ESG rebrands to responsible investing as Canadian investors refocus

While the term ESG may be fading from institutional portfolios and annual reports, the underlying considerations remain integral to investment decisions.

Rather than a simple change in terminology, investment professionals managing institutional money in Canada say responsible investing reflects a greater emphasis on financial materiality and the meaningful integration of ESG factors into the investment process.

“I wouldn’t say that ESG investing doesn’t matter. I never referred to it as ESG investing, to be honest, and I think now you’re starting to see the lexicon change,” says Adelaide Chiu, Toronto-based vice-president of responsible investing at Beutel Goodman. “The incorporation of investment risks into fundamental analysis hasn’t changed.”

A shift in language, not in responsible investing substance

Chiu pointed to the evolution of the term as something the industry has been working through for years, tracing it back to the socially responsible investing movement of the 1980s. Because investors didn’t understand the concept of sustainability, they “put it in 3-factor definitions and I think that probably created a lot of conflict,” she explains. “It does create silos because you can have an investment that could have exposure to both or all governance, social, and environmental factors. But it became hard to pigeonhole that investment into one factor or one exposure.”

According to Anton Tabuns, director of investment stewardship at Addenda Capital, in Toronto, the rebrand from ESG to responsible investing doesn’t signal a change in how the work gets done, “but companies are always updating their strategy. Their approach to sustainable investing is and should evolve over time, and it definitely has over the past five to 10 years,” he says.

For Virginie Laplante, sustainability analyst at Global Alpha Capital Management, in Montreal, she pointed to the pandemic-era overpromising by investors chasing the trend, a regulatory pileup that created compliance fatigue, and a breakdown in trust around ESG ratings as factors that have contributed to growing headwinds for ESG.

“During the pandemic, we witnessed a massive surge in responsible investment objectives. There was a big boom around ESG factors and how these should be integrated in our investment processes. Perhaps this went a little bit too far in the sense that a lot of investors were just following the bandwagon without necessarily having substance,” she says.

Evelyne L’Archevêque, Montreal-based manager and investment product specialist at Global Alpha, agreed, adding that the shift from ESG to responsible investing reflects a greater emphasis on financial materiality rather than a retreat from ESG.

“We’ve moved from ESG to responsible investing, placing greater emphasis on integrating financially material ESG considerations into our investment philosophy and process. It’s not about talking about ESG less but about focusing on what truly matters to investment decisions,” she says.

Build Canada Strong tests the materiality case

What currently complicates the responsible investing picture, however, is Carney’s Build Canada Strong agenda, which emphasizes economic competitiveness, energy security, critical minerals, and major infrastructure, areas that carry environmental and social trade-offs. This also comes as infrastructure investors have begun positioning Canada ahead of the United States in their allocation priorities, drawn by policy signals including the $25-billion Canada Strong Fund announced in April 2026.

As a result, that raises a critical question for institutional investors: does a resource-first economic strategy make responsible investing harder to practice, or does it make the case sharper?

Chiu argues that the Build Canada Strong agenda isn’t the one-dimensional fossil-fuel play its critics suggest. She pointed to Carney’s nature strategy, which focuses on conservation and nature-based solutions, as well as a $10 billion commitment from alternative asset manager Power Sustainable – a subsidiary of Power Corporation of Canada - toward low-carbon investments, which includes grid upgrades and renewables, that came out of the Canada Investment Summit.

Nuclear energy, she added, represents another pillar, with Ontario Power Generation’s first small modular reactor and the Bruce C project both advancing as low-carbon options that could position Canada as an exporter of nuclear expertise.

On the oil and gas side, both Chiu and Tabuns underscored Indigenous engagement as a critical variable in how these projects proceed. Chiu highlighted the Haisla Nation’s involvement in an LNG project near Kitimat, British Columbia, as a model where Canadian infrastructure serves as a platform for pension-grade investment alongside reconciliation.

She emphasized how these are achieving lower-carbon emissions intensity than previous operations while creating economic benefits for Indigenous communities.

“Canada is a resource-based economy. We can’t hide from that,” she says. “There are ways to satisfy global demand, to provide economic opportunity to Indigenous communities, and support economic reconciliation as well as support our own economy here in Canada.”

For Laplante, the agenda underscores the materiality case rather than weakening it and creates opportunities alongside environmental and social trade-offs. She believes that’s precisely the kind of analysis responsible investing is built for.

“For us at Global Alpha, it’s not about being opposed to economic growth or certain activities or sectors. It’s more about understanding the full range of risk and opportunities that could affect the long-term investment value,” she says. Rather than putting responsible investing at odds with the government’s economic agenda, she says, the push reinforces why a materiality-driven approach matters.

While Tabuns acknowledged that some major Build Canada Strong projects align with transition investing and will produce the opposite of what ESG skeptics might expect, he flagged risks around Indigenous rights and fast-tracked environmental assessments.

“I think there are going to be serious impacts and issues when it comes to engaging with First Nations throughout the country on many of these fast-track projects, especially with Canada’s adoption of UNDRIP (United Nations Declaration on the Rights of Indigenous Peoples),” he says, adding the fast-tracking doesn’t make ESG integration harder in principle, but compressed environmental assessment windows could challenge investors and project developers alike when it comes to evaluating sustainability impacts.

Notably, multiple First Nations in B.C. have already filed a lawsuit against the Pacific Link Pipeline, which has been dubbed a “project of national interest” by the Federal Government, Tabuns noted.

“There’s going to be a lot more scrutiny on what is being assessed and how they’re being handled. I would bet money that a few projects are going to be taken to court in some capacity or other,” he adds.

Disclosure remains voluntary as ESG debate stalls

To that end, when it comes to the disclosure front, Canada remains in a holding pattern. Chiu, who sits on the Canadian Sustainability Standards Board, says the standards remain voluntary and that the path to mandatory disclosure is unclear. Tabuns noted the federal regulatory apparatus already acknowledges these risks as material to institutional portfolios, adding that the Canadian Securities Administrators had been developing mandatory climate disclosure rules but quietly abandoned the effort after the US Securities and Exchange Commission dropped its own proposed regulations.

With Carney’s government now focused on diversifying trade beyond the US, Tabuns says a small window may exist to revisit the conversation, though he acknowledged he’s doubtful it could happen.

Meanwhile, Laplante cautioned against assuming that more disclosure necessarily solves the problem.

“It’s not because you disclose information that’s in line with a mandatory framework that your ESG strategy is necessarily better. That’s one bias that a lot of investors have in this space,” she says.

The bottom line, in Chiu’s view, is that responsible investing and resource development aren’t in conflict with one another. Rather, investors will need to find a way for them to work in tandem with each other.

“I don’t think ESG is dead, for lack of a better word. I just think it’s changing in the sense that we can’t think about it in silos anymore,” she says.