Morgan Stanley: Over 90% of companies advance sustainability strategies, but execution concerns rise

15 / 05 / 2026

• Global Experiences
• news

Over 90% of sustainability leaders say their companies continue to make progress on sustainability strategies in 2026, but nearly half now see growing challenges in execution, according to a new survey by the Morgan Stanley Institute for Sustainable Investing.

The report highlights how macroeconomic uncertainty, rising investment needs, regulatory pressure, investor expectations, and climate risks are making sustainability efforts increasingly difficult to implement effectively.

The institute’s 2026 “Sustainable Signals: Corporates” report, based on a survey of 300 sustainability decision-makers globally, found that 47% of respondents now believe there is room for improvement in executing sustainability strategies, up more than ten percentage points from 2025.

Companies still see sustainability as commercially valuable:

Despite growing operational challenges, most companies continue to see sustainability as an important business priority.

According to the report, 88% of respondents said sustainability delivers commercial value to their company, while 87% described it as a critical risk-management exercise. Another 84% said sustainability is either primarily or partly a value-creation opportunity for their long-term corporate strategy.

However, the way companies frame sustainability is shifting.

Only 22% of respondents in 2026 described sustainability as primarily a value-creation opportunity, down sharply from 53% in 2025. Meanwhile, 62% now see sustainability as a combination of value creation and risk management, compared with 35% last year.

Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley, said companies are adapting to a more complex business environment.

“Our Sustainable Signals survey shows that corporates around the world continue to see the value of sustainability, but their motivations and concerns have shifted amid a complex operating environment.”

She added “Sustainability is becoming more integrated into core business strategies as macroeconomic uncertainty, rising costs, and regulatory and investor expectations increasingly shape decision-making.”

Regulatory pressure, investor expectations gain importance:

Regulatory compliance and investor expectations are becoming increasingly influential in shaping corporate sustainability strategies.

Nearly half of respondents — 49% — ranked regulatory compliance among their top three motivations for pursuing sustainability initiatives, up from 23% in 2025.

Investor expectations also rose significantly, with 42% placing them among their top three drivers, approximately double last year’s level.

The report noted that while regulatory momentum has slowed in some markets, companies operating globally continue to face expanding disclosure and compliance requirements in other regions.

Rising costs, economic uncertainty are slowing momentum:

The need for substantial investment remains the most commonly cited obstacle to delivering sustainability strategies.

Around 39% of respondents identified high investment requirements among their top three barriers, up from 24% in 2025.

Macroeconomic uncertainty ranked second at 36%, more than doubling from last year.

Other major challenges include lack of data, regulatory uncertainty, and difficulties translating sustainability strategies into operational action, each cited by around 30% of respondents.

Notably, no respondents said they faced no barriers in 2026, compared with 7% a year earlier.

Climate risks are increasingly seen as operational threats:

Corporate leaders are also becoming more concerned about climate-related disruptions.

On average, 78% of respondents said physical climate risks — including extreme weather, flooding, and wildfires — are very or somewhat likely to negatively affect operations within the next five years, up from 65% in 2025.

Nearly two-thirds — 63% — said increased operational costs are very likely as a result of climate impacts.

Meanwhile, 81% of respondents said climate transition risks are likely to affect operations, compared with 71% last year.

Sustainability becoming more embedded in corporate governance:

The report found sustainability is increasingly integrated into governance structures and strategic business decisions.

Nearly two-thirds of respondents — 63% — said key decisions, including capital expenditures, R&D budgeting, and mergers and acquisitions, are now subject to sustainability criteria, up from 51% in 2025.

Similarly, 62% reported Board-level responsibility for sustainability, compared with 42% last year.

Leadership expectations are also becoming a stronger driver, with around a quarter of companies placing Board or senior management expectations among the top three reasons for pursuing sustainability strategies.

Sustainability roles expand beyond dedicated ESG teams:

The survey found sustainability responsibilities are increasingly spread across different business functions rather than limited to dedicated ESG teams.

Only 10% of respondents said they work exclusively in sustainability-focused roles, while most operate across broader functions such as strategy, finance, and risk management.

A smaller share also contributes to artificial intelligence governance. Around 15% of respondents said they participate in AI governance decisions, rising to 20% in North America.