What’s behind the retreat in responsible investing? – Money sense

The decline in RI use was driven by fewer new advisors offering RI to clients, according to the 2025 Advisor RI Insights Study. However, the share of clients using a responsible methodology remained roughly stable at 18%, up from 19% two years ago. Clients are increasingly initiating conversations about responsible strategies (41%), rather than advisors (28%). Yet almost half of advisors (46%) agree that questions about responsible investing should be included in Know Your Client forms used with new clients.

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

The reasons for the decline in responsible investing could be related to economic headwinds, the backlash against environmental, social and governance criteria in the US, or the maturation of the responsible investing niche, which is reducing the number of new investment products coming to market, the study authors speculated.

This reversal is consistent with public attitudes reflected in President Donald Trump’s recent dismissal of climate change as a “con” and Canada’s withdrawal of carbon taxes and electric vehicle subsidies.

But it may also have its roots in the relatively poor performance of responsible investment investments in recent years.

In the early years of what was then called “ethical investing”—the 1990s and early 2000s—many mutual funds boasted superior returns to broad index funds. Responsible investing 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.

In contrast, the past decade has been characterized by strong performance by major indices such as the S&P 500 and underperformance by sectors that are typically overweight in investment portfolios, such as renewable energy. In the RIA survey, ‘concerns about returns’ was the second most common reason advisors cited for not including responsible investing in client portfolios (47%), after ‘lack of interest/demand from clients’ (61%).

Other factors potentially contributing to the pause on responsible investing include the rising market share of exchange-traded funds (ETFs) versus mutual funds – 76% of advisors offering responsible investing say they primarily use mutual funds, compared to just 8% who use ETFs – and the skepticism fueled by so-called “greenwashing.” Thirty-five percent of advisors surveyed by RIA cited “concerns about the validity of ESG benefits” as one of the reasons for not offering RI portfolios.

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About Jessica Barrett

Jessica Barrett is the editor-in-chief of MoneySense. She has extensive experience in the fintech industry and personal finance journalism.