Ethische screening

What Is Ethische Screening?

Ethische screening is a process used in sustainable finance to evaluate investments based on an investor's moral, social, environmental, or ethical principles. It is a key component of ethical investing and involves systematically reviewing companies, industries, or countries to determine their alignment with specific non-financial criteria. This screening can lead to the inclusion or exclusion of certain assets within an investment portfolio.

Ethische screening helps investors align their capital with their values, moving beyond purely financial returns to consider broader societal and environmental impacts. It can be applied across various asset classes, including stocks, bonds, and mutual funds, as part of a comprehensive investment strategy.

History and Origin

The roots of what is now known as ethische screening can be traced back centuries, predating modern finance. Early examples of value-driven investing emerged from religious groups. For instance, in the 18th century, American Quakers and Methodists advocated against investments in the slave trade, as well as industries involved with alcohol, tobacco, or gambling.⁶ This early form of filtering investments based on moral objections laid the groundwork for modern socially responsible investing.

In the 20th century, the concept gained broader traction with social and political movements. The Vietnam War protests in the 1960s prompted demands for university endowments to divest from defense contractors, and the anti-apartheid movement of the 1980s saw significant divestment campaigns against companies doing business in South Africa.⁵ These movements solidified the practice of using investment decisions as a tool for social change, paving the way for more formalized ethische screening methodologies. The establishment of dedicated mutual funds focused on ethical criteria further popularized this approach.

Key Takeaways

Ethische screening evaluates investments against an investor's ethical, social, or environmental values.
It serves as a foundational method within sustainable finance, often implemented through negative screening or positive screening.
The practice allows investors to align their financial holdings with their personal or institutional principles.
While initially driven by moral considerations, ethische screening has evolved to encompass Environmental, Social, and Governance (ESG) factors.

Formula and Calculation

Ethische screening is a qualitative process rather than a quantitative calculation; therefore, no universal formula applies. Instead, it involves defining and applying specific criteria to a universe of potential investments. For example, a common approach involves creating a list of excluded industries or companies (negative screening) or a list of preferred industries or companies (positive screening).

The "calculation" in ethische screening comes from the meticulous research and data analysis required to determine if a company meets the predefined criteria. This often involves reviewing corporate reports, third-party ESG ratings, and news to assess a company's practices related to its environmental footprint, labor practices, human rights, or corporate governance standards.

Interpreting Ethische Screening

Interpreting ethische screening involves understanding the specific criteria applied and the rationale behind them. For an investor, the result of ethische screening is a filtered universe of investable assets that align with their ethical stance. For example, a portfolio that has undergone ethische screening to exclude fossil fuel companies indicates a commitment to environmental sustainability. Conversely, a portfolio focused on companies with strong diversity policies through positive screening reflects a social value.

The interpretation also considers the depth and breadth of the screening process. Some screenings might be broad, excluding entire sectors, while others might be granular, focusing on specific practices within a company. The effectiveness of ethische screening is judged by how well the resulting portfolio reflects the investor's intended values, rather than by a single numerical output.

Hypothetical Example

Consider an individual investor, Sarah, who wants her portfolio to reflect strong ethical principles. She decides to apply ethische screening to her stock selections.

Define Criteria: Sarah establishes her ethical criteria:
- No investments in tobacco, alcohol, or gambling companies (sin stocks).
- No companies involved in weapons manufacturing.
- Preference for companies with strong labor practices and a low carbon footprint.
Initial Universe: Sarah starts with a broad market index of 500 companies.
Negative Screening: She first applies her negative screens. After research, she removes 20 companies involved in tobacco, alcohol, gambling, or weapons. This is a form of exclusionary screening.
Positive Screening/Preference: Next, she evaluates the remaining companies based on their labor practices and environmental impact. She uses third-party Environmental, Social, and Governance (ESG) data to identify companies with high scores in these areas, preferring them over others. For instance, she might prioritize a tech company known for fair wages and renewable energy use over one with questionable labor conditions.
Final Portfolio: Her final portfolio consists of companies that have passed both her negative and positive ethische screening criteria, reflecting her commitment to ethical values alongside financial goals.

