Explanation

Negative screening is the correct answer because:

1. Definition of Negative Screening: Negative screening involves excluding specific sectors, companies, or practices from a portfolio based on ESG criteria. This approach avoids investments in industries or companies that are considered harmful or unethical.

2. Divestment from Fossil Fuels: Divesting from fossil fuels specifically means excluding companies involved in the extraction, production, or distribution of fossil fuels (coal, oil, natural gas) from the investment universe. This is a classic example of negative screening where an investor chooses not to invest in certain sectors due to environmental concerns.

3. Comparison with Other Options:

   • ESG Integration (Option A): This involves systematically including ESG factors in financial analysis and investment decisions, but doesn't necessarily mean excluding entire sectors. It's about incorporating ESG risks and opportunities into valuation models.
   • Impact Investing (Option B): This focuses on generating measurable positive social or environmental impact alongside financial returns, often through active investment in solutions-oriented companies rather than simply excluding harmful ones.

4. Key Distinction: Negative screening is about what you don't invest in (exclusionary approach), while impact investing is about what you do invest in (inclusionary approach). ESG integration is about how you analyze investments.

Conclusion: Divesting from fossil fuels aligