Values-Based Investing is an investment approach that considers the investor's values, beliefs, and ethics when making investment decisions. This type of investing aims to align the investor's portfolio with their values, often focusing on environmental, social, and governance (ESG) factors.
Which of the following best describes values-based investing?
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A) Investing based solely on financial factors is traditional, not values-based. B) Investing in companies with strong ESG performance is a component of values-based investing but does not fully capture the concept. C) When making investment decisions, Values-based investing involves considering the investor's values and beliefs. D) Investing in companies with the highest potential for financial return focuses on traditional investing, not values-based investing.
What is the primary difference between negative screening and positive screening in values-based investing?
A) Negative screening excludes certain investments based on specific criteria, while positive screening involves selecting investments based on specific criteria. B) Both negative and positive screening can focus on ESG factors in values-based investing. C) Both negative and positive screening can be used in values-based investing. D) The time horizon of the strategy is not the primary difference between negative and positive screening.
In the 1960s and 1970s, many investors began to divest from companies involved in producing tobacco, alcohol, and weapons and those with ties to apartheid South Africa. This movement began modern values-based investing, as investors sought to align their portfolios with personal beliefs and values.
Which of the following is an example of shareholder activism in values-based investing?
A) Divesting from a company with poor ESG performance is an example of negative screening, not shareholder activism. B) Shareholder activism involves using shareholder rights to influence a company's management and operations, such as voting on shareholder resolutions. C) Investing in a mutual fund that focuses on socially responsible companies is an example of values-based investing but not specifically shareholder activism. D) Selecting individual stocks based on their alignment with the investor's values is an example of positive screening, not shareholder activism.
An investor passionate about environmental conservation may invest in a portfolio of companies prioritizing sustainable business practices, such as reducing carbon emissions and using renewable energy sources. This investor may also exclude companies involved in fossil fuel production or those with a history of environmental violations.
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Values-based investing, a choice so wise, Aligns your portfolio with your heart's ties. ESG factors, SRI, and more, Guide your investments to a cause you adore.