They're just lacing in-baked racism and derogatory racial language into the everyday dialogue of their scenes, and making everyone act like it's okay, normal, natural and fine - no-one reacts to it, no-one comments on it, and we have zero options to say anything about it, and so are forced, in almost every case, to act like our character is fine with this kind of language.
It kinda always was the case in the setting, though, until WotC started to cover it all with glitter and pink paint because they don't want their newer players to be - gasp! - offended by a
fictional setting, which people are all too happy to project real-life issues onto in an even more exaggerated form than they already exist in rather than deal with/face those issues in real life for a change. I do agree that the PC should have more options to bite back to such remarks, though - taking them passively definitely wouldn't work for every character out there.
The double standards for such a mindset do fascinate me, though. Apparently the Witcher's (to name one example) racism plays into the setting and is an integral part of it (which it is, and a lot of narrative points and the state of the world are dependant on it), and nobody lifts a brow, but apparently here it's wrong and shouldn't exist and Larian are bigots for writing it this way. Except, again, this from conception wasn't a glitter-and-rainbows setting, as wasn't any high fantasy out there, and there being "racist" language doesn't mean it's a view that the writers are on board with (take Pratchett, whose setting's centerpiece is basically the fantasy New York City with London sprinkled in, and a lot of racial/immigrant allegories there - at which point is there a hint of support for racism?). Too wash it all away and pretend that there is no tension in the world that has (or at least had) plenty of superstition, superority complexes (Hillsfar, Eldreth Veluuthra), and centuries-old grudges (shield dwarves do hate goblinoids and orcs for a reason, having lost their kingdoms to them) is to hypocritically pretend that everything is fine and open-minded on Faerun - which it sure isn't, no matter how many "morally outdated" labels they slap on their old lore supplements and campaigns.
