Which of the following is NOT a reason for an asset owner to implement an exclusionary screening approach?

An exclusionary screening approach involves the deliberate avoidance of certain investments based on predefined criteria, often linked to ethical, moral, or sustainability considerations. The correct answer highlights that improving portfolio diversification is not a primary reason for implementing this strategy.

When asset owners choose to exclude certain sectors or companies (such as those involved in fossil fuels, tobacco, or weapons), their main objectives usually revolve around aligning investments with the values of their beneficiaries or adhering to societal norms. This type of screening reflects personal or societal beliefs and does not directly consider the diversification of the portfolio.

While an exclusionary approach can lead to a unique portfolio composition, it does not inherently enhance diversification. In fact, it may narrow the range of securities available for investment, possibly leading to increased concentration in specific sectors or asset classes, which can negate the benefits of diversification.

The other choices align well with typical motivations for implementing exclusionary screening. Reflecting fundamental values acknowledges the ethical perspectives of beneficiaries, while adhering to global or regional norms is about the collective standards that guide investment practices. Additionally, recognizing that exclusionary screening can be one of the easier strategies to implement reflects the pragmatic side of socially responsible investing, as it involves clear criteria for inclusion or exclusion without the complexity of assessing the sustainability performance of