Impact easier to market than ESG, but tougher to deliver in wake of 'woke backlash': Study

A semi-annual ESG sentiment study by Quebec consulting firm Millani, published on Sept. 9, shows a shift from ESG funds to impact funds.

ESG funds select companies with good Environmental, Social, and Governance scores, mitigating negative impacts better than their peers. Impact funds, however, focus on business models that generate social, environmental, and financial returns.

Millani’s survey reveals that investors now link geopolitical shifts, inflation, and rising interest rates to issues like affordability and social unrest. Investors say they believe responsible investment should be broader than ESG, making impact funds easier to market and less polarizing, according to the study.

A 2023 survey by The Conference Board found that nearly half of more than 100 large U.S. companies have faced ESG backlash, sometimes referred to as “woke backlash,” with 61 per cent expecting it to persist or intensify.

Although impact investing seems more appealing, it still needs validation. New amendments to Canada’s Competition Act require corporations to test their claims using internationally recognized methods, leading some to remove information from their communications.

These amendments and the politicization of ESG in the U.S. have mixed effects on investors. Some agree that information should be tested before disclosure, while others see the removal of information as a risk of greenwashing. Pragmatic investors believe the amendment will lead to shorter, more focused reporting.

For organizations seeking impact investment, this could mean delays and interference in capital flow as investors navigate ESG backlash and impact-washing fears.

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