The Key Difference between Impact Investing and ESG

 Aaron Marzwell is a real estate executive and developer who founded APPA Real Estate in 2013 and has since served as its CEO. Under his guidance, APPA Real Estate creates workforce housing at affordable rates for individuals in various communities. Throughout his career, Aaron Marzwell has gained experience in several real estate-related fields, including co-living and impact investing.

Impact investing aims to deliver or drive positive change that benefits the community. Impact investors are individuals who are interested in exploring opportunities that can better the lives of people living in surrounding communities and attenuate the negative impact of technology on the environment. These opportunities typically concern education, health, and climate. For example, an impact investing endeavor may include building an investment portfolio that invests in companies that build or use green energy solutions to minimize air pollution and carbon footprint.

While the prime aim of impact investing is to drive positive social change, the commercial solutions generated in that endeavor often result in above-market-rate returns for investors in the long run. Research shows that 88 percent of impact investors have historically reported returns that exceeded their expectations.

Environmental, social, and governance (ESG) shares similarities with impact investing in some areas. However, ESG investing is not the same thing as impact investing in terms of goals. It involves corporate strategies to pursue sustainability by minimizing pollution, enhancing relevancy, and building trust with stakeholders.

ESG investors invest their money in businesses that pivot operations around environmental goals (such as reduction of waste output), social impacts (such as building a healthy workplace culture by promoting diversity), and also cement an effective governance foundation (such as enhancement of business ethics and shareholder transparency). The environmental goals in ESG should not be confused with impact investing since the goal is to show responsibility from which a material financial effect (such as customer retention) may be elicited.