Investment Screening and Exclusion Policy
Version 3.0 - Consolidated Final
Comprehensive policy framework for ethical investment screening and exclusion criteria
Ethical Capital Investment Collaborative
Investment Screening and Exclusion Policy
📋 Open Source License
This screening methodology is published under Creative Commons CC BY 4.0. You are free to use, adapt, and share this work with attribution.
1. Policy Framework and Governance
1.1 Fiduciary Foundation
Our fiduciary responsibility to investors is to ensure our strategies do not place them under undue risk. This policy positions ethical screening as a primary risk management tool that insulates portfolios from product and conduct-based issues that may result in financial liabilities, reputational damage, and stranded assets.
1.2 Core Philosophy
We seek to align with goodness and avoid preventable harm to living things. This principle guides all investment decisions through professional discretion. The systematic elimination of companies engaged in harmful activities reveals businesses that are structurally integrated into healthy social systems, demonstrating sustainable competitive advantages through reciprocal value creation rather than extractive practices.
1.3 Governance Structure
- Decision Authority: The Chief Investment Officer maintains sole discretion over all exclusion and inclusion decisions, including the authority to reverse exclusion criteria when warranted
- Discretionary Management: As a discretionary investment manager, professional judgment is exercised on a case-by-case basis within the framework of preventing harm
- Client Input: While clients cannot weaken firm-wide exclusions, they may adopt stricter parameters for their individual portfolios
- Documentation Standards: All exclusion decisions are tracked through portfolio management systems and reviewed monthly
1.4 Formal Commitments
Ethical Capital maintains the following institutional commitments:
- Apartheid-Free Pledge: Formal commitment to exclude companies complicit in systematic oppression
- PetChem Investor Declaration: Commitment to address petrochemical risks and plastic pollution
- Plant-Based Treaty: Commitment to support a transition towards a plant-based society.
- Additional commitments may be adopted as they align with our core mission
2. Criteria for Product-Based Exclusion of Companies
Assets entrusted to our firm shall not be invested in companies which engage in any of the below activities directly or through entities they control:
2.1 Harm to Living Beings
- Manufacturing meat, dairy, eggs, honey, butter, silk, cheese
- Contributing to demand for leathers, hides, and furs
- Production of equipment that directly harms animals
2.2 Weapons and Military Operations
- Sale of weapons, military materiel, or consulting services that support military operations
- Manufacturing or distribution of defense equipment and technologies
2.3 Addictive and Exploitative Products
- Prey on addictions to alcohol, tobacco, and gambling
- Products designed to exploit vulnerable populations or dependencies
2.4 Fossil Fuels and Extractive Industries
- Upstream (extraction) and downstream (refining/retail) operations in oil and gas industry
- Principally engaged in mining, expropriation of public assets, or activities generating significant externalized costs
2.5 Surveillance and Incarceration Systems
- Enable and deepen surveillance through consumer tracking, privacy erosion, and related operations
- Operate for-profit prisons and/or utilize prison labor
3. Criteria for Conduct-Based Exclusion of Companies
Companies may be excluded or placed under observation if there is unacceptable risk that the company contributes to or is responsible for:
3.1 Direct Harm and Rights Violations
- Direct harm to human and non-human animals through testing, environmental practices, hostile work environments, or neglect
- Human rights violations including murder, torture, deprivation of liberty, forced labor, and child labor
- Serious violations of individual rights in situations of war or conflict
- Inadequate respect for indigenous communities and sovereignty
3.2 Environmental and Climate Misconduct
- Gross abuse of water resources
- Severe environmental damage
- Acts or omissions leading to unacceptable greenhouse gas emissions
- Failure to develop credible climate transition plans.
3.3 Governance and Operational Failures
- Failure to adequately hire, retain, include, and promote diverse staff
- Failure to secure information resources and technology infrastructure
- Failure to provide appropriate oversight (including safe working conditions and consumer protection)
- Gross corruption and systematic fraud
- Anti-union behavior
- Contravention of law with criminal convictions
- Tax avoidance schemes significantly departing from industry practice
4. Implementation and Discretion
4.1 Exclusion Framework
- Binary Decisions: Exclusions are binary determinations subject to overruling at the Chief Investment Officer’s discretion
- Industry Context: Companies presenting outstanding opportunities on all criteria except a narrow issue consistent with industry practices may warrant reconsideration
- Holistic Assessment: All securities evaluated based on products and conduct
- Professional Judgment: All decisions involve professional discretion within the framework of preventing harm
- Information Basis: We make the best decisions we can with the information we have
4.2 No Exceptions or Appeals
- No formal appeals process exists, as companies are not notified of their exclusion status.
- Clients are encouraged to request a rationale for any exclusion decision.
- No temporary exceptions are granted
- Reversal authority rests solely with the Chief Investment Officer, and will be granted at their sole discretion.
4.3 Engagement with Companies
- Upon discovery of a prohibited practice at a current holding, The Chief Investment Officer may choose to engage with companies instead of immediately disposing of the position.
5. Strategy-Specific Implementation
5.1 Growth Strategy - Full Implementation
- Target: Full policy alignment.
