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Responsible Investment Industry in the Midst of Remarkable Evolution

Responsible Investment Industry in the Midst of Remarkable Evolution

The responsible investment industry is in the midst of a remarkable evolution, according to new data from the 2022 Canadian Responsible Investment (RI) Trends Report. Released today by Canada’s Responsible Investment Association (RIA), the report tracks the national trends and outlook for RI, which refers to investments that incorporate environmental, social, and corporate governance (ESG) issues into the selection and management process.

“RBC Global Asset Management is proud to collaborate with the RIA Canada and support its efforts to build greater awareness of ESG trends and issues facing the investment community”

This year’s report confirms that RI’s recent momentum is giving way to demand for sophistication and more vigilant reporting, signaling a maturing industry. Over the past two years, the rush into RI claims has been met by forces both external and internal to the financial industry, including the reputational and legal risks associated with greenwashing and lack of clarity around ESG industry terminology and disclosure requirements.

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With its updated methodology, the report affirms that RI is entrenched in Canada, with reported assets under management at $3 trillion, and 94% of respondents using ESG integration as an RI strategy. This marks the emergence of a reliable baseline for RI market share and demonstrates that ESG Integration is a fundamental tool in Canadian investors’ decision-making.

“Greater vigilance is redefining the ‘floor’ of RI assets under management. Increased clarity and alignment are necessary to shape the slope and raise the ceiling,” said Patricia Fletcher, CEO of the RIA. “RI is here to stay, but we have work to do with everyone in the investment ecosystem to get the next steps right in order to propel further growth.”

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Growth expectations overall remain strong with 90% of respondents anticipating moderate to high levels of growth over the next two years. The demand for sophistication and vigilance is further reflected in investors’ future outlook, with respondents citing the top three potential deterrents to RI growth as: (1) mistrust or concerns about greenwashing, (2) a lack of standardized ESG disclosure frameworks/standards, and (3) lack of reliable data.

The report found an increase in the prevalence of all other RI strategies in addition to ESG integration, including corporate engagement, positive and negative screening, and thematic and impact investing, further pointing to the growing RI sophistication of Canadian investors. Respondents cited risk management as their top motivation for considering ESG factors.

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