In the current market, "ESG" and "Impact" are often tossed around as interchangeable synonyms for "sustainable." But for the serious investor, treating them as the same is like confusing a company’s insurance policy with its real-world impact.
One measures Risk; the other measures Results.
Conflating the two doesn't just lead to "greenwashing" confusion—it leads to misguided portfolio construction and missed opportunities.
Philip Morris International (PMI) has an ESG score of 78 out of 100 from S&P Global (as of December 2025). By ESG standards, that’s a strong score. Yet the company’s core product remains tobacco—linked to significant global health harm. If ESG is supposed to identify “responsible” companies, how does this make sense? The answer reveals something most investors misunderstand.
Most investors assume ESG tells them whether a company is good for the world. It doesn’t. ESG was built to answer a different question entirely: How exposed is this company to environmental, social, and governance risks that could affect its financial performance?
That’s a subtle shift—but it changes everything. A company can score highly on ESG because it:
Even if its core business model produces negative real-world outcomes. That’s how a tobacco company can achieve a score of 78. ESG is working exactly as designed. It just doesn't reflect what private investor actually want.
At its core, ESG is a risk framework. It looks at how external forces—climate policy, labor practices, governance failures—might impact a company’s future profitability. Impact investing flips that lens.
Instead of asking how the world affects the company, it asks: How does the company affect the world?
That distinction is the fault line between the two approaches. ESG evaluates risk to the company. Impact evaluates outcomes in the real world.
Once you see that clearly, the PMI example stops being surprising and reveals the massive flaw in ESG ratings - assuming you care about creating a better future.
ESG investing evaluates how environmental, social, and governance risks affect a company’s financial performance.
Impact investing focuses on how a company’s activities affect the environment and society.
In short:
The confusion doesn’t stop at definitions. It shows up in the data. ESG ratings from providers like MSCI, Sustainalytics, and S&P Global often diverge significantly. The same company can receive very different scores depending on methodology, weighting, and peer comparisons.
But even when ratings agree, they share a common limitation. They are relative. A company is judged against its industry peers, not against an absolute standard of societal benefit. That’s why industries with inherently harmful products can still produce “high ESG performers.” For investors, this creates a false sense of alignment. A portfolio can look “sustainable” on paper while still being exposed to businesses that, in aggregate, contribute to the very problems the investor cares about.
Impact investing begins with a different premise. It doesn’t ask whether a company manages risk well. It asks whether the company’s core activities create net positive outcomes. We highlight such companies through our dedicated GoodStocks research - available on Substack and on our blog. This shifts the focus from policies and disclosures to tangible results.
A renewable energy company generating clean electricity is directly contributing to decarbonization. A healthcare company expanding access to treatment is improving human outcomes. In each case, the impact is not a side effect—it is the business model.
If you want to see what that looks like in practice, explore our breakdown of the best sustainable stocks and top climate stocks, where companies are ranked based on both financial strength and real-world impact.
That’s a fundamentally higher bar.
This is where the conversation becomes more interesting. For years, ESG was framed as a way to reduce downside risk. Impact investing reframes it as a way to capture structural growth.
The global economy is undergoing large-scale transitions—toward clean energy, electrification, resource efficiency, and better healthcare systems. Companies aligned with these trends are not just “doing good.” They are often positioned in markets with strong demand tailwinds and long-term capital support.
Research from University of Oxford and Schroders points to a consistent conclusion: companies contributing to positive societal outcomes can exhibit stronger resilience and competitive positioning over time. In other words, impact and performance are not opposing forces. Increasingly, they reinforce each other.
The shift from ESG to impact is not just semantic. It changes how portfolios are built. An ESG-oriented approach may still include companies like Philip Morris International—as long as they rank well within their peer group.
An impact-oriented approach starts with a more fundamental filter: Does this company’s core business create a positive contribution to society or the environment? That question removes entire categories of companies while elevating others.
It also forces a deeper level of analysis. Investors need to understand not just how a company operates, but what it actually produces—and whether that output moves the world in a better direction.
If ESG tells you how well a company manages risk—but not whether it creates positive outcomes—then investors face a practical problem: How do you actually measure impact?
This is where most frameworks fall short. They rely heavily on disclosures, policies, and relative rankings within industries. What’s often missing is a clear view of real-world outcomes. Ziggma’s Impact Score is designed to close that gap.
Instead of focusing on risk signals alone, it evaluates companies based on their measurable contribution to environmental and societal outcomes—alongside financial strength.
That includes factors such as:
The goal is simple: to identify companies whose core business models are part of the solution and/or who demonstrably and proactively act as good corporate citizens.
Once you shift from ESG to impact, the investable universe changes. Companies that score well on traditional ESG metrics—yet derive revenues from harmful products—naturally fall out of focus. In their place, you uncover businesses aligned with long-term structural trends like clean energy, electrification, and healthcare innovation.
More importantly, this approach doesn’t require a trade-off. By combining Ziggma’s Impact Score with its fundamental Stock Score, investors can identify companies that are both:
That combination is what defines a true “profit with purpose” portfolio.
See how your portfolio scores on impact.
ESG gives you part of the picture. Impact completes it. And when you evaluate both together—financial quality and real-world contribution—you move beyond labels and toward better-informed, more aligned investment decisions.
ESG tells you how well a company manages sustainability risks, while impact investing tells you whether the company creates positive real-world outcomes.
ESG brought much-needed transparency to corporate behavior. It helped investors think more systematically about risk. But it was never designed to measure real-world impact.
That’s why examples like Philip Morris International scoring 78/100 are not contradictions—they’re signals. Signals that the framework is being asked to do more than it can.
For investors who want alignment the path forward is clear. Not just avoiding risk. But allocating capital to companies that actively create a better future.
ESG investing evaluates how environmental, social, and governance risks affect a company’s financial performance.
Impact investing focuses on how a company’s activities affect the environment and society.
In short, ESG measures risk to the company, while impact investing measures impact on the world.
ESG investing is a framework used to assess how sustainability-related risks—such as climate change, labor practices, and governance—may affect a company’s financial performance.
It does not measure whether a company’s products or services are beneficial to society.
Impact investing is an approach that targets measurable positive environmental or social outcomes, alongside financial returns.
It focuses on companies whose core business activities contribute to solving real-world problems.
Companies can receive high ESG scores because ESG ratings measure how well risks are managed—not whether a company’s products are inherently beneficial.
That’s why firms like Philip Morris International can score well on ESG metrics despite the nature of their core business.
Impact investing is not necessarily “better,” but it answers a different question.
ESG helps assess risk, while impact investing helps identify companies contributing to positive real-world outcomes. Many investors use both together.
