Negative screening
Negative screening can be used by charities to protect their reputation, avoid conflict with their objectives or contradictions with their work. It is about avoiding investments that do not meet their social, environmental or ethical criteria.
In this section:
What is negative screening?
Reasons for using negative screens
Ways of using negative screens
Common negative screening issues
Further information
What is negative screening?
Negative screening involves avoiding investments that do not meet the social, environmental or ethical (SEE) standards which your charity client has set. It is also known as avoidance or exclusion.
There is no single correct approach to negative screening. The degree to which a particular behaviour is avoided will be determined by the charity’s policy.
Negative screening can involve avoiding investments in certain companies or sectors. In the case of government bonds it may also be possible to avoid investing in particular countries.
Investors can set materiality thresholds to determine which investments will be excluded – for example avoiding companies which derive more than 10% of turnover from gambling, rather than avoiding companies with any involvement in gambling. It is also possible to avoid the worst performing companies within a particular sector, for example those with the poorest human rights record.
The use of extensive screens reduces the investable universe and a portfolio is generally rebalanced to take account of this. More details of how portfolios can be rebalanced are available in the UKSIF online training course.
Reasons for using negative screens
Your charity clients may wish to use negative screening to
- avoid conflicts with their objectives
- avoid contradictions with their work
- protect their reputation
- avoid alienating stakeholders such as staff, funders and members
- remove specific risks from their portfolio
- avoid investments that they believe to be morally irresponsible
Ways of using negative screens
Your charity client may wish to :
- use the services of a research organisation
- ask fund managers to apply screens to their investments
- select a pooled fund that uses negative screens which fits with their needs
Negative screening can be used in combination with other strategies such as positive screening or engagement.
Common issues
Issues that are a common focus for negative screening include
- Alcohol
- Animal testing
- Environmental impact
- Gambling
- Military involvement
- Nuclear power
- Pornography
- Tobacco
Further information
UKSIF’s online training course provides guidance on selecting a negative screening approach and understanding how screens can be applied.
