As economics of green transition improve, some investors prioritize pragmatism over values

The environmental, social and governance investing boom feels like a long time ago. Political backlash to “woke capital,” energy security concerns, geopolitical instability, affordability issues and, in Canada, a new focus on economic sovereignty seem to have pushed responsible investing down the priority list for investors.

But the changing political and social landscape and a wave of ESG fund closures belie the vast amounts of capital now moving into clean technology, the energy transition and climate adaptation.

Global investment into clean technologies – including clean power, transportation, manufacturing and low-carbon industry – reached a record high of US$2.3-trillion in 2025, according to BloombergNEF.

Tim Nash, president and founder of Toronto-based Good Investing, says this green shift is less values-motivated now. Instead, “the hard economics are winning.”

John Cook, managing director and portfolio manager at Mackenzie Investments’ resources and energy evolution team in Toronto, says the use of ESG factors has now become “table stakes” among institutional investors for risk management.

There has also been a more pragmatic shift, he says, with thematic managers understanding that businesses may still have a carbon footprint and be important contributors to the energy transition. He gave the examples of copper mining for electrification, polysilicon manufacturing for solar panels and graphite electrodes for less energy-intensive steel production.

“These connections are starting to be made [between] the environmental solutions and the building blocks, molecules and metals we need to make them,” Mr. Cook says. “I think that gap has closed, which is tremendous.”

AGF Investments Inc. recently made a similarly pragmatic update, changing the name and strategy for its AGF Global Sustainable Growth Equity ETF to AGF Energy Transition and Adaptation ETF (ATAP-NE) in August.

The fund holds companies involved in the energy transition and climate change adaptation, even if they have higher emissions right now, such as Saskatoon-based uranium producer Cameco Corp. (CCO-T) and Houston-based energy technology company Baker Hughes Co. (BKR-Q).

The strategy switch follows the company’s launch, three years ago, of a U.S.-focused energy transition and adaptation strategy as a separately management account.

Martin Grosskopf, vice-president and portfolio manager at AGF who runs both strategies, says the ETF strategy change was partly to reach a broader swath of investors who want “to have capital invested in these areas and aren’t as concerned about having a dogmatic approach to the issue.”

AGF Global Sustainable Growth Equity Fund has been around since 1991 and is still available as a mutual fund. It invests thematically in companies that deliver a positive sustainability impact.

“We’re very excited about what’s happening there, but that’s a niche audience we’re trying to meet with that product,” Mr. Grosskopf says. “We didn’t want to diminish the integrity of our approach there.”

With several U.S. states restricting their public investment funds from investing with managers espousing certain ESG or sustainability strategies, he says, a transition-focused strategy was “more palatable to a broader audience.”

“This is just the pendulum swinging,” he says. Although many investors are interested in the energy transition, “they just want to be invested where capital is flowing” without the ESG framing.

The Responsible Investment Association’s RIA Investor Pulse Check: Fall 2026 found retail investors are moderately interested in strategic investment opportunities, including energy security (65 per cent), domestic manufacturing and supply chains (64 per cent) and critical minerals (62 per cent), with about half interested in defence and security.

In a video discussing the survey, Glen Pichanick, the RIA’s head of advocacy and industry insights, characterized the results as “more openness rather than strong demand at this point,” noting most investors said they were somewhat interested in these opportunities.

He said the results raise an interesting question: “Are investors beginning to think differently about what responsible or values-aligned investment opportunities look like in today’s economic and geopolitical environment?”

The survey also found inflation and affordability are the most prominent influences on Canadians’ investment decisions, followed by Canada’s economic resilience and global geopolitical uncertainty.

“Investors are clearly still thinking about the pressures that they’re experiencing personally in their finances, but they’re also looking outward at what’s happening in Canada and globally,” Mr. Pichanick said.