The three pillars of sustainable investing are Environmental, Social and Governance, the lenses used to judge how responsibly a company operates. The environmental pillar covers a company’s impact on the planet, the social pillar covers how it treats people, and the governance pillar covers how honestly and accountably it is run.
inaam is an ASIC regulated impact investing app for Australians. The subscription is $10 a month, which is $120 a year, and the minimum to invest in the fund is $100. The fund holds 23 companies mapped to five impact themes: renewable energy, sustainable agriculture, sustainable consumption, health and wellbeing, and waste and recycling. You customise them yourself, and sign-up happens in the app.
Three acronyms dominate every conversation about investing with values: ESG, SRI and impact investing. They get used interchangeably and explained badly. If you have ever nodded along while someone mentioned ESG investing without knowing what they meant, this is the guide that fixes that.
These three approaches are three different levels of commitment to how your money interacts with the world. The difference matters, because it decides what your investment does.
the three letters first
Start with the letters, because everything else is built on them. Each one is a lens on a different part of how a company behaves.
E
environmental
What the company does to the planet. Emissions, water, waste, land use, and whether any of it is being measured or only described.
S
social
How it treats people. Workers, suppliers, customers and the communities it operates in, including the ones further down the supply chain.
G
governance
How honestly and accountably it is run. Board structure, pay, disclosure, and who gets to hold the company to its word.
the quick version
| what it does | analogy | |
|---|---|---|
| ESG | Scores companies on environmental, social and governance practices. Used to manage risk. | Checking the restaurant’s health rating before eating there. |
| SRI | Excludes specific industries, weapons, tobacco, fossil fuels, based on values. Avoidance-focused. | Refusing to eat at a restaurant that serves shark fin. |
| impact investing | Actively invests in companies solving problems. Requires measurable outcomes alongside returns. | Funding the restaurant that sources locally, pays fairly and composts everything. |
ESG checks the label, SRI avoids the bad and impact investing funds the good. They are not mutually exclusive, and most serious impact funds use all three. Knowing which is which helps you read marketing with sharper eyes.
esg, the risk lens
ESGEnvironmental, Social and Governance. Three categories used to judge how responsibly a company operates. It is a scoring framework. stands for Environmental, Social and Governance. It is a framework for evaluating how well a company manages risks across those three areas. Investopedia’s ESG overview covers the technical detail.
ESG is a scoring system. A fossil fuel company can score well on ESG if it manages its environmental risks effectively, treats employees well and has a diverse board. The company is still extracting fossil fuels. The score measures how well it manages the risks that come with what it does, and makes no judgement on the business itself.
This is why ESG fund is a label that needs interrogation. Some ESG funds hold oil companies. Some hold mining stocks. ESG integration means the manager believes those companies handle their ESG risks better than their peers, whether or not they are making the world better. Useful to know, and different from ethical investing.
the catch
a good score is not a good company
Read what a fund owns before you read what it scores. The score tells you how a business manages its risks. The holdings tell you what the business is.
sri and ethical investing, the values filter
Socially Responsible Investing takes a different route. Instead of scoring companies on how well they manage risk, it draws hard lines. Certain industries are out, however well they are run.
| reason it is excluded | |
|---|---|
| tobacco | Products designed to addict and harm. |
| weapons | Direct role in conflict and civilian harm. |
| fossil fuels | Climate damage and environmental destruction. |
| gambling | Exploitation, addiction and social harm. |
| modern slavery supply chains | Human rights violations. |
SRI is values-based. ESG asks whether a company is managing its risks well, and SRI asks whether the company belongs in your portfolio at all.
The limit of SRI on its own is that it only tells you what is missing from the portfolio. Excluding tobacco and weapons is a good start, and it says nothing about what the remaining companies are actively doing.
impact investing, the active one
Impact investing goes further than both. It selects companies that are creating measurable positive outcomes. The Global Impact Investing Network (GIIN) defines it as investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.
The key words are intention and measurable. An impact fund picks companies because of the good they do, and it measures the outcomes: how much carbon was avoided, how many people reached healthcare, how many jobs were created in underserved communities.
the standard
measured, or it did not happen
Intention without measurement is a mission statement. The test of an impact fund is whether it publishes outcomes per holding, and whether those outcomes are the kind you could check yourself.
Sectors where impact capital makes a real difference:
- Clean energy. Solar, wind, battery storage, grid modernisation.
- Healthcare access. Telehealth, affordable diagnostics, mental health services.
- Sustainable food. Regenerative agriculture, food waste reduction, plant-based alternatives.
- Financial inclusion. Banking for the unbanked, microfinance, accessible insurance.
- Circular economy. Waste-to-resource companies, recycling infrastructure, sustainable packaging.
how the three work together
The best funds use all three. ESG data helps identify well-managed companies. SRI screening removes industries that do not belong in a values-aligned portfolio. Impact criteria make sure what is left is actively contributing something.
Three filters, stacked:
- ESG filter. Removes companies that manage environmental, social or governance risks poorly.
- SRI filter. Removes entire industries that conflict with the fund’s values.
- Impact filter. From what is left, selects companies with measurable positive outcomes.
A fund that only uses ESG might still hold fossil fuel companies. A fund that only uses SRI knows what it does not want without knowing what it does. A fund that uses all three can tell you what is in the portfolio and why.
The RIAA tracks which Australian funds use which approaches and certifies those meeting genuine responsible investment standards. Their annual benchmark report is the best public resource for comparing how different funds apply these frameworks.
what to look for in a fund
When a fund uses these terms in its marketing, ask three questions:
- ESG integrated. Does that mean they score companies, or that they exclude low scorers? Some funds integrate ESG data and still hold every company in the index.
- Ethical or responsible. What is the exclusion list? If they will not publish it, the screening may be loose.
- Impact. What outcomes do they measure, how often do they report, and is it per holding or a portfolio-level average?
how to read a fund
the questions are the product
A fund that answers all three of those in public has told you more than any rating could.
how inaam uses all three
At inaam we use all three approaches. ESG data informs company evaluation. SRI screening removes industries that do not line up with the values. The impact methodology then selects companies across five themes: health and wellbeing, renewable energy, waste and recycling, sustainable agriculture and sustainable consumption, with outcomes tracked per holding. How that works, on financial robustness, purposeful impact and leadership calibre, is set out on how it works.
The subscription is $10 a month, which is $120 a year, and it is separate from the money you invest. The minimum to invest in the fund is $100. The five themes are customised by you, not by us, and every company is named in the app with its impact data beside it. Sign-up happens in the app. SMSFs and family trusts are welcome.
If you want to see how that sits against other platforms, compare lays it out. If you want to know which of the five themes you care about most, the money values quiz takes two minutes.
