Just one-quarter of institutional investors worldwide consider sustainability to be a significant influence on their decision-making, new research from Schroders has found.
Strategic asset allocation was found to have the most influence on investments, followed by a fund manger's track record, anticipated returns, and risk tolerance.
Almost a third of the investors studied, which represent around £19trn in assets, said sustainability had "little to no influence" on their decisions, while 41% said it had a moderate influence.
However, three-quarters think sustainability will grow in importance over the next five years, with the issue found to be a greater focus for larger institutional investors.
"Empowering investors to think longer-term has been a growing focus of policymakers," Schroders global head of stewardship, Jessica Ground, said.
"Investors clearly recognise that investing sustainably is going to be more and more important, but this approach is yet to sit at the heart of their investment process."
The research shows that investors placing a greater emphasis on sustainability tend to think more long-term, have greater investment confidence, and prioritise risk-adjusted returns.
Well over half were at least reasonably confident of meeting their return expectations, compared with 37% of investors who did not prioritise investing sustainably.
However, over three-quarters of investors admitted they found investing sustainably at least somewhat challenging, with performance concerns perceived as the greatest obstacle.
A lack of transparency and difficulty measuring risk were the other main challenges.
Over a third said that evidence demonstrating better returns on sustainable investments would make them change their allocations accordingly.
"Investors who prioritise investing sustainably tend to have longer-term investment horizons and greater confidence about achieving their return targets," Ground continued.
"Sustainability is going to increasingly sit alongside institutional investors' more long-standing priorities, although there still remain barriers to overcome to achieve this in the near-term."