The report details the results of Morgan Stanley’s Sustainable Signals survey of individual investors. In the United States alone, as of 2018, the maturing market neared $12 trillion, confirming the solid position of sustainable investments in mainstream financial strategies. Individual investor conviction outweighs the perception of a financial trade-off, with investors seeking strategies that align with their interests.

Central themes:

• Investor interest and adoption continue to rise
  There is a steady upward trend in sustainable investing with interest increasing from 71% in 2015 to 85% in 2019 amongst the general population. Notably, millennial interests jumped from 84% in 2015 to 95% in 2019.

• Investors want products that match their interests
  A growing sense of agency among investors is driving the desire to align investments with personal values and the social causes they care about. Seventy-one percent of the general population and 85% of millennials believe that investment decisions can alleviate the harm caused by human activity for climate change. Eighty-three percent of the general population and 89% of millennials believe that investment decisions can create economic opportunities to alleviate poverty. The themes that respondents were most interested in are plastic reduction (83%) and climate change (78%).

An impact report included with their portfolio is welcomed by 84% of investors surveyed, millennials being the strongest supporters with 91% interested in transparent reporting.

The survey also indicates the parallels between consumer behaviour and investor action.

• Investor conviction outweighs financial trade-off concerns
  The belief that it is possible to balance financial gains and sustainability was agreed to by 88% of the respondents. As many as 86% believed companies that embraced environmental, social and governance (ESG) practices are potentially better long-term investments.

There is still room for growth to convince sceptical investors that investing for social and environmental impact does not necessarily involve financial sacrifice. The belief of a financial trade-off rose to 64% in 2019 from 54% in 2015. At 77%, millennials are most sceptical. However, this has not dissuaded expressions of interest in sustainable investing, with 52% adopting sustainable investing strategies.

• Investors want more product choices
  The survey highlights that demand is outpacing supply. The shortfall in strategies that align with investor values helps explain gaps in interest versus adoption. A lack of available sustainable investments and products was cited as a barrier for 73% of millennials and 65% of the general population.Other barriers to adoption mentioned were the lack of financial advice and the time and effort required to understand sustainable investing due to its perceived complexity.

Opportunities for the industry:

• Portfolio impact reports
  There is a pressing need for greater transparency in impact investment reporting. A similar survey was conducted with asset managers in 2018 and there was concern at the lack of industry-standard metrics to measure non-financial performance.

• Financial advice
  There is a need to address investor concerns on investment performance and inform and educate due to the perceived complexity of sustainable investing.

• Sustainable investment strategies
  There is space for asset managers to expand their sustainable investing solutions to satiate increasing demand of the proactive values-based investor.

1. The positive attitude towards sustainable investing and increase in adoption puts pressure on the industry to innovate; a chance for financial professionals to develop solutions and expand capabilities in order to keep pace with the market.
2. The report surfaces the opportunities available for the industry with the increasing demand for sustainable investing solutions, strategies, impact reporting and financial advice.
3. The report confirms the rising interest in responsible investing among individual investors; of those surveyed 85% of the general population and 95% of millennials seek products and solutions across asset classes in line with their values and interests. The lack of available sustainable investment products opens up opportunities for growth.
4. The social impact causes that investors are most passionate about targeting through their investments are plastic reduction and climate change. However, if you include both very interested and somewhat interested in the calculations, then the top three investment themes are circular economy and then plastic reduction and community development both in second place. This is followed by climate change and then the Sustainable Development Goals.
5. There is concern that the industry is lacking in metrics to measure social and environmental impact impeding in the ability to provide impact reporting for clients. Yet there is strong desire from investors to measure their impact, suggesting a pressing need for a collective industry effort to improve tracking and reporting of sustainable investing impact.
6. The adoption of values-based investing reflects growing investor confidence that impact can be generated alongside financial returns. However, one of the barriers to entry cited is the lack of financial advice and the perceived complexity of such investments.
7. With a majority of the general population (52%) and two-thirds of millenials (67%) now adopting at least one sustainable investing activity, the trend reveals attitudes and preferences that will drive the market's future and help close the gap between interest and adoption.
8. Investors believe that they can affect change through their investment decisions, particularly through influencing human induced climate change and alleviating poverty. Interestingly, while almost 71% of the general population agree that their investments can influence climate change, nearly 30% of respondents disagree, and 9% of those strongly disagree. What is not known from these results, is if the respondant believes in human induced climate change to begin with.
9. There is a strong connection between consumer behaviour and investor action. Purchasing behaviours such as checking product packaging for sustainability or ensuring a brand's environmental or social impact, align with interest in reducing plastic through investments or targeting impact investments. Among millenials, values also carry over to career choices.
10. Retirement funds provide a clear example of demand for sustainable investing options outpacing supply. In 2019, 88% of respondents were interested in pursuing sustainable and impact investments in their pension funds, but only 42% were sure that their fund provided this option, 37% were unsure and 21% reported that sustainable options were unavailable. These gaps suggest an important role to increase availability and investor knowledge.