Community Forex Questions
What is the difference between negative screening and positive screening in socially responsible investing (SRI)?
In Socially Responsible Investing (SRI), negative screening and positive screening are two common strategies used to align investments with ethical, social, and environmental values. While both approaches focus on selecting companies based on specific criteria, they differ in how they are applied.
Negative screening involves excluding certain industries, companies, or practices that do not align with an investor’s values or ethical standards. For example, many SRI investors avoid businesses involved in tobacco, gambling, weapons, fossil fuels, or companies with poor labour practices. The goal is to eliminate exposure to organisations whose activities are seen as harmful to society or the environment. This approach helps investors avoid supporting industries that conflict with their personal or institutional principles.
Positive screening, on the other hand, actively seeks out companies that demonstrate strong performance in Environmental, Social, and Governance (ESG) areas. Instead of focusing only on exclusion, this method rewards businesses that promote renewable energy, gender equality, fair labour standards, or community development. Positive screening encourages capital to flow toward organisations making a measurable positive impact, often supporting innovation and sustainable business models.
The key difference lies in the approach: negative screening removes harmful options, while positive screening highlights and supports beneficial ones. Many investors combine both strategies, aiming to avoid unethical practices while encouraging companies that contribute to long-term sustainability and social good.
Negative screening involves excluding certain industries, companies, or practices that do not align with an investor’s values or ethical standards. For example, many SRI investors avoid businesses involved in tobacco, gambling, weapons, fossil fuels, or companies with poor labour practices. The goal is to eliminate exposure to organisations whose activities are seen as harmful to society or the environment. This approach helps investors avoid supporting industries that conflict with their personal or institutional principles.
Positive screening, on the other hand, actively seeks out companies that demonstrate strong performance in Environmental, Social, and Governance (ESG) areas. Instead of focusing only on exclusion, this method rewards businesses that promote renewable energy, gender equality, fair labour standards, or community development. Positive screening encourages capital to flow toward organisations making a measurable positive impact, often supporting innovation and sustainable business models.
The key difference lies in the approach: negative screening removes harmful options, while positive screening highlights and supports beneficial ones. Many investors combine both strategies, aiming to avoid unethical practices while encouraging companies that contribute to long-term sustainability and social good.
In socially responsible investing (SRI), negative and positive screening are two different approaches to selecting investments. Negative screening involves excluding companies or industries that do not align with certain ethical, social, or environmental standards. For example, investors may avoid businesses involved in tobacco, weapons, or fossil fuels. This method focuses on avoiding harm. Positive screening, on the other hand, actively seeks out companies that demonstrate strong environmental, social, and governance (ESG) practices. Investors may favour firms with sustainable energy initiatives, fair labour policies, or strong diversity programs. While negative screening is about eliminating undesirable options, positive screening rewards companies that contribute positively to society. Many SRI strategies combine both methods to build a values-based and balanced portfolio.
Oct 01, 2025 02:51