustainability policies with hundreds of ‘anti-ESG’ bills, arguing that these criteria are not in investors’ or companies’ best interest. 

Just last week, the US Chamber of Commerce, the American Farm Bureau Federation, the California Chamber of Commerce, and several other state business organisations filed a lawsuit against California’s new climate disclosure laws. 

But this latest survey shows that most investors still prefer companies or funds that consider positive social and/or environmental impact.

Additionally, a wide majority of investors and voters are in favour of stronger regulation around ESG investment. When asked by Morgan Stanley about concerns holding them back, they cited a lack of transparency and trust in sustainability reporting (63%) and the potential for greenwashing (61%).

Most voters support SEC climate rule

And in a different poll released last week by Data for Progress and Unlocking America’s Future, 58% of US voters said having transparent information on companies’ climate-related financial risks would help them make more informed investment decisions – suggesting strong support for the SEC’s disputed climate rule.

When provided with a brief description of ‘responsible investing’, including a reference to environmental, social, and governance (ESG) issues, a majority of voters (71%) also showed support for responsible investing, including Democrats (80%), Independents (69%), and Republicans (64%).

A recent report by InfluenceMap found that 45 of the world’s largest asset managers made no significant progress on climate goals between 2021 and 2022 – with 95% of the portfolios analysed “misaligned with the goals of the Paris Agreement”.