Exclusionary screening is the process by which investors can eliminate exposure to certain investments to align with their preferences. It can be applied to portfolios as a standalone ESG approach, or in combination with other styles, such as thematic investing or integrating ESG into the investment process.
Screening may sound simple, but the process involves a significant amount of judgment on the part of asset managers or the third party data providers with whom a manager may partner to conduct exclusionary screens.
At State Street Global Advisors, we offer our clients our own perspective on how to conduct exclusionary screening, and have developed a recommended approach. This approach represents the shared perspectives of our investment teams across active and index investment styles in equity, fixed income, and alternatives.
We follow a well-defined methodology that can be flexibly applied to different use cases.
We use inputs from multiple data providers where accessible to us. This broadens our overall coverage universe, and reduces the potential biases of a single data provider.
Our point of view is attentive to the impact on tracking error of excluded securities.
Deviations from firm-wide consistency are made where appropriate to adapt to investment styles, national legislation, and/or market-specific norms prevalent in certain regions.
Important Risk Disclosures
State Street Global Advisors Worldwide Entities
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. Past performance is not a reliable indicator of future performance.