CFA Level I · CFA Level I Exam · Investors and Other Stakeholders
An investment firm integrates ESG factors by excluding companies from its portfolio that derive revenue from tobacco and thermal coal, regardless of their financial characteristics. This approach is best described as:
This approach is best described as negative screening. The firm removes companies from the investable universe based on involvement in specified activities such as tobacco and thermal coal, rather than selecting themes or influencing companies through engagement or proxy voting.
- Athematic investing
- Bnegative screeningCorrect
- Cengagement and active ownership
Explanation
Excluding sectors or companies based on activities is negative (exclusionary) screening. Thematic investing selects exposure to themes such as clean energy, and engagement involves dialogue and voting to influence companies.
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