Which investing approach is defined by avoiding objectionable or low-performing investments such as weapons manufacturers or tobacco companies?

Which investing approach is defined by avoiding objectionable or low-performing investments such as weapons manufacturers or tobacco companies?

• A. Positive screening
• B. Exclusionary screening
• C. Socially responsible investing
• D. Values-based screen

Answer: (B)

Exclusionary screening is about deliberately avoiding investments in sectors or companies that are considered objectionable or low-performing on ESG grounds, such as weapons makers or tobacco firms. This approach focuses on exclusion to manage risk or align with ethical preferences, rather than seeking out high-performing or positively screened options. Positive screening, in contrast, would select investments based on favorable ESG attributes, not on which ones to avoid. Socially responsible investing is a broader umbrella term that can include both exclusion and positive screening, so it’s less precise for this specific description. Values-based screening centers on matching investments to stated values, which can include exclusions but is not limited to the broad practice of avoiding objectionable holdings.

Exclusionary screening is about deliberately avoiding investments in sectors or companies that are considered objectionable or low-performing on ESG grounds, such as weapons makers or tobacco firms. This approach focuses on exclusion to manage risk or align with ethical preferences, rather than seeking out high-performing or positively screened options.

Positive screening, in contrast, would select investments based on favorable ESG attributes, not on which ones to avoid. Socially responsible investing is a broader umbrella term that can include both exclusion and positive screening, so it’s less precise for this specific description. Values-based screening centers on matching investments to stated values, which can include exclusions but is not limited to the broad practice of avoiding objectionable holdings.