Responsible investing—investment decisions that explicitly factor in environmental, social and governance (ESG) considerations—has become a prominent theme in recent years. But how does that attention translate into the actual choices made by Canadian investors?
According to the 2023 Canadian Responsible Investment Trends Report, published Oct. 26 by the Responsible Investment Association (RIA), the answer is clear: responsible investing remains a high priority and is expected to expand as reporting standards improve both domestically and internationally. The report is based on survey responses from Canadian institutional asset managers and asset owners collected in mid-2023, and it reflects the state of the industry as of Dec. 31, 2022. The following summarizes the report’s most notable findings and what they mean for investors and the broader market.
About half of professionally managed assets are invested responsibly
Responsible investment (RI) in Canada now accounts for $2.9 trillion in assets under management, making it a substantial segment of the financial landscape. While that figure shows a slight decrease from the previous year in absolute dollars, the change is driven by market conditions rather than waning interest. As a share of all professionally managed assets in Canada, RI has actually increased—from 47% in 2021 to 49%—indicating growing penetration of ESG considerations across the investment ecosystem.
Responsible investing is viewed first and foremost as risk management
Many presume that environmental, social and governance values are the primary engines behind responsible investing—and values do play an important role. Fourteen percent of survey participants said their organization’s main motivation for RI was to fulfil mission, purpose or values. However, the dominant driver cited by respondents is risk management. Thirty-five percent identified minimising long-term risk as their primary reason for choosing RI, and 41% ranked risk reduction among their top three priorities. Improvement of returns over time was also a top consideration, with 61% naming it among the three most influential factors guiding their allocation decisions.
Fiduciary duty—an obligation to act in clients’ best financial interests—remains important as well: 26% of organizations listed fiduciary considerations as their primary motivation for adopting responsible investment approaches. In short, many Canadian investors see ESG integration not only as a values-based choice but as a practical tool for managing risk, protecting portfolios and pursuing durable returns.
Which ESG factors matter most? A broad set
Canadian investors are considering a wide range of ESG issues when they make investment decisions. Climate-related risks top that list: 93% of respondents reported they consider greenhouse gas emissions, up from 85% the previous year. Other environmental concerns such as climate change mitigation and adaptation were cited by 84% and 76% of respondents respectively. These figures highlight the increasing materiality of climate issues in investment analysis.
On the social front, respondents frequently named equity, diversity and inclusion (81%), human rights (76%), labour practices (76%) and health and safety (71%) as important considerations. Governance topics ranked highly as well: board diversity and inclusion was highlighted by 87% of organizations, executive compensation by 71%, and shareholder rights by 70%—underscoring that strong governance remains central to RI assessments.
Multiple strategies are used together for robust decisions
To incorporate ESG issues into investment selection and stewardship, Canadian organizations deploy a combination of approaches. The top tools reported were:
- ESG integration (94%): Systematically embedding ESG considerations into traditional financial analysis to assess material risks and opportunities.
- Corporate engagement (82%): Active dialogue and engagement with companies to encourage improved practices and disclosure.
- Negative screening (80%): Excluding specific companies, sectors or activities from investment universes based on ESG criteria.
Other commonly used strategies include thematic investing, positive screening and norms-based screening. More than half of respondents also engage in impact investing—targeting investments designed to deliver measurable social or environmental benefits alongside financial returns. Together, this mix of approaches enables investors to tailor RI strategies to their risk-return objectives and values.
Better reporting is boosting confidence
There has been a concerted industry effort to improve and standardize ESG reporting, and survey results indicate progress. Fifty-seven percent of respondents said they are much more or somewhat more confident in the overall quality of ESG reporting compared with the prior year. Slightly more than half (53%) reported increased confidence in their own organization’s reporting around responsible investing.
Respondents also identified the main barriers that could slow RI’s growth: concern over greenwashing, a lack of standardized frameworks, and unreliable or inconsistent data. Addressing these issues by improving disclosures and standardizing metrics could be pivotal in driving further adoption of responsible investing across Canada.
A continued trajectory of growth
Looking ahead, optimism is widespread. Ninety-three percent of respondents expect responsible investing to grow, though they differ on the pace of that expansion. Over the next two years, climate change remains a leading catalyst—with 63% of organizations naming it a significant driver—alongside investor demand, evolving regulatory requirements, and broader public awareness of ESG issues. The study concludes that as reporting standards improve and regulatory guidance becomes clearer, responsible investing is well positioned to continue expanding in Canada.
More about responsible investing:
- 5 ways to invest sustainably for Canadian investors
- Why sustainable investing is important
- Greener days ahead: There’s a new global standard for climate-related disclosures
- What are climate action incentive payments?
- Home insurance: Are you covered for wildfires, floods and other climate-related disasters?