Best-in-class

An ESG approach that selects the companies rated highest on ESG within each sector rather than excluding sectors, so sector weights stay close to the benchmark.

Where you will meet it

Best-in-class appears in 3 learning outcomes on the CFA syllabus. A few of them:

• Set out ways to build ESG considerations into planning and constructing a portfolio
  CFA Level I · Portfolio Management

  “Positive or best-in-class screening selects the highest-rated issuers within each sector, keeping sector weights near the benchmark.”

• Explain how environmental and social considerations feed into investment analysis
  CFA Level I · Corporate Issuers

  “Integration approaches range from negative screening, which excludes sectors, through best-in-class selection, to full integration, where the factors are modelled in cash flows and discount rates like any other risk.”

• Explain how ESG factors enter the management of long-horizon institutional portfolios
  CFA Level III · Portfolio Management Pathway

  “ESG can be applied through exclusionary screens, integration of ESG factors into security analysis, best-in-class selection, thematic or impact investing, and active ownership through voting and engagement, including assessing external managers' ESG practices during selection and monitoring.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with B · Glossary