Marc Foran, MBA, CFA
Chief Investment Officer
Karolina Iaydjieva, CFA, CAIA
Portfolio Manager, Custom Impact Portfolios
Ryan Clancy, CPA, MPA
Head, Impact Management and AI Strategy
2026 Outlook from an Impact Portfolio Manager
January 2026
As an impact portfolio manager, our firm seeks to understand and navigate the evolving macroeconomic, geopolitical and market dynamics that influence both financial outcomes and real-world impact. The following outlook highlights key trends we think will influence investment decision-making and impact management in 2026 and how they may inform portfolio positioning over the near and medium term.
In 2026, we expect greater dispersion in real-world outcomes across sectors and geographies, making it essential to stress-test impact theses under multiple macro scenarios, track distributional effects (i.e. who benefits and who bears costs), and lean further into stewardship as a core tool for protecting both impact integrity and financial resilience.
Ultimately, these forces are felt through the cost of essentials, the resilience of local livelihoods and access to care, energy and opportunity. Our goal is to keep capital flowing to solutions that meet basic needs, advance social equity, preserve and restore natural capital and address climate change, while actively managing the risk of unintended harm. In Canada, the continued build-out of social finance infrastructure, including the federal Social Finance Fund, should expand pathways for private capital to reach community solutions at scale.
Dynamics Affecting Investment Management
Geopolitical Realignment Expected to Reshape Trade Relationships
Recent events in Venezuela and developments related to Greenland have underscored the degree to which the global economy continues to operate in a challenging macroeconomic environment marked by shifting geopolitical relationships, trade dynamics, and power structures. Geopolitical fragmentation raises the bar on supply chain integrity and operating resilience, especially for strategies exposed to cross-border digital and technology flows. In private markets, where portfolios are often more concentrated and liquidity limited, geopolitical shifts often show up quickly in working capital stress, input-cost spikes and delayed scaling, all of which can undermine impact delivery if resilience is not built in early.
The United States and China continue to rely on a mix of economic, political, and strategic tools to expand global influence, at times including coercive measures. U.S. policy appears focused on maintaining dominance within the Western Hemisphere and increasingly focused on reducing reliance on foreign inputs deemed critical to national security (for example, strategic minerals from China), driving an emphasis on reshoring and domestic production capacity. While this signals a potential reconfiguration of global trade and supply chains, the U.S. faces material constraints, including labour availability and power generation capacity. Meanwhile China continues to prioritize influence across Asia, alongside a growing regional role for India.
In Canada, discussions around reducing economic dependence on the United States may intensify as the USMCA approaches a renewal or renegotiation period. As a commodity-rich country, Canada is prioritizing access to new export markets. In his Davos speech, Prime Minister Marc Carney underscored the importance for Canada and other middle powers of building resilience through greater diversification of trade and investment partners and by reducing exposure to geopolitical and policy volatility.
Opportunities appear strongest in supporting domestic business development in sectors expected to play a role in a more sustainable global economy, including healthcare, inclusive fintech and advanced technologies such as quantum computing. From an impact lens, these priorities create opportunities where competitiveness aligns with public goods, provided that benefits are broadly shared and negative externalities are actively managed. For Canada-first impact strategies, we will also be watching whether industrial and trade policy translates into durable local benefits. This includes a sharper focus on reconciliation in practice: meaningful Indigenous partnership and benefit-sharing where projects intersect with Indigenous rights and lands. Developing sectors likely to prove resilient may require both stronger domestic skills and the attraction of specialized expertise from abroad through immigration. Canada may position itself as a destination of choice for global talent amid more restrictive U.S. visa policies.
Positive Global Growth Set to Moderate
Overall growth rates are expected to remain positive in 2026, though at a slower pace as a combination of U.S. policy uncertainty, elevated geopolitical tensions and persistent, though moderating, inflation continues to weigh on demand for goods and services, alongside softer labour market conditions in several regions. In practice, slower growth can differentiate impact models with durable demand and clear unit economics from those dependent on rapid expansion or continued policy support. In private markets, a slower-growth environment often means longer holding periods and a higher premium on operational value creation and follow-on capital, underscoring the value of underwriting for both financial and impact resilience.
Heightened uncertainty and reduced confidence among consumers and corporations, driven by a volatile macroeconomic backdrop, may contribute to lower levels of business investment and activity. It also heightens the relevance of tracking who is affected by weaker demand, particularly employment quality, access to services and affordability outcomes across income groups. In Canada, this backdrop may favour patient, structured capital such as private credit and blended structures that can help proven social-purpose models continue to scale without compromising mission, especially where traditional growth capital becomes more selective.
Rising Electricity Demand Expected to Place Upward Pressure on Power Prices
Power prices may face upward pressure where electricity demand is growing faster than new generation capacity and efficiency gains. Rising demand reflects, in part, increased reliance on cooling systems, driven by hotter summers and economic development that has shifted cooling from a discretionary expense to a necessity. Rising power costs have a distributional dimension: they can amplify energy poverty and affordability challenges, making it important to evaluate contribution and impact on climate change as well as household energy burden and reliability for essential services, especially for rural, remote and Northern communities.
In the United States, rapid expansion of data centres has increased competition for electricity supply, contributing to localized price pressures. At the same time, the U.S. walkback of renewable subsidies appears to be reducing the pace of power supply growth. Data on growing electricity demand data are supported by the International Energy Agency’s Electricity 2024 outlook (published early 2024) which estimates global electricity demand growth averaging approximately 3.4 per cent per year through 2026, following growth of 2.2 per cent in 2023. In its July 2024 Mid-Year Update, the IEA revised near-term expectations higher, citing global electricity demand growth of roughly four per cent in both 2024 and 2025, levels described as the highest since 2007, excluding post-recession rebound years. For impact investors exposed to digital infrastructure, this also increases scrutiny on “compute with consequences” – strengthening engagement priorities around clean power procurement and transparent reporting on emissions and water use. This backdrop can support investment cases for grid efficiency, storage, and demand-side solutions that reduce emissions while improving system resilience.
