WARD We have been using negative screening for several years. Some years ago, when British American Tobacco was still an active issuer in Australia, I remember having an argument with a portfolio manager about its bonds. He was intent on not holding them largely due to personal ethical and moral views. There were more smokers back in the early 2000s and my view at the time was that we were going to get paid back on those bonds so why wouldn’t we hold them.

Investor sentiment – including mine – has certainly changed. We have a range of formal negative screens – tobacco, munitions, controversial weapons and the like – but we are seeing more client demand for positive screening, particularly from insurance clients. As debt investors, our priority is to ensure we get our money back. Positive screening picks companies that will be sustainable over the longer term.

We also want to invest in companies that will come back to market. We are developing tools that seek out companies that under certain scenarios – such as climate risk – might perform better than their peers.

SWAN From our perspective, negative screens are first and foremost the path of least resistance. We are pushing more resources into the responsible investment (RI) space and when we allocate capital to any investment negative screen is quick, efficient and easy to deliver. But we are building in other ESG approaches, such as portfolio optimisation.

PEARSON We have negative screening in our fixed-income portfolio and this reflects the broader QBE position. For example, last year we introduced a negative screen around thermal coal in line with QBE’s broad view around climate change.

We became responsible investors relatively late compared with some other asset managers and owners, and we took a broader view around ESG integration within our fixed-income portfolio. We don’t have a large equities portfolio so we wanted our responsible approach to be reflected across fixed income.

As well as negative screening, this includes what one might call a negative screen around some ESG ratings data. Examples are thresholds around controversies, or we will mark down or exclude certain credits based on their external ESG data-provider ratings.

We are also focused on the ESG integration component, and thematic and impact investing in a more positive screening sense.

BISHAY Negative screening can mean many things over and above traditional industry screening of tobacco, thermal coal, controversial weapons and the like. Industry-based screening is the easiest to apply and we have had two clients in the last six months say they want to apply a negative industry screen on a couple of specific sectors. I imagine this will continue.

There is another negative-screen type that is easy to confuse with positive screening. If you rate issuers on an ESG basis and screen out the poor performers this is a negative screen – but it can also be viewed as a positive screen for high-quality ESG issuers.

NUNEZ I don’t find the survey response surprising. Investors are moving through different stages of ESG approaches. IFM Investors applies a negative screen that is driven by our clients and covers some of the same sectors others have mentioned. We monitor an issuer’s performance from a relative-value perspective and how it manages ESG business relative to its peers.

More recently, we introduced an in-house ESG scorecard that directly contributes to our internal credit rating. We have noticed that rating agencies are beginning to incorporate ESG factors into their broader analysis, too.

We have always considered these factors and now we have a label for them. But we integrate ESG into all our asset classes. We have an RI team to oversee transactions and we use its research and recommendations in our analysis and investment decisions.

YUAN We have all seen big interest from our end investors for ESG integration into investment processes and reporting.

It is harder to have a positive impact in investment-grade fixed income so we are not seeing too much pressure from our end investors to have positive impact in our portfolios. However, they are very interested in more traditional sector-based negative screening. This could be why there isn’t as much positive screening as negative in the survey results.

We like negative screening because it is customisable. ESG factors are subjective, so while everyone is on board with excluding immoral activities, every client will put greater weight of judgement on some things than others. Negative screening is also supportive of concrete limitations – it’s designed to give an easy yes or no on measurable factors to a particular asset or sector.