IMPACT INVESTING A DEEP DIVE

Pulling together profits and the planet

- Peter Shadbolt

When it comes to applying business methods to solving the problems of climate change, not all approaches are born equal. Terms such as ESG, sustainability and impact investment are often used interchangeably, regardless of the investment strategy. However, as definitions solidify around increasing global regulations aimed at meeting the Paris Agreement target of net zero carbon emissions by 2050, each of these approaches is emerging as very different.

ESG investing is the process of investing in assets that currently meet a company’s goals, while sustainability is the capacity to invest in processes and products that can be maintained over time—hopefully generations. Impact investing, meanwhile, is investment with a measurable social and environmental effect that also turns a profit. While these three terms may overlap, it’s impact investment’s focus on financial return that puts it bang in the centre of the Venn diagram of responsible investment.

John O’Brien, partner, energy, climate and sustainability at Deloitte Touche Tohmatsu, says that impact investing may be growing strongly, but it still suffers from inconsistent definitions. “There is an ongoing transition from this being a philanthropic pursuit to a genuine investment option with target investment returns,” he says.