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While ethical investors are hanging on, the number of advisors offering the methodology has pulled back, according to a recent study by the RIA.
Socially responsible investing is down but not out in Canada, a new survey of investment advisors by the Responsible Investment Association (RIA) has found. Just under two-thirds of advisors (64%) report using responsible investing (RI) approaches and investments, down from 73% in 2023. But the share of assets allocated to RI investments is holding firm at 13% and three-quarters of the 300 respondents to the survey expected growth in RI over the next two years.
The decline in RI usage was driven by fewer new advisors offering RI to clients, the 2025 Advisor RI Insights Study said. The proportion of clients using a responsible methodology was roughly steady at 18%, however, compared to 19% recorded two years ago. Increasingly, it is clients initiating conversations about responsible strategies (41%) over advisors (28%). Still, nearly half of advisors (46%) agree that questions about RI should be included in Know Your Client forms used with new clients.
“While adoption has steadied, investor demand for RI remains strong and advisors remain open to closing the service gap,” Patricia Fletcher, CEO of the RIA, said in a release. “Mobilizing wholesalers and equipping advisors with tools and training, we can empower advisors to align portfolios with their clients’ values.”
The reasons for the RI pullback could be related to economic headwinds, the backlash against environmental, social, and governance (ESG) criteria in the U.S., or the maturation of the RI niche, with fewer new investment products coming on the market, the study’s authors speculated.
This reversal is consistent with public attitudes reflected in President Donald Trump’s recent dismissal of climate change as a “con job” and Canada’s withdrawal of carbon taxes and electric vehicle subsidies.
But it may also be rooted in the relatively poor performance of RI investments in recent years.
In the early years of what was then called “ethical investing”—in the 1990s and early 2000s—many RI funds could boast superior returns to broad index funds. RI advocates pointed to the way ESG criteria served as a force for risk mitigation, steering clients away from potentially unsustainable industries (tobacco, coal) and companies at greater risk of lawsuits and increased regulation.
The last decade, by contrast, has been marked by strong performance of major indices like the S&P 500 and underperformance by sectors commonly overweighted in RI portfolios, such as renewable energy. In the RIA survey, “Concerns about returns” ranked as the second most common reason advisors cited for not including RI in client portfolios (47%), after “Lack of client interest/demand” (61%).
Other factors possibly contributing to the RI pause include the rising market share of exchange-traded funds (ETFs) over mutual funds—76% of advisors offering RI said they predominantly use mutual funds, compared to just 8% using ETFs—and skepticism fed by so-called “greenwashing.” Thirty-five percent of advisors polled by RIA cited “Concerns about the validity of ESG benefits” among their reasons for not offering RI portfolios.
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