What is Sustainable Finance?
'Sustainable finance' generally refers to the process of taking due account of environmental and social considerations when making investment decisions, leading to increased investment in longer-term and sustainable activities. (Source: European Commission)
Impact investing vs ESG investing?
There are various definitions of impact investing – most of the time understood as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return”. These investments could be typically made in any of the 17 sustainable development goals (water, food security, health and well-being, education, financial inclusion, future mobility, circular economy, energy transition, and impact enablers).
This is different from ESG, which focuses on integrating Environmental, Social and Governance factors into the investment process in order to make informed decisions. “ESG investing” is therefore investing in companies with good ESG practises.
Impact investing focuses on a company’s activity or services whereas ESG focuses more on how a company operates.