Overwhelmed by ESG debate? Impact investing may be the answer

investmentnews.com:

Don’t give up so quickly, all you browbeaten ESG investors. Consider impact investing instead.

All the recent political furor surrounding environmental, social and governance investing has an increasing number of investors who were once looking to do well by doing good now saying good riddance to the whole idea of purposeful investing. All those congressional hearings, opposing Wall Street Journal and New York Times op-eds, and heated cable news debates seem to have soured a segment of folks who simply wanted to align their investment choices with their personal values and maybe make a buck or two along the way.

The backlash has gotten so bad that about two-thirds of respondents in a recent survey of roughly 300 Bloomberg terminal users said the anti-ESG movement that started in the U.S. last year will force firms to stop using those three letters in conversations with clients.

That said, there is another way for those investors determined to invest with purpose yet sidestep the partisan frenzy. It’s called impact investing and it’s been around far longer than the oldest cable network — or stock exchange for that manner.

“ESG looks really at how environmental, social and governance factors affect financial return and performance of a company. Impact Investing looks at how you can use your investments to actually create net positive impact in the world,” said Jed Emerson, managing director at AlTi Global. “It’s been around actually since the beginning of modern financial capitalism with the first publicly traded stock company.”

Emerson, who recently published a book titled “The Purpose of Capital,” said impact investing works on a portfolio basis, so diversification is paramount, just as with any other investment