To help a fund manager avoid having too small a selection of companies to choose from, positive screening can be used. This enables the ethical investment fund to invest in a different selection of firms. Some funds will use both positive and negative screening.
Positive screening is essentially looking for companies who try to make a worthwhile contribution to society or the environment. However, different funds will view the same company in different ways meaning that firms will be eligible for some ethical funds and not others.
As you may imagine, by using either positive or negative criteria, the resulting companies can be wildly different. This means that without any real effort or analysis, it is easy to see why many ethical investment funds seem to be totally different and have differing risk ratios and annual growth returns. Some activities which are viewed well and may be used as selection criteria include:
- equal opportunities for employees
- environmental policy (including clean energy generation, energy conservation and recycling)
- forestry and / or sustainability
- waste disposal companies
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Saturday, October 11, 2008
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