What’s behind the pullback in responsible investing?

The decline in RI usage is on account of fewer latest advisors offering RI to their clients, in line with the Advisor RI Insights Study 2025. However, the share of clients using a responsible methodology remained roughly constant at 18%, in comparison with 19% two years ago. Conversations about responsible strategies are increasingly being initiated by customers (41%) relatively than advisors (28%). Still, nearly half of advisors (46%) agree that questions on RI ought to be included within the “Know Your Client” forms used with latest clients.

“While adoption has stabilized, investor demand for RI remains strong and advisors remain open to filling the service gap,” RIA CEO Patricia Fletcher said in a press release. “By 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 decline may very well be economic headwinds, the environmental, social and governance (ESG) backlash within the US, or the maturation of the RI area of interest with fewer latest investment products coming to market, the study authors speculated.

This about-face is consistent with public attitudes reflected in President Donald Trump’s recent dismissal of climate change as a “fraud” and Canada’s removal of carbon taxes and electric vehicle subsidies.

But it might also be on account of the relatively poor performance of RI investments in recent times.

In the early years of so-called “ethical investing”—the Nineties and early 2000s—many RI funds boasted higher returns than broad index funds. RI advocates identified that ESG criteria served as a risk mitigation tool, steering customers away from potentially unsustainable industries (tobacco, coal) and firms that were at higher risk of lawsuits and increased regulation.

In contrast, the last decade has seen strong performance from major indices reminiscent of the S&P 500 and weak performance from sectors often overweighted in RI portfolios, reminiscent of renewable energy. In the RIA survey, “return concerns” was the second commonest reason advisors gave for not including RI in client portfolios (47%), behind “lack of client interest/demand” (61%).

Other aspects potentially 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, in comparison with just 8% using ETFs – and skepticism fueled by so-called “greenwashing.” 35 percent of advisors surveyed by the RIA cited “concerns about the validity of ESG benefits” as one in all their reasons for not offering RI portfolios.

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About Jessica Barrett

Jessica Barrett is Editor-in-Chief of MoneyDown. She has extensive experience within the fintech industry and private finance journalism.