Environmental, social, and governance (ESG) considerations are indicators of sustainable and responsible business practices. Environmental criteria indicate how a company performs as a steward of the natural environment. Social criteria examine how a company manages relationships with its employees, suppliers, clients, and communities. Governance criteria include a company’s board and leadership, executive pay, financial and other controls, and shareholder rights. There are several types of activities associated with ESG investing.   

Exclusionary screening: The exclusion of certain sectors, countries, and securities from an investment universe based on specific ESG-related criteria.

Inclusionary screening:  Proactive investment in sectors or companies selected for higher ESG ratings relative to industry peers or other investment opportunities.

Norms-based screening: A form of exclusionary screen that sets minimum standards criteria for business practice based on companies’ adherence to international norms (e.g., human rights, corruption)