CEOs and Investors Double Down on Sustainability

The sustainability landscape has entered what industry leaders call an “era of pragmatism.” While headlines trumpet ESG backlash and political resistance, two landmark studies—Morgan Stanley’s Institutional Investors 2025 survey of 967 investors and the UN Global Compact-Accenture CEO Study featuring nearly 2,000 chief executives—reveal a strikingly different narrative unfolding in corporate boardrooms and investment committees. 99% of CEOs report they will maintain or expand their climate, environmental, and social commitments over the next two years.

Simultaneously, 86% of asset owners plan to increase allocations to sustainable investments, while 79% of asset managers expect sustainable AUM growth. This represents not retreat, but strategic recalibration. What’s emerging is a paradox of progress. While 88% of both CEOs and investors believe the business case for sustainability has strengthened significantly over the past five years, public communication has notably quieted. CEO mentions of climate-related topics in earnings calls dropped 45% from their 2021 peak, even as companies deepen operational commitments behind the scenes.

This disconnect between rhetoric and reality reveals a critical inflection point: sustainability leadership is transitioning from aspirational pledges to embedded business fundamentals. How to make this happen is described in our Towards 2030 (version 2026) report.

Institutional Capital Flows Accelerate Despite Headwinds

Investors See Stronger Business Case, Not Weaker Resolve

The Morgan Stanley Institute for Sustainable Investing’s comprehensive survey reveals institutional investors remain remarkably bullish on sustainability’s trajectory. Asset owners managing trillions in capital report that 86% expect to increase sustainable allocations over the next two years—a six-point increase from 2024 despite intensifying political and regulatory uncertainty.

The motivations are decidedly pragmatic. When asked why they’re increasing allocations, 22% of asset owners cite strong financial performance as their top reason, followed by 18% motivated by an increasingly established track record. This marks a fundamental shift: sustainability has moved from values-driven screening to performance-seeking strategy.

Asset managers echo this sentiment, with 42% strongly agreeing that growth will come from existing clients increasing allocations, and 39% expecting new mandates. The sustainable investment infrastructure is maturing rapidly—over half of surveyed investors have maintained programs for more than five years, rising to more than two-thirds among the largest institutions.

Regulatory Readiness Becomes Competitive Advantage

Forward-looking investors view the evolving regulatory landscape not as burden but as catalyst. Eighty-four percent of CEOs report their companies are ready to meet upcoming sustainability regulations, while 95% identify regulatory compliance as a leading organizational priority.

The proliferation of disclosure frameworks—from ISSB standards gaining traction across 36 jurisdictions covering 60% of global GDP, to over 5,000 companies now setting science-based targets—is creating the transparency infrastructure investors demand. More than 4,000 organizations now use TCFD-aligned reporting, while 10,000+ organizations across 100+ countries employ GRI standards.

This standardization is unlocking capital. Asset managers increasingly require sustainable investing policies from external managers, with many asset owners making this a mandate prerequisite. The message is clear: regulatory preparation is becoming table stakes for accessing institutional capital.

The Quiet Revolution—CEOs Advance Commitments While Refining Communications

From Loud Pledges to Measurable Integration

The UN Global Compact-Accenture CEO Study reveals a striking paradox: while 99% of CEOs maintain or expand sustainability commitments, only 50% feel very comfortable communicating this progress publicly. This communications recalibration reflects hard-won lessons about the difference between ambition and accountability.

CEOs are embedding sustainability deeper into operations than ever before. Eighty-six percent report sustainability is currently integrated into core operations, with 66% believing the private sector will drive significant progress by integrating it into business strategy and leadership remuneration over the next 25 years—nearly double the 34% who believe this was accomplished in the previous quarter-century.

The operational integration is measurable. Fifty-nine percent of CEOs now use sustainability criteria to evaluate and reward leaders and departments, up from 33% in 2022. Seventy-five percent are actively constructing responsible supply chains, focusing on Scope 3 emissions and ethical sourcing. This represents transformation of fundamental business architecture, not peripheral CSR programming.

The Business Case Strengthens as Rhetoric Quiets

Here lies the central paradox: 88% of CEOs believe the business case for sustainability is stronger today than five years ago, yet public mentions of climate, carbon, and clean energy in earnings calls have declined 45% since their 2021 peak. Some interpret this as retreat; the data suggests it’s strategic maturation.

