Why the Difference Matters - ESG OR IMPACT?
By Collette Mwansa Sijamba, CESFi, CECCREF, MBA(F), FCCA, FZICA — Certified Climate & Sustainable Finance Expert, Zesco Limited
Sustainable investment is no longer a niche. According to the Global Sustainable Investment Alliance, more than a third of global assets under management now fall under the “sustainable” label. From New York to Nairobi, investors are seeking to align portfolios with environmental and social priorities. Yet as capital pours into this space, one persistent confusion risks undermining trust: the distinction between ESG investing and impact investing.
The difference matters. Environmental, Social and Governance (ESG) emerged as a framework to manage non-financial risks that could affect company performance. It is essentially an inclusion mechanism, therefore; integrating ESG data into investment decisions helps identify firms more resilient to climate risks, governance failures or social backlash. Strong ESG scores can correlate with healthier balance sheets and better valuations.
Impact investing, however, goes a step further. Defined by the Global Impact Investing Network (GIIN) as investing with the intention to generate measurable, positive social and environmental outcomes alongside financial return. It is underpinned by four tenets which are; intentionality, measurability, tractability of results, and transparency. Increasingly, “additionality”— asking what difference an investor’s capital makes that would not have happened otherwise, is becoming a fifth benchmark.
Why does this distinction matter for global investors? Because expectations shape outcomes. Allocating to an ESG-labelled fund does not guarantee that your capital is driving new solutions to climate change or poverty. Confusing ESG with impact can lead to investor disappointment, reputational risk, and in the long run, disillusionment with sustainable finance itself.
This is especially relevant in Africa, where the demographic story is compelling; a youthful population, rapid urbanisation, and abundant natural resources. Southern Africa in particular is at the frontline of climate risk, from droughts in Zambia to energy transitions across the region. Here, the opportunity for impact investing is profound; financing renewable energy, inclusive financial services, sustainable agriculture, and climate adaptation. These are not just moral imperatives; but instead are growth markets waiting for capital.
For global investors, the practical questions are clear. When evaluating a fund or strategy, ask: Is the investment simply integrating ESG data, or is it designed with intentional social and environmental objectives? How is impact measured, tracked and reported? What additionality does your capital bring?
Clarity on these questions ensures that sustainable finance lives up to its promise. ESG helps manage risk; impact investing helps solve problems. Both have a role, but only if we know which is which. The challenge now for global investors is to ask, with every allocation: are we protecting value, or are we creating it?