ESG Is Not Impact Investing and Impact Investing Is Not ESG

ESG Is Not Impact Investing and Impact Investing Is Not ESG

What we are reading this week: ESG Is Not Impact Investing and Impact Investing Is Not ESG


Key pointers by the author on the difference between ESG investing and impact investing:

  • ESG is a backward-looking framework. Impact investing is a forward-looking strategy.
    Our thoughts: A good approach is based on both hindsight and foresight, while considering current circumstances.
  • ESG faces fiduciary scrutiny. Impact does not.
    Our thoughts: Impact investing imparts an ethical duty of an investment manager to balance risks and opportunities, taking into account multiple stakeholders.
  • ESG can be risk-mitigating or an opportunity. Impact is both.
    Our thoughts: Both ESG and impact investing can be risk-mitigating and opportunity.
  • ESG is generally a financial-first framework. Impact investing generally equally weights financial, social, and environmental impact.
    Our thoughts: Impact investing can also be finance-first or impact-first.
  • ESG-focused investments are primarily public market entities. Impact investments are primarily private market entities. But could that change?
    Our thoughts: Definitely changing!
  • All impact funds are ESG-compliant, but not all ESG funds are impact.
    Our thoughts: Only some impact funds are ESG-compliant, depending on type of asset class and other factors.

Indeed, there are too many different terms and concepts, with different nuances and implications, that are used and debated both in academia and in practice. At Citrine Capital, we aim to explore the principles behind these concepts instead. We think two distinct principles broadly underpin the different forms of approaches and frameworks: ‘Do No Harm’ and ‘Do Good’, and Citrine stands for both.