What’s behind the decline in responsible investment?

The 2025 Advisor RI Insights study says the decline in RI usage is due to fewer new advisors offering RI to clients. However, the proportion of customers using responsible methods remained broadly stable at 18%, compared with 19% recorded two years ago. Increasingly, clients (41%) rather than advisors (28%) are initiating conversations about responsible strategies. Still, nearly half of advisors (46%) agree that questions about RI should be included in the “know your client” form used by new clients.

“While adoption has plateaued, investor demand for RI remains strong and advisors remain willing to close service gaps,” RIA CEO Patricia Fletcher said in a release. “By mobilizing wholesalers and providing advisors with the tools and training, we can empower advisors to align portfolios with their clients’ values.”

The study’s authors speculate that the reasons for the RI pullback could be related to economic headwinds, backlash against environmental, social and governance (ESG) standards in the U.S., or the maturation of the RI niche and fewer new investment products on the market.

The shift is consistent with public attitudes reflected in President Donald Trump’s recent dismissal of climate change as a “hoax” and Canada’s elimination of carbon taxes and electric vehicle subsidies.

But this may also stem from the relatively poor performance of RI investments in recent years.

In the early days of what was then called “ethical investing”—the 1990s and early 2000s—many RI funds could boast higher returns than broad index funds. RI advocates point to ESG standards as a risk-mitigating force, steering clients away from potentially unsustainable industries (tobacco, coal) and companies facing greater litigation risk and increased regulation.

In contrast, the past decade has been characterized by strong performance in major indexes such as the S&P 500 and underperformance in sectors that are generally overweight in RI portfolios, such as renewable energy. In the RIA survey, “concerns about returns” was cited by advisors as the second most common reason for not including RIs in client portfolios (47%), behind “lack of client interest/demand” (61%).

Other factors that could lead to a pause in RI include the rising market share of exchange-traded funds (ETFs) relative to mutual funds — 76% of advisors offering RI said they primarily use mutual funds, while only 8% use ETFs — and skepticism stemming from so-called “greenwashing.” Thirty-five percent of advisors surveyed by RIA cited “concerns about the effectiveness of ESG benefits” as the reason 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 news.