At RBC Global Asset Management (RBC GAM), we continually monitor the responsible investment (RI) landscape to refine our perspectives and ensure we remain well positioned to act in the best interests of our clients. Looking ahead, we have identified six themes likely to shape the RI environment in the coming year.
These themes collectively reflect a complex and dynamic backdrop characterized by rapid technological advancement and deepening social and political divides, with the potential to present material risks and opportunities across the portfolios we manage.
1) The continued rise of AI. As artificial intelligence (AI) capabilities rapidly advance, companies face mounting pressure to deliver tangible business value from substantial investments. An intensifying focus on measurable outcomes risks creating a dangerous trade-off where speed and efficiency are prioritized over critical safeguards like fairness, accuracy, and bias prevention. Resource constraints further amplify these complexities. Nearly one-quarter of today’s data centers operate in water-stressed regions, underscoring the environmental and operational tensions accompanying AI.[1] Workforce disruption adds another layer of complexity. Early indicators suggest AI is already shaping corporate hiring decisions, though real-time data on precise implications remains fragmented. Meanwhile, the regulatory landscape is contentious. Efforts such as streamlining the EU AI Act and the Trump administration’s push to restrict state-level AI regulations highlight the delicate balance between fostering innovation and mitigating risks.
2) Recalibrating defense. Rising global tensions and widespread conflicts have led to substantial commitments to boost defense spending worldwide. At the same time, several EU-based funds and pensions are re-evaluating exclusionary policies for the sector. Regulatory frameworks are also evolving to accommodate this shift. Notably, the EU’s proposed Defense Readiness Omnibus package aims to refine sustainable finance exclusions and potentially ease restrictions on conventional defense activities. The sector presents unique challenges for investors as well. The boundaries of what constitutes a “defense company” are becoming blurred as non-traditional players enter the space to capitalize on emerging opportunities. These developments underscore a growing recognition of the strategic importance of the defense sector in the current geopolitical environment, while highlighting the need for nuanced due diligence to navigate the sector’s inherent complexity.
3) The evolving voice of shareholders. Tensions between management control and shareholder engagement are intensifying as structural and technological shifts reshape proxy voting and stewardship practices in some regions. Meanwhile, an evolving regulatory backdrop is adding to the complexity. In the U.S., the Securities and Exchange Commission’s recent announcement that it will no longer opine on companies’ requests to omit shareholder proposals from ballots introduces uncertainty around established protocols. These intersecting forces create a fluid environment for investors to navigate during the 2026 proxy season.
4) Climate adaptation accelerates. Physical climate risk isn’t just a problem for tomorrow; the impacts are being felt today. In 2024, extreme weather events led to US$318 billion in economic losses, with only US$137 billion insured, leaving a staggering protection gap of US$181 billion (57%).[2] This gap has the potential to widen as insurance becomes costlier and less accessible, potentially leading to increased costs and reduced earnings capacity, with risks ultimately borne by companies and investors. Supply chain disruptions further compound these risks. Projections indicate that the vulnerabilities embedded within global supply chains could inflate the economic costs associated with extreme weather by up to 30%.[3] While physical risks are expected to intensify, transition risks continue to advance. Market-driven declines in renewable energy costs accelerate the transition, while shifting government policies introduce uncertainty. A critical differentiator for investors is distinguishing between technologies that are economically self-sufficient and those dependent on policy support.
5) Human rights in focus. Human rights risks, including working conditions, forced labor, personal safety, and social inclusion, have become central business imperatives. As investor practices in this area evolve, companies face novel complexities associated with the rapid advancement of AI, including algorithmic bias, automated decision making, inequitable technological access, data privacy violations, and tracking technologies. As these emerging digital risks intersect with traditional human rights concerns, there’s a growing need for strong governance and corporate accountability, along with proactive mitigation strategies to navigate the intersecting risks.
6) Indigenous investments. Across Canada, Indigenous investments are gaining prominence as conversations evolve to include a focus on equity ownership and long-term strategic partnerships. However, realizing this potential requires navigating decades of mistrust, and missteps can jeopardize progress, potentially creating legal, financial, and reputational risks for issuers. There is a growing emphasis on Indigenous-led economic development in other regions as well, such as Australia, New Zealand, Latin America, and the United States. Indigenous communities are important partners in sustainable and inclusive economic growth.
As the RI landscape undergoes rapid transformation, these six themes highlight how technological disruption, geopolitical tensions, and evolving social expectations are reshaping the makeup of ESG factors. At RBC GAM, our investment teams aim to incorporate material ESG factors when making investment-related decisions within the portfolios that they manage, for applicable types of investments, with an aim to identify potential material risks and opportunities and improve risk-adjusted, long-term performance.