New report says asset owners shift focus to risk management as ESG performance gaps widen
Despite global headwinds and politicization of ESG, Canada's largest institutional investors—including pension funds and asset owners—show no signs of backing down on climate targets.
According to the 2025 Canadian Responsible Investment Trends Report released by the Responsible Investment Association, 84 percent of organizations with greenhouse gas reduction targets plan to maintain those commitments over the next two years, with 6 percent planning to set more ambitious ones.
The finding underscores a critical divergence between Canadian institutional commitment and international trends.
A survey of 83 organizations conducted between May and July 2025 shows Canada's asset owners hold stronger conviction about collaborative stewardship than their US and international counterparts.
Seventy-six percent of Canadian respondents remain committed to these initiatives despite recent legal challenges elsewhere.
Yet a single barrier threatens to derail momentum: performance concerns now rank as the leading deterrent to responsible investment adoption, cited by 17 percent of respondents as their top concern.
This reflects a broader challenge facing the industry.
Both users and non-users of RI consistently cite performance data as their most sought-after information, revealing a critical gap between investor appetite for sustainable strategies and their confidence in demonstrable returns.
The nature of why institutional investors pursue responsible investment has shifted dramatically.
According to the report, risk minimization now far outpaces return improvement as the primary reason for considering ESG factors in investment decisions.
The gap between these two motivations expanded to 27 percentage points in 2025, up from just 13 points in 2023.
This reflects how financial materiality now anchors responsible investment discussions.
Climate risk, specifically, has rebounded to top spot as the leading driver of RI growth, cited by 48 percent of respondents—up from 40 percent in 2024.
As per the RIA research, this prominence aligns with stewardship priorities, where 92 percent of respondents address climate change and climate risk through active engagement programmes.
The shift also shows in how Canadian asset owners evaluate governance.
Board diversity and inclusion ranks as the top governance factor considered systematically in investment decisions for the fourth consecutive year at 84 percent, followed by executive pay at 78 percent and shareholder rights at 76 percent.
Ninety-one percent of respondents express confidence in their own organization's ESG reporting, according to the report.
However, broader confidence gaps emerge: just 65 percent feel equally assured about other organizations' reporting across Canada, and only 69 percent express confidence in the overall quality of ESG reporting.
This confidence gap points to a persistent challenge.
Respondents consistently call for standardized disclosures and definitions aligned with Canadian standards, as well as advancement of global standardization of ESG metrics and climate regulations.
The report indicates that 51 percent of respondents believe policymakers should prioritize adoption of the Canadian Sustainability Standards Board's new Disclosure Standards (CSDS 1 & 2), released in December 2024.
In the absence of standardized disclosure frameworks, asset owners rely heavily on resource-intensive practices.
According to the RIA data, in-house research and direct company engagement each register as “very valuable” to 75 percent of respondents—revealing the inefficiency created by fragmented reporting across portfolio companies.
Institutional investors now surpass retail investors as the expected drivers of RI growth over the next two to five years, according to the report.
Sixty-three percent of respondents identify institutional investors as key growth drivers, up from 58 percent in 2024, while expectations for retail investor growth declined to 56 percent from 70 percent.
Regulatory guidance ranks as the third-strongest growth driver at 39 percent, followed by younger investors and plan members at 34 percent.
Investment manufacturers are expected to contribute at 31 percent.
