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Environmental, Social &
Corporate Governance Assessment

Environmental, Social & Corporate Governance Assessment

Step 1 of 5

Appendix - Investment screening

Ethical investment traditionally focussed on excluding companies whose activities conflict with negative criteria, such as “no tobacco” or “no armaments”. Increasingly, investment managers are adding an inclusive element to investment criteria by seeking companies with positive environmental and social attributes; and by influencing positively the companies in which they invest through engagement. Ethical funds reflect a range of approaches from purely exclusive to purely engagement.

Negative criteria

Alcohol/Tobacco Retailing – avoiding companies in these categories may exclude investment in supermarkets.

Animal Testing – covers the development of cosmetics, toiletries and household products which involving animal testing (Non-Medical), and the development of drugs and healthcare services which involve animal testing (Medical).

Animal Welfare Issues - covers a range of activities including intensive farming; the processing and retailing of meat and dairy based foods; and the use of fur and animal skins.

Armaments – covers companies developing, manufacturing or supplying weapons, components of weapons and other military equipment; and companies with sales or service contracts with military customers.

Banking & Finance – covers conventional banks and financial institutions, including those involved in socially or environmentally irresponsible practices.

Corporate Governance – covers issues such as bribery, corruption, and anti-competitive and socially irresponsible practices.

Environment – covers environmental impacts, such as biodiversity, pollution, and ozone depleting chemicals. Negative Impact with Inadequate Positive Mitigation covers funds with a balanced consideration of impacts and positive mitigation measures. Negative Impact Regardless of Mitigation covers funds with basic statements to “avoid environmental damage” and avoiding specific impacts without reference to positive analysis. Climate Change & Fossil Fuels covers funds with policies targeting these specific issues.

Gambling – covers issues such as involvement in casinos, betting shops, online gaming and the National Lottery.

Genetic Modification – covers the development of products involving the genetic modification if animals or plants, or the use of genetically modified ingredients in areas such as food products.

Human Rights – covers the effect of companies on their workforce and the communities in which they operate, either by reference to evidence that a company’s operations have negatively affected human rights (Evidence of Human Rights Violations), or by reference to whether the countries in which they operate have oppressive regimes (Countries with Poor Human Rights Records).

Nuclear – covers companies involved in nuclear power for electricity generation, and provision of products and services to the nuclear industry.

Pornography – covers the production, distribution and retailing of pornographic or “adult” items such as films or magazines.

Product Stewardship – covers the ways in which companies promote and market products with potentially negative social impacts such as alcohol, tobacco, and breast milk substitutes.

Shariah Law – covers companies that do not comply with the principles of Islamic (Sharia) law.

Positive criteria

Some ethical funds apply positive criteria in addition to negative criteria; others apply only positive. Those applying mainly positive criteria and aiming to invest in companies or activities with positive social and/or environmental benefits may be identified as “Themed” funds. Some of these funds avoid investments in ethically contentious areas by virtue of a narrow focus into sectors such as environmental technology or sustainable forestry, but as they apply few or no negative screening criteria, they may invest in activities which you consider unsuitable.