Why exclusionary screening matters
It aligns portfolios with constraints but can change diversification, factor exposure, tracking error, and engagement opportunities.
How it is applied
Investors define thresholds, revenue tests, data sources, exceptions, look-through, review frequency, and benchmark treatment.
Portfolio example
A mandate excludes companies deriving more than 10% of revenue from thermal coal.
How to interpret it
An exclusion expresses a boundary, not proof of real-world impact. Portfolio effects depend on scope and substitutes.
Limitations and common misconceptions
Data gaps, conglomerates, threshold cliffs, and index differences create inconsistency.
Sources and further reading
- What is Responsible Investment?Principles for Responsible Investment