Framework
Four responsible-investment strategies
The question it answers
When a fund manager wants to build ESG and ethical concerns into a portfolio, should they use screening, integration, shareholder engagement or impact investing, and what does each trade off?
- Origin
- Louche and Lydenberg, 2010
- Diagram type
- Comparison table
- Level of analysis
- Industry
Diagram
Four responsible-investment strategies
| Criterion | Avoidance | Inclusion | Relative selection (best-in-class) | Engagement |
|---|---|---|---|---|
| How it works | Avoid firms or sectors judged harmful | Back activities that are exceptionally beneficial | Pick the ESG leader in each industry | Dialogue, proxy voting, shareholder resolutions |
| Common limits | Limited impact | Concentration risk if portfolios are narrow | Still holds controversial sectors; no accurate relative ESG metric | — |
Pitfalls
Pitfall
"ESG integration" and "thematic investing" are sometimes discussed alongside these, but they are not among the four strategies, so do not present them as part of the four.
Sources
References
Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.
- Louche, C. and Lydenberg, S. (2010) ‘Responsible investing’, in Boatright, J.R. (ed.) Finance ethics: critical issues in theory and practice. Wiley, pp. 393–417.doi:10.1002/9781118266298.ch21Source page