In ESG investment, what refers to socially responsible fund management?

• A. greenwashing
• B. impact investing
• C. sin stocks
• D. negative or exclusionary screening

Answer: (B)

Impact investing refers to investments made with the intention to generate positive social and environmental impact alongside a financial return. This approach goes beyond traditional socially responsible investment (SRI) which primarily screens out harmful industries. Impact investing seeks to actively create beneficial outcomes, such as funding renewable energy projects or affordable housing, while still aiming to achieve competitive financial performance. This dual focus on positive intent and measurable outcomes defines impact investing within the ESG framework.

In contrast, while other choices may relate to socially responsible management, they do not capture the active creation of positive impact that characterizes impact investing. For instance, greenwashing refers to misleading claims about environmental benefits and does not reflect genuine responsible management. Sin stocks involve investing in companies that may not align with socially responsible criteria, and negative or exclusionary screening involves avoiding investments in certain sectors rather than seeking to generate positive impact. Therefore, impact investing is the most fitting choice for describing socially responsible fund management that aims to provide both social benefits and financial returns.