The sustainable investing movement has had several terminologies attached to it. Here is provided clarification between relevant terminologies.
- Environmental, social, and governance (ESG) investing: data driven approach that acknowledges that a company’s carbon footprint, labor conditions, and number of women on their board may affect economic performance. The main objective of ESG investing is financial performance.
- Sustainable investing/ ethical investing / value based investing / socially responsible investing: an approach where an investor makes decisions based on ethics and financial returns. The main objective of sustainable investing is balancing profit with social responsibility. Yield Positive focuses on this category of investing.
- Impact investing: often a pro-active approach where investors seek out certain activities e.g. clean technology, high gender equality score, community development. Impact investors may be willing to take a higher investment risk, in return for a potentially high return on impact. The main objective of impact investing is generating impact.
The terminology used on Yield Positive platform is sustainable investing – balancing profit and social responsibility. This terminology is used by a number of the largest investment management firms including BlackRock, Deutsche Bank, JP Morgan, and UBS. The European Union has drafted regulation, including taxonomy, around the terminology sustainable finance and investing.
Photo by Amador Loureiro