Sustainable Investments Hold Strong Despite Slight Portfolio Decline in 2026

Sustainable investments will represent an average of 31% of global portfolios by 2026, according to Morgan Stanley’s “Sustainable Signals” research, which highlights how performance and private markets continue to drive interest in ESG.

Sustainable investments continue to hold a significant weight in global investors’ portfolios. In 2026, the average share allocated to ESG instruments will stand at 31% , slightly down from 33% in 2025, but within a context of growing interest in financial sustainability. In fact, 92% of investors declare themselves interested in sustainable investments, an increase of four percentage points compared to 2025.

This is what emerges from the report “Sustainable Signals: Individual Investors 2026” by the Morgan Stanley Institute for Sustainable Investing, conducted on a sample of 2,250 investors in North America, Europe, and Asia-Pacific.

“Our latest Sustainable Signals survey shows that performance continues to be the primary driver of individual investors’ interest in sustainable investing, as they seek both market-matched returns and tangible impact,” said Jessica Alsford, Chief Sustainability Officer and President of the Institute for Sustainable Investing at Morgan Stanley. “Looking ahead, most individual investors see increased sustainable investing opportunities in private markets, particularly for portfolio diversification and investing in innovation.”

Performance remains the main driver of sustainable investments

According to Morgan Stanley research, the primary factor driving sustainable investment decisions continues to be financial performance. More than four out of five investors say returns are a key driver of their interest in ESG. Furthermore, 40% of respondents believe sustainable investments can achieve stronger financial returns than traditional investments; while 13% focus primarily on aligning investments with their personal values. A smaller share, approximately 2%, considers reducing ESG risks a priority.

Looking ahead to the next 12 months, 64% of respondents plan to increase their exposure to sustainable investments, primarily due to favorable return expectations. A further 28% intend to maintain their current exposure, while only 5% plan to reduce it, primarily due to lower-than-expected performance.

The report also highlights a significant generational difference: Millennials and Gen Z are significantly more likely to increase their ESG allocation than older investors. Younger investors, in fact, show a greater belief that sustainability and returns can go hand in hand.

Thematic priorities and the risk of greenwashing

This year’s survey analyzed investors’ priorities across seven major themes related to sustainable investing. A quarter of respondents cited a broad approach that combines environmental and social objectives as their top priority. Financial inclusion and health and well-being followed , both cited by 15% of the sample. All seven themes considered were among the top or second priorities for at least a fifth of investors.

An integrated approach to sustainability drives preferences in all three regions analyzed, although geographical differences emerge. In North America and Asia-Pacific, economic empowerment is particularly important, while in Europe, climate action, health, and well-being stand out.

On average, 25% of respondents in 2026 rated a number of potential obstacles to the inclusion of sustainable investments as very significant, an increase of four percentage points from 2025. This suggests moderately greater concern than last year, but lower than in Sustainable Signals’ most recent survey of institutional investors, in which the average number of very significant concerns rose to 38%, up from 24% the previous year.

Greenwashing remains the primary concern, with 32% rating it as very significant and 27% citing it as the primary obstacle. Despite this, ESG solutions continue to be a distinguishing factor when choosing a financial advisor: 79% of investors say they are very or somewhat likely to choose a financial advisor based on its sustainable investment offerings.

Private markets: the new frontier of sustainable investments

One of the most notable trends emerging from the research is the growing focus on private markets. Nearly three-quarters of investors say they already invest in private markets or plan to do so in the future , while 64% see greater sustainable investment opportunities in private assets than in public markets.

Investors cite portfolio diversification, access to innovation, and the potential to have a more direct impact on the real economy among the main advantages associated with private markets.

Finally, the research highlights that investors with greater exposure to ESG are also the most active in private markets, confirming an approach oriented towards long-term strategies and transformative investments.

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(Featured image by Towfiqu barbhuiya via Unsplash)

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