Negative Screening

Negative and Positive Screening are tools used to judge corporations against each other on environmental, social or governance (ESG) measures.

Positive Screening is what we would think of as a contest to determine the best choice in a class or geographic area.

Negative Screening is the opposite. It is a contest to exclude the worst in class, or to exclude whole industries or classes of businesses from consideration of investment.

It should be noted that while Negative Screening is about avoidance in investing, or in the case of shopping, not purchasing a product or from a business, divestment is about removing funds from a company or investment or ceasing to purchase it going forward.

The effectiveness of Negative Screening is studied in terms of investments by Harvard Law, and it was concluded that such screening did not affect sin businesses from procuring capital. Perhaps the best way to think of negative screening in these instances is that the investment firm is signaling value to its retail investors to attract their own clients rather than making an earnest attempt to halt any so-called sin based business from operating.

https://www.robeco.com/en-us/glossary/sustainable-investing/negative-screening

https://www.fe.training/free-resources/esg/positive-vs-negative-screening/

https://corpgov.law.harvard.edu/2022/08/08/does-esg-negative-screening-work/