Practical Applications

Ethische screening finds practical application in several areas of the financial world:

Retail Investing: Individual investors use ethische screening to build portfolios that resonate with their personal values, often through specialized ethical mutual funds or exchange-traded funds.
Institutional Investing: Large institutions, such as pension funds, university endowments, and charitable foundations, frequently employ ethische screening to meet the ethical mandates of their beneficiaries or organizational missions.
Faith-Based Investing: Religious organizations have historically been pioneers in ethische screening, applying principles derived from their doctrines to their investment choices.
Product Development: Financial product providers create investment vehicles specifically designed to meet various ethische screening criteria, offering portfolios free of certain industries or focused on specific positive themes.
Regulatory Alignment: In some jurisdictions, financial regulations may prohibit investment in certain assets or companies involved in specific activities, such as manufacturing controversial weapons, necessitating adherence to ethische screening principles.⁴ This ensures compliance and promotes responsible investment practices.

Limitations and Criticisms

Despite its growing popularity, ethische screening faces several limitations and criticisms:

Definition Inconsistencies: There is no universal standard for what constitutes "ethical." What one investor considers ethical, another might not, leading to variations in screening methodologies and potential confusion.
Data Quality and Availability: Relying on company disclosures or third-party ratings for ethische screening can be challenging due to inconsistent reporting standards and varying methodologies among data providers.³ This can make it difficult for investors to accurately assess a company's true ethical performance and compare it across different firms.
"Greenwashing" Risk: Companies may engage in "greenwashing," presenting a misleading or exaggerated image of their ethical or sustainable practices to attract capital, which can undermine the integrity of ethische screening efforts.²
Limited Diversification: By excluding entire sectors or a significant number of companies, ethische screening might limit an investor's diversification opportunities, potentially impacting financial performance. Some studies suggest a potential for underperformance due to these exclusions.¹
Subjectivity: The inherent subjectivity of ethical judgments means that screens can sometimes be arbitrary or fail to capture the nuances of a company's operations, leading to unintended consequences or overlooking complex ethical dilemmas.
Engagement vs. Exclusion: Some critics argue that outright exclusion (negative screening) forfeits the opportunity for shareholder activism and engagement, where investors can use their influence to encourage companies to improve their ethical practices from within.

Ethische Screening vs. Socially Responsible Investing

While closely related, ethische screening is a specific method within the broader concept of Socially Responsible Investing (SRI).

Ethische Screening: This term refers to the specific filters or criteria applied to investment universes. It is the tactical process of including or excluding investments based on predefined ethical or values-based parameters. For instance, a screen might exclude companies involved in tobacco production or include companies that demonstrate strong community involvement.
Socially Responsible Investing (SRI): This is the overarching investment approach that considers both financial returns and social/environmental good. SRI encompasses various strategies, including ethische screening, ESG integration (incorporating ESG factors into financial analysis), impact investing (seeking measurable positive social/environmental outcomes alongside financial returns), and shareholder advocacy. Essentially, ethische screening is one of the primary tools or techniques employed by investors practicing SRI.

FAQs

What is the primary goal of ethische screening?

The primary goal is to ensure that an investment portfolio aligns with an investor's ethical, moral, or social values, by including or excluding companies based on specific criteria.

Is ethische screening the same as ESG investing?

No, ethische screening is a component often used within the broader framework of ESG investing. ESG investing typically involves integrating environmental, social, and governance factors into traditional financial analysis to identify material risks and opportunities, whereas ethische screening focuses more directly on values-based inclusions or exclusions.

Does ethische screening impact investment returns?

The impact of ethische screening on investment returns is a subject of ongoing debate. Some studies suggest that certain screens, particularly those that limit investment opportunities significantly, could potentially affect diversification and returns. However, other research indicates that companies with strong ethical practices may exhibit better long-term risk management and financial resilience.

Can individuals perform ethische screening?

Yes, individuals can perform ethische screening by researching companies, using ethical investment guides, or investing in dedicated ethical mutual funds or ETFs that already apply such screens. Many brokerage platforms also offer tools to help investors identify ethically aligned investments.

What are common types of ethische screening?

Common types include negative screening (excluding industries like tobacco, weapons, or fossil fuels) and positive screening (selecting companies based on strong performance in areas like environmental sustainability, fair labor, or diverse leadership). Norms-based screening, which assesses companies against international standards, is also used.