What defines the practice of avoiding investments in specific industries due to ethical concerns?

What defines the practice of avoiding investments in specific industries due to ethical concerns?

• A. engagement strategy
• B. negative or exclusionary screening
• C. positive screening
• D. proxy voting

Answer: (B)

The practice of avoiding investments in specific industries due to ethical concerns is best defined as negative or exclusionary screening. This approach involves identifying and eliminating companies or sectors from an investment portfolio based on moral values or ethical considerations. For example, an investor might choose to exclude industries such as tobacco, gambling, or fossil fuels due to their negative impact on society, health, or the environment. This strategy allows investors to align their investment choices with their personal or organizational values, ensuring that their capital is not supporting activities or sectors they find objectionable. While other strategies like positive screening involve selecting companies based on favorable characteristics, or engagement strategies focus on influencing corporate practices, negative screening is primarily concerned with exclusionary practices driven by ethical considerations. Proxy voting, on the other hand, pertains to voting on corporate matters and is not directly related to the initial decision-making on where to invest.

The practice of avoiding investments in specific industries due to ethical concerns is best defined as negative or exclusionary screening. This approach involves identifying and eliminating companies or sectors from an investment portfolio based on moral values or ethical considerations. For example, an investor might choose to exclude industries such as tobacco, gambling, or fossil fuels due to their negative impact on society, health, or the environment.

This strategy allows investors to align their investment choices with their personal or organizational values, ensuring that their capital is not supporting activities or sectors they find objectionable. While other strategies like positive screening involve selecting companies based on favorable characteristics, or engagement strategies focus on influencing corporate practices, negative screening is primarily concerned with exclusionary practices driven by ethical considerations. Proxy voting, on the other hand, pertains to voting on corporate matters and is not directly related to the initial decision-making on where to invest.