What is Positive Screening in an investment context?

Positive screening in an investment context refers to the strategy of including companies that meet specific positive criteria in a portfolio. This approach is part of responsible or sustainable investing, where investors look for companies that actively contribute to social, environmental, or governance goals beyond merely avoiding negative behaviors.

For instance, an investor may prioritize companies with strong records in sustainability, innovation, or diversity in leadership. This method contrasts with negative screening, where the focus is on avoiding companies that do not meet certain ethical standards or practices, such as those involved in fossil fuels or tobacco.

The inclusion of such companies demonstrates a proactive investment strategy, where investors aim to support and benefit from organizations that display positive attributes and societal contributions. This practice is increasingly popular among investors who want their investments to align with their values while also seeking financial returns.