Persistent Affordability Pressures Likely to Shape Economic and Political Dynamics
We expect affordability pressures to remain a significant issue for lower-income households in North America, where essential expenses such as food, housing, energy and healthcare account for a growing share of household budgets. In Canada, the affordability conversation is inseparable from housing: supply, preservation and the cost of financing increasingly shape whether people can stay housed and communities can remain intact. For impact portfolios, this pushes us to treat affordability as an outcome to be protected over time.
In the United States, recent fiscal and trade policy developments, including the passage of the OBBB (One Big Beautiful Bill Act) and the introduction of tariffs, are likely to have uneven effects across income groups. Higher-income households appear better positioned to benefit from tax relief and a more favourable regulatory environment, while lower-income households face higher effective costs related to inflation and tariffs, with fewer offsetting fiscal benefits due to their lower tax brackets. This distributional divergence also raises the bar on impact claims, as business models can appear beneficial in aggregate while shifting costs onto lower-income households through pricing or service constraints. For private market impact strategies, this argues for explicit “impact downside protection” such as covenants that safeguard affordability and service quality when margins tighten, so resilience is not achieved by shifting costs onto the very households the model is meant to serve.
We expect key affordability themes in 2026 to centre on food, energy, shelter and healthcare, particularly in the U.S. These pressures may contribute to shifting political dynamics, including increased support for policies focused on income support, benefits, and economic stimulus aimed at improving productivity and living standards. All eyes are on the U.S. Congress midterm elections where Democrats are expected to regain control.
AI-Driven Equity Leadership Expected to Draw Increased Scrutiny
Equity market performance in recent years has been driven largely by mega-cap technology companies, with artificial intelligence investment emerging as a dominant theme. Over this period, smaller-capitalization equities and other segments of the market have generally lagged. Although AI companies have seen an uptick in investment activity, this is likely to be offset by performance from companies providing efficiencies in business productivity, workflows and cost reduction. M&A activity is expected to continue as large technology companies seek to acquire, rather than build, AI capabilities in-house. For impact portfolios, the AI cycle touches on themes such as the future of work, privacy and bias as well as the resource intensity of digital infrastructure. The key question is whether benefits are broadly shared, especially for frontline workers and public-serving systems or primarily captured by a narrow set of firms and stakeholders.
By late 2025, some investors began questioning the sustainability of current AI-driven growth rates, given the scale of capital expenditures required to build supporting data infrastructure and uncertainty around the timing and magnitude of realized returns. Survey data from EY indicate that approximately 85 per cent of organizations increased AI spending during 2025, with many anticipating further increases in 2026; however, translating these investments into measurable returns has remained a challenge. In private markets, where many AI-enabled companies are still in build-and-scale mode, due diligence should separate impact claims from evidence early and set expectations for responsible AI governance before growth pressures set in.
As scrutiny of corporate AI spending intensifies, companies may shift toward more targeted and disciplined investment strategies. Such a shift could moderate the pace of AI spending growth and place pressure on valuation levels for companies with elevated expectations, potentially leading to valuation multiple compression over time.
Dynamics Affecting Impact Management
Impact Measurement Likely to Shift Toward Greater Comparability
In 2026, impact investment activity is likely to place greater emphasis on measurement quality, comparability and evidence of outcomes, as investors seek clearer links between capital deployed and real-world impact. Growing scrutiny from asset owners, regulators and beneficiaries continues to push the market away from high-level narratives toward more standardized, decision-useful metrics. At the same time, resource constraints and uneven data availability may limit the pace of adoption, particularly among smaller and emerging managers. As a result, we expect impact measurement practices to evolve unevenly, with larger institutions advancing more rapidly, while others prioritize materiality, proportionality and practical integration of impact data into investment and portfolio management decisions.
Standardized Reporting Norms and Institutional Capital Expected to Shape Impact Practices
This heightened focus on measurement would also reflect persistent investor demand for comparable impact data and clearer signals of what may constitute strong impact performance. As the market matures, we believe investors will increasingly ask not just whether impact is being pursued, but how well it is being delivered relative to peers. The release of Impact Frontiers’ first version of the Impact Performance Reporting Norms is expected to reinforce this shift by offering practical guidance and greater standardization on what to report, reducing ambiguity and improving consistency across managers. This trend is likely to be further reinforced by the continued growth of capital from institutional investors, including insurance companies and pension funds, which are placing greater emphasis on standardized, decision-useful impact data. With this in mind, and as a founding adopter of the IPRN, Rally will continue to align its approach with emerging market practices as these norms shape expectations around investor-grade impact reporting. Looking ahead, advances in artificial intelligence may also influence how impact is assessed and measured, particularly through enhanced analysis of structured and unstructured data and increased automation to support reporting processes.
In 2026, impact investing is likely to be shaped by heightened geopolitical uncertainty, moderating growth, persistent affordability pressures and increased scrutiny of technology-driven models. These dynamics reinforce the importance of disciplined underwriting, active stewardship and rigorous impact management to protect both financial performance and real-world outcomes. As dispersion widens across sectors and geographies, impact portfolios may need to prioritize resilience, distributional awareness and accountability over narrative-driven growth. At the same time, evolving measurement standards and institutional expectations are likely to raise the bar for credible impact performance. Together, these forces underscore the need for patient, intentional capital that delivers durable benefits while managing downside risk.