Misconceptions About Positive Screening in Impact Investing
Positive screening refers to the strategy of selecting investments based on specific positive criteria, rather than solely avoiding negative factors. Despite its growth, various misconceptions persist:
1. It Guarantees High Returns
One common misconception is that positive screening automatically leads to high financial returns. While sustainable companies often perform well, there is no guarantee of superior returns across the board. Investors should still conduct thorough analyses.
2. It Excludes Profitable Sectors
Another belief is that positive screening forces investors to forgo profitable sectors. In reality, many companies within traditionally 'high-impact' industries are implementing sustainable practices and report strong performance, making them viable investment options.
3. It's Only About Environmental Issues
Many assume that positive screening focuses only on environmental criteria. However, it encompasses social and governance factors too, addressing a broad spectrum of ethical and impact considerations.
4. It’s a One-Size-Fits-All Approach
Positive screening is often perceived as a uniform strategy, but each investor’s criteria and goals vary significantly. Tailoring screening methods to align with personal values and investment objectives is crucial.
5. It Lacks Objectivity
Some believe that positive screening is fundamentally subjective. However, many investors utilize standardized metrics and frameworks, ensuring a more objective and data-driven approach to evaluations.
Understanding these misconceptions can help investors make informed decisions as they explore positive screening within the realm of impact investing.