Best-in-class investment:

Question

BlackTom AI · Accepted Answer

Best-in-class investment: a concept in sustainable investing where we identify top-performing companies within each sector according to a defined sustainability ranking. 
Option 1: 'uses negative screening to exclude companies'—this describes exclusionary screening, where certain firms are removed based on criteria (e.g., industries or practices), but best-in-class is not about excluding broadly; it seeks leaders within peers, so this is not a correct depiction. 
Option 2: 'refers to selecting companies that fall under a sustainability-related theme'—this sounds like thematic investing, focusing on a particular issue or trend, rather than comparing and picking the highest-rated performers within each sector. Therefore it does not match the best-in-class approach. 
Option 3: 'involves selecting only the companies that overcome a defined ranking hurdle'—this aligns with the core idea of best-in-class: you evaluate companies on a sustainability score across peers and choose those that meet or exceed a predetermined standard or threshold, effectively selecting leaders that clear a ranking hurdle. This option captures the competitive, within-sector selection mechanism that defines best-in-class. 
In summary, the reasoning hinges on distinguishing screening versus thematic focus versus leader selection against a benchmark, with option 3 correctly describing the leader-filtering process typical of best-in-class strategies.

FINA3401.13791.202610 Practice Ch. 1 Quiz

Best-in-class investment:

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Best-in-class investment:

Sustainable Investing (SI) focuses solely on financial returns without regard for environmental impact.

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