- Positive Impact Requirement: Companies must generate positive outcomes through their primary business lines (i.e., the same way they generate revenue, not through unrelated programs)
5.2 Income Strategy - Flexible Implementation
- Target: As close to 100% policy alignment as possible while fulfilling strategy objectives
- Implementation Limitations: This strategy may hold as much as 100% direct securities or 100% funds.
- Direct Holdings: Individual securities will always be selected with full exclusion criteria.
- Fund Component: Managers that align with our screening policy will be selected.
5.3 Diversification Strategy - Aligned Implementation
- Target: As close to 100% policy alignment as possible while fulfilling strategy objectives
- Implementation Limitations: This strategy is invested through external managers, 100% funds.
- Through selection of aligned managers and vehicles
- Fund Selection: Values-screened funds preferred; broad market funds accepted where necessary
- Structural Limitations: Acknowledges constraints inherent in external fund management
5.4 Portfolio Management
- Review Frequency: All holdings rebalanced on the last trading day before or first trading day after the new moon
- Composition Changes: All strategies evolve to align with opportunities - clients should expect this
- Client Communication: Chief Investment Officer retains discretion regarding issue notification
6. Research and Monitoring Framework
6.1 Data Sources
Primary Sources:
- Company disclosures and direct communications
- Proprietary research
Secondary Sources:
- Activist reports and NGO investigations
- Credible media reporting
- AI-enhanced analysis for filing review
Note: We do not rely on third-party ethical ratings services, conducting all screening through internal analysis.
6.2 Process
- Preemptive Screening: Exclusions occur before purchase consideration
- Continuous Monitoring: Living framework refined through ongoing research
- Corporate Actions: Evaluated the same way as any other investment decision
- Documentation: Portfolio management spreadsheet tracks exclusion decisions and rationale
7. Risk Management Integration
7.1 Preventable Harm as Investment Risk
Companies engaged in activities causing preventable harm face material risks including:
- Regulatory sanctions and legal liabilities
- Reputational damage affecting brand value
- Stranded assets from changing regulations or social norms
- Operational disruptions from stakeholder opposition
- Reduced access to capital markets
7.2 Portfolio Risk Mitigation
Systematic exclusion of companies engaged in harmful activities serves to:
- Reduce exposure to contingent liabilities
- Avoid assets at risk of becoming stranded
- Minimize reputational risk to investors
- Align portfolios with long-term sustainability trends
8. Client Relations & Communications
8.1 Customization Parameters
- Clients may adopt stricter exclusion parameters than firm policy
- Clients cannot weaken or reverse firm-wide exclusions
- Individual position exclusions permitted at client request
8.2 Transparency
- Clients are asked not to share details on our engagements with companies to maximize the likelihood of positive outcomes.
- Full explanation of exclusion rationale available to clients upon request.
- Open-source methodology available on GitHub (exclusion policy, data structure, policies and procedures manual)
9. Key Performance Indicator
Primary Metric: Do portfolio companies align with goodness and avoid preventable harm to living things?
This singular focus reflects our conviction that long-term value creation requires integration between business operations and societal wellbeing.
10. Revision History
| Date | Version | Summary of Changes | Approved By |
|---|---|---|---|
| 8/10/2021 | 1.0 | Initial policy adoption | SO |
| 9/28/2021 | 1.1 | Corporate lobbying provisions added | SO |
| 11/26/2023 | 1.2 | Language harmonization | SO |
| 3/11/2024 | 1.3 | Organizational rebranding | SO |
| 5/11/2024 | 1.4 | Creative Commons licensing | SO |
| 8/20/2025 | 2.0 | Comprehensive update | SO |
| 8/22/2025 | 2.1 | Fiduciary framework integration | SO |
| 8/23/2025 | 2.2 | Discretionary management clarification | SO |
| 8/29/2025 | 2.3 | Final implementation with clarifications | SO |
| 8/29/2025 | 3.0 | Consolidated final version | SO |
11. Licensing
This policy is licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0). Organizations may adapt this framework with appropriate attribution to Ethical Capital Investment Collaborative.
Appendix A: Implications of our public pledges
As signatories to the Apartheid-Free Pledge, we commit to:
- Exclude companies complicit in systematic oppression
- Divest from entities operating in occupied territories in ways that entrench oppression
- Support economic pressure for justice and human rights
- Regular review of operations in contested regions
Companies are assessed against apartheid criteria including:
- Operating in occupied territories
- Providing services/infrastructure that entrench occupation
- Supplying military/security equipment used in oppression
- Benefiting from systematic discrimination
As signatories to the petchem investor statement, we formalize the expectation that companies:
- Transparently disclose, define strategies and set clear targets to transition to production of safe, environmentally sound and sustainable plastic
- Address polymers and chemicals of concern in their products
- Build suitable infrastructure for production of sustainable materials
- Establish dedicated governance
- Publicly support an ambitious international legally binding instrument for ending plastic pollution
Appendix B: Core Harm Assessment Questions
When evaluating a company, we ask:
- Does this company’s existence cause net harm to living beings?
- Is the harm preventable through different business practices?
- Is the company taking meaningful action to eliminate harm?
- Would excluding this company reduce harm in the world?
- Are there alternatives that achieve similar ends without harm?