The Best-in-Class approach selects issuers with the best ESG practices in each sector, generally excluding the bottom 20% to 30% of issuers by sector. This method maintains sector diversification comparable to conventional investing, but may include controversial sectors such as fossil fuels if a company in that sector is an ESG leader in its field.

The SRI V3 label, effective since March 2024, imposes strict sector exclusions for companies deriving more than 5% of revenue from coal or unconventional hydrocarbons. It also requires divestment after three years of engagement without improvement in ESG practices.

The essential difference lies in the sector representativeness constraint. Best-in-Class respects the sector weighting of the benchmark index, while Best-in-Universe selects the best ESG practices without regard to sectors, which can lead to overrepresentation of certain naturally better-rated sectors and the complete exclusion of others.

Best-in-Progress focuses on the improvement of ESG practices over time rather than their current level. This approach allows investment in companies whose current ESG rating would be insufficient under other methods but that demonstrate an improvement trajectory. Some managers define a threshold score for Best-in-Class and a lower range for Best-in-Progress to capture this potential.

Shareholder engagement indeed includes dialogue with management, exercising voting rights at general meetings on specific resolutions such as Say on Climate and Say on Pay (executive compensation), as well as collective actions through investor coalitions. The SRI V3 label requires a detailed chapter on these practices with a maximum three-year deadline to achieve improvements.

Impact investing is a demanding approach that aims to generate positive and measurable social and environmental impact, in addition to a financial return. It rests on three pillars: intentionality (explicit desire to contribute to a specific objective), additionality (financial or non-financial contribution to maximize impact), and measurability (defining objectives and tracking results). Unlike conventional SRI, impact is an objective in itself, not a secondary criterion.

The GIIN defines impact investing as investments made with the intention of generating a positive, measurable social and environmental impact alongside a financial return. This definition highlights the intentionality, additionality, and measurability of impact.

ESG integration does not involve exclusions. It consists of systematically and traceably taking ESG criteria into account throughout the investment process, by enhancing or penalizing securities based on their ESG rating within traditional financial analysis. AMF doctrine DOC-2020-03 requires that the commitment to ESG consideration be significant in order to communicate on this approach.

This question distinguishes approaches based on positive selection (best practices) from those using negative screening (exclusions). Best-in-Class and Best-in-Universe are positive; exclusions are negative. Integration and engagement do not fall directly into this category but are often associated with positive selection.