Environmental, Social, and Governance (ESG) and impact investing are often lumped together, but there are meaningful differences between these approaches. With so much positive and negative spin and contradictory coverage of ESG and impact investing, many investors are understandably confused about what these terms mean and how they differ in practice. 

I have worked in the sustainable finance industry both in the United States and in emerging markets – for over 24 years and now lead one of the longest-serving ESG- and impact-focused investment advisory firms in the US. To help investors better understand the differences between ESG and impact investing, I will briefly compare them in terms of purpose, measurement practices, investment approach, and market size.

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Despite politicization and anti-ESG and anti-DEI rhetoric, I believe investor interest in sustainable, socially responsible, and impact investment is on the rise.¹ The ESG and impact investing industry continues on a path to the mainstream, as I predicted in my last article on impact investing trends in 2022.

I still believe now, as I did then, that ESG and DEI mitigate risk and help identify long-term investment opportunities and returns. A growing number of investors seem to share that belief.

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