Why Responsible Investing Is Losing Momentum

A new survey of Canadian investment advisors by the Responsible Investment Association (RIA) finds that socially responsible investing (often called responsible investing or RI) remains present in the market, but its momentum has softened. The study reports that 64% of advisors now say they use RI approaches and RI-focused products—down from 73% in 2023. Despite that decline, the percentage of assets invested in RI strategies has remained steady at about 13%, and roughly three-quarters of the 300 advisors surveyed expect RI to grow over the next two years.

The 2025 Advisor RI Insights Study points to a drop in the number of new advisors offering RI as the main driver behind the fall in usage. The share of clients using a responsible methodology held relatively steady at 18%, nearly unchanged from the 19% measured two years ago. Notably, investor-initiated conversations are becoming the norm: 41% of advisors said clients are starting the discussion about responsible strategies, compared with 28% who said advisors typically begin the conversation. Nearly half of advisors (46%) also agreed that questions about RI should be integrated into Know Your Client (KYC) forms used with new clients.

“While adoption has steadied, investor demand for RI remains strong and advisors remain open to closing the service gap,” said Patricia Fletcher, CEO of the RIA. “By mobilizing wholesalers and equipping advisors with tools and training, we can empower advisors to align portfolios with their clients’ values.”

The authors of the study suggest several possible explanations for the recent pullback. Wider economic headwinds may be causing investors and advisors to prioritize other considerations. Political shifts and a backlash against environmental, social, and governance (ESG) criteria, especially in the United States, have also created headwinds for ESG-labeled strategies. The niche has matured as well, with fewer new RI products coming to market, which can dampen growth among advisors seeking new solutions for clients.

Public and political attitudes have influenced the climate for RI. High-profile skepticism toward climate policy and changes in national incentives—such as reductions or rollbacks in carbon pricing and electric vehicle subsidies—have shaped perceptions about the urgency and utility of ESG-focused approaches. That broader context can affect both investor enthusiasm and the regulatory environment in which advisors operate.

Performance trends are another important factor. In the early years of so-called ethical investing, some RI funds outperformed broad market indexes, and proponents argued that ESG criteria helped mitigate risk by steering portfolios away from industries facing heightened legal or regulatory exposure. Over the last decade, however, major benchmark indexes such as the S&P 500 posted strong returns while certain sectors often overweighted in RI portfolios—renewable energy being one example—lagged. In the RIA survey, “concerns about returns” was the second most frequent reason advisors gave for not including RI in client portfolios (47%), following “lack of client interest/demand” (61%).

Other challenges cited by advisors include the rapid shift from mutual funds to exchange-traded funds (ETFs). Among advisors who currently offer RI, 76% said they primarily use mutual funds while only 8% rely primarily on ETFs; this contrasts with the broader market trend toward ETFs and may complicate product selection and implementation for advisors. Skepticism about the authenticity of ESG claims—often described as “greenwashing”—also persists, with 35% of respondents naming doubts about the validity of ESG benefits as a reason for steering clear of RI portfolios.

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