Please note: The information in this guide does not constitute legal, financial, or investment advice. This guide is meant as education only.

As ethical investing has become increasingly popular, so has the jargon — ESG or SRI? Impact investing or responsible investing? It can all be difficult to understand for everyday investors.

But rather than focusing on the labels, it can be helpful to think about investing in four broad categories along a spectrum, with increasing levels of intentionality.

1. Traditional investing

Traditionally, investing has focused primarily on financial return and risk. Investment decisions are based on factors like profitability, growth potential, valuation, and market conditions.

While companies may still have positive environmental or social impacts, these factors are generally only considered by traditional investors if they are expected to affect financial performance. The primary objective is to maximize risk-adjusted returns.

2. Considering social and environmental harm as financial risk

Environmental, Social, and Governance (ESG) investing expands traditional financial analysis by intentionally recognizing that issues like climate change, labour practices, cybersecurity, or corporate governance can create material financial risks and opportunities.

Rather than investing based on personal values, ESG investors ask whether these factors could affect a company’s long-term performance.

For example, a company with poor governance may be more vulnerable to scandals, while a business that fails to prepare for climate-related regulations could face higher costs in the future.

Many investment managers now integrate ESG information their research alongside traditional financial metrics. This approach—often called ESG integration—aims to improve long-term investment decisions, not necessarily to avoid specific industries or create measurable social impact.

3. Screening out harmful investments

Some investors want their portfolios to reflect their personal values by avoiding companies or industries they believe cause harm.

This approach typically excludes sectors like tobacco, controversial weapons (typically weapons that are restricted by international treaties, like chemical or nuclear weapons), gambling, and fossil fuels.

Often referred to as ethical investing, socially responsible investing (SRI) or values-based investing, this approach is less about managing financial risk and more about excluding investments that contradict the investor’s ethics.

But because there’s no universal definition of ‘responsible’ or ‘ethical’ it’s important to look beyond a fund’s name and understand exactly what’s screened out and what’s included. For example, a socially responsible RRSP fund may exclude tobacco manufacturers but include fast fashion companies.

4. Intentionally creating measurable change

Impact investing goes a step further by intentionally seeking investments that generate measurable positive social or environmental outcomes alongside financial returns.

Unlike ESG investing or screening approaches, impact investing begins with the desired social or environmental outcome. Investors actively direct capital toward organizations, projects, or businesses that are expected to create positive change. Many organizations report on the social or environmental results they achieve to their investors.

Examples could be renewable energy, affordable housing, sustainable agriculture, accessible healthcare, education, or other social enterprises.

These investors expect financial returns from their investments—they’re not donors. But financial returns aren’t the only, or sometimes even the primary, motivation.

Where community bonds fit

Community bonds are an accessible kind of impact investing for retail investors (i.e. regular people investing their own money).

A community bond is a fixed-income investment issued by a nonprofit, charity, or cooperative to finance projects like affordable housing developments, solar energy installations, community centres, and more. Investors receive a fixed rate of interest while helping fund initiatives they believe in, often in their own city or neighbourhood.

Unlike diversified public market funds, community bonds create a direct link between an investor’s money and a tangible project. Investors often know exactly what their investment is financing and can see the results as they manifest.

Because community bonds are meant to create specific, measurable, often local outcomes, they sit at the far end of the sustainable and social impact investing spectrum.

Ultimately, though, investing with ethics and values in mind is often not a single strategy but a continuum of approaches. Understanding where each approach fits on the spectrum can help retail investors (like you!) find and choose investments that align with both their financial goals and the kind of change they want to see in the world.