Which statement best contrasts norms-based screening with positive screening?

Which statement best contrasts norms-based screening with positive screening?

• A. Norms-based screening excludes investors based on adherence to international norms; positive screening prioritizes firms meeting positive criteria such as high ESG scores.
• B. Norms-based screening focuses on best-in-class performance; positive screening focuses on momentum.
• C. Both approaches are identical in practice.
• D. Positive screening excludes companies with any ESG risk.

Answer: (A)

This question tests how norms-based screening differs from positive screening in ESG investing. Norms-based screening excludes companies that violate internationally recognized standards or norms (such as on human rights, labor rights, or corruption). Positive screening, on the other hand, looks for firms with positive ESG attributes, often using ESG scores or rankings to identify leaders or strong performers. The statement is best because it captures the essential contrast: norms-based screening is about excluding for norm violations, while positive screening is about selecting for positive criteria like high ESG scores. Other options don’t fit as well. Focusing on best-in-class performance versus momentum describes different performance frameworks rather than the fundamental screening approach. Saying both approaches are identical ignores the real practical distinction between excluding due to norms violations and selecting for positive ESG characteristics. Claiming positive screening excludes companies with any ESG risk is too absolute; positive screening aims to favor strong ESG performance, not necessarily to eliminate every risk.

This question tests how norms-based screening differs from positive screening in ESG investing. Norms-based screening excludes companies that violate internationally recognized standards or norms (such as on human rights, labor rights, or corruption). Positive screening, on the other hand, looks for firms with positive ESG attributes, often using ESG scores or rankings to identify leaders or strong performers.

The statement is best because it captures the essential contrast: norms-based screening is about excluding for norm violations, while positive screening is about selecting for positive criteria like high ESG scores.

Other options don’t fit as well. Focusing on best-in-class performance versus momentum describes different performance frameworks rather than the fundamental screening approach. Saying both approaches are identical ignores the real practical distinction between excluding due to norms violations and selecting for positive ESG characteristics. Claiming positive screening excludes companies with any ESG risk is too absolute; positive screening aims to favor strong ESG performance, not necessarily to eliminate every risk.