What is the term for investors avoiding sectors based on moral or religious beliefs?

• A. negative or exclusionary screening
• B. engagement strategy
• C. positive screening
• D. proxy voting

Answer: (A)

The term for investors avoiding sectors based on moral or religious beliefs is negative or exclusionary screening. This approach involves intentionally excluding certain industries or companies from a portfolio due to ethical considerations, such as moral or religious beliefs that conflict with the activities of those sectors. For example, investors might avoid investing in the tobacco, alcohol, or firearms industries based on their personal values.

This strategy is a significant aspect of socially responsible investing (SRI), where the focus is on aligning investment choices with an individual's or institution's ethical standards. By employing negative or exclusionary screening, investors seek to ensure that their portfolios reflect their beliefs and values while also potentially influencing corporate behavior by reducing capital flow to sectors they deem undesirable.

The other terms provided refer to different investment strategies or approaches. Engagement strategy focuses on interacting with companies to encourage better practices or policies. Positive screening involves selecting investments based on favorable attributes or characteristics rather than avoiding negative ones. Proxy voting pertains to the rights shareholders have to vote on company decisions, which is not directly related to avoiding sectors based on ethical beliefs.