Companies are navigating legitimate tensions. Growing political scrutiny, greenwashing accusations, and “greenhushing” concerns have made bold public statements riskier. Simultaneously, consumer expectations (identified by 60% of CEOs as top-three sustainability drivers), employee demands, and investor requirements continue intensifying.

Leading CEOs are responding by anchoring sustainability communication in business fundamentals—risk management, regulatory readiness, operational efficiency, and return on investment. The focus shifts from marketing sustainability to making it synonymous with business excellence.

Climate Adaptation and Physical Risk Management Enter the Mainstream

Investors and CEOs Align on Escalating Physical Climate Risks

Both studies reveal converging awareness of physical climate risks moving from theoretical concern to material financial threat. Over 75% of institutional investors expect physical climate risks to have major impacts on asset prices within five years, with 35% anticipating widespread market impacts and 42% seeing concentrated effects on vulnerable assets.

This investor concern mirrors corporate reality. The Morgan Stanley Sustainable Signals—Corporates 2025 survey found 60% of companies anticipate negative operational impacts from physical climate risks over the same period. Climate adaptation and resilience has jumped to the third-ranking investment priority for institutional investors globally, up from sixth place in 2024.

The operational implications are profound. Fifty percent of investors globally—rising to 65% in North America—now make climate resilience a core part of their risk-return models for infrastructure and real estate investments. The message to portfolio companies is unambiguous: physical climate preparedness is becoming a valuation factor.

Technology and Data Infrastructure Drive Adaptation Strategies

The solutions investors are prioritizing reveal the infrastructure requirements of climate-resilient business models. Data and analytics tools top the list at 49%, followed by water infrastructure (44%) and power grid modernization (44%). These aren’t peripheral sustainability initiatives—they’re foundational systems upgrades essential to operational continuity.

Barriers remain significant:

• 37% cite regulatory and policy uncertainty,
• 38% identify insufficient data or risk models,
• 34% point to unclear financial returns.
• Yet 97% of CEOs expect the private sector to drive progress in developing digital tools to track and measure ESG performance over the next 25 years.

The gap between expectation and current prioritization is revealing. 96% of CEOs view innovation and technology as critical to advancing sustainability. But only 26% currently rank them among their top three strategic priorities. This disconnect represents both vulnerability and opportunity. Companies that close this gap will capture competitive advantage as climate adaptation becomes business-critical.

Conclusion

ESG is not “declining” but evolving from an inspirational approach to a fully integrated reality within organizations.

The narrative that ESG is in retreat fundamentally misreads the current moment. What’s actually occurring is a transition from aspirational sustainability—characterized by bold pledges and extensive public commitments—to embedded sustainability, where environmental and social considerations become inseparable from operational excellence, risk management, and value creation.

The dual evidence from institutional investors and corporate leaders reveals remarkable alignment. Nearly universal CEO commitment (99%) to expanding sustainability efforts is matched by investors. Indeed, 86% of asset owners increase allocations despite a year marked by greater concerns about data quality, and political headwinds.

Three critical dynamics define this evolution:

1. First, the business case is strengthening, not weakening. Eighty-eight percent of both CEOs and investors report the business case is stronger than five years ago. This conviction is driving capital allocation decisions and operational transformation, even as public communication becomes more measured and strategically focused.
2. Second, material risks are accelerating integration. Physical climate risks, supply chain vulnerabilities, and regulatory requirements are moving sustainability from the CSR office to the C-suite. When 75% of investors expect climate impacts on asset prices within five years, and 84% of CEOs report readiness for evolving regulations, sustainability becomes enterprise risk management.
3. Third, infrastructure for accountability is maturing rapidly. From science-based targets (now adopted by 5,000+ companies) to standardized disclosure frameworks (covering 60%+ of global GDP), the transparency architecture that enables both greenwashing detection and legitimate progress measurement is finally emerging.

Sustainability Leadership for 2026

For business leaders navigating this landscape, the implications are clear: sustainability leadership in 2026 requires less talk and more results, integration over isolation, and business fundamentals over aspirational rhetoric. Companies that master this transition will access expanding pools of institutional capital while building genuine competitive advantage.

The era of sustainability as corporate social responsibility is ending. The era of sustainability as business strategy has arrived. The question is no longer whether to advance sustainability, but how to advance it credibly, measurably, and profitably—even, and especially, when the political winds shift.

Picture: Freepic