Should we trust impact indices? Not all that glitters is gold

This paper examines the alignment of MSCI ACWI Sustainable Impact Index companies with impact investing principles, highlighting impact washing risks. Using a composite impactfulness indicator combining ESG scores and controversies, we assess whether the index identifies genuinely impactful firms. Results show significant variability, with many companies facing ESG controversies. This suggests that inclusion in the index does not guarantee impactfulness. We also find a positive link between impactfulness and profitability. Our findings emphasize the need for greater transparency and standardized metrics in impact investing to ensure sustainability indices serve as reliable benchmarks for impact-focused investments.