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Impact vs. ESG Investing: What is the Difference?


More investors today want their money to reflect their values. Two popular ways to do this are ESG investing and impact investing. ESG stands for Environmental, Social, and Governance. It looks at how companies handle things like climate issues, employee treatment, and leadership ethics. Impact investing goes further—it puts money into projects that aim to solve social or environmental problems directly.

ESG investing is now mainstream. Investors use ESG scores to help manage risk and find long-term opportunities. It’s about choosing companies that are doing better on sustainability and ethics, while still aiming for strong financial returns.

Impact investing is more focused. It’s about making a difference—like funding clean energy, affordable housing, or education in underserved areas. Investors track the actual impact, such as how many people were helped or how much pollution was reduced.

Both approaches are growing fast. More people want investments that do good and perform well. Climate change, clean energy, and social equity are top themes, and many investors are aligning with global goals like the UN’s Sustainable Development Goals.

In short, ESG helps you invest in better companies. Impact investing helps you invest in better outcomes. Both let you support a better future—while still growing your portfolio.

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