Beyond Negative and Positive Screens

Last reviewed February 24, 2022

Original upload February 24, 2022

Blog summary

In thinking about funds and portfolios with a social or environmental focus, it’s tempting to imagine their managers as being akin to nightclub bouncers: “Good” companies are welcome, while “bad” ones are turned away.

But that’s an outdated analogy. Decades ago, funds used relatively crude screens to include or exclude certain stocks or even entire industries. In the modern generation of funds, however, managers deploy a finely calibrated investment selection process that incorporates environmental, social and governance (ESG) factors. For those funds that truly follow an ESG mandate, the result has been increasing success in achieving parallel goals: meeting social and environmental objectives while earning competitive rates of return.