Impact Investing Op-ed in the Toronto Star
Jory Cohen, Inspirit’s Director of Finance and Impact Investment, wrote an opinion editorial for the Toronto Star that explains the difference between ESG and impact investing. Jory debunks Elon Musk’s claim that “ESG is the devil” and dissects the two distinct investment approaches.
Read the full article here. Below is an excerpt.
Back in 2023, Elon Musk claimed that “ESG is the devil” after Tesla received a lower environmental, social and governance (ESG) score than Philip Morris International, a cigarette manufacturer on the S&P 500 Sustainability Screened Index.
Is Musk correct to push back on the concept of ESG? Musk, like so many other vocal critics of ESG, seems to misunderstand the difference between ESG and impact investing.
ESG is good for business and provides a more profitable investment. But it’s impact investing that assesses social and environmental benefits too.
It is well documented that investing with an ESG lens is correlated with higher financial returns. Broadly speaking, if companies have strong ESG scores, they tend to be resource-efficient, have a healthier and more productive employee base and be composed of more diverse leadership that generates stronger strategic decision-making.
There is clear a link between high ESG scores, decreased risk and higher profitability levels. What’s not to like?
Impact investing, however, offers even greater promise.
Impact investing is an investment philosophy that aims to generate social and environmental benefits as well as financial returns. The two important investment approaches are cousins, but impact investing is the more ambitious of the two.