What term describes the practice of excluding certain sectors or companies from an investment portfolio for ethical reasons?

The term that describes the practice of excluding certain sectors or companies from an investment portfolio for ethical reasons is negative screening. This approach is often utilized by investors who wish to avoid investing in businesses that do not align with their values or ethical standards. For example, an investor might choose to exclude companies involved in tobacco, firearms, or fossil fuels, perceiving these sectors as contrary to their moral or ethical viewpoints.

Negative screening is distinct from other strategies like positive screening, where investors actively seek out companies that meet specific environmental, social, and governance criteria. In contrast, negative screening focuses specifically on avoiding investments that conflict with the investor's ethical preferences. Impact investing, on the other hand, targets investments that generate specific social or environmental benefits alongside a financial return. Lastly, ESG integration refers to the incorporation of environmental, social, and governance factors into the investment analysis process, rather than simply excluding companies based on ethical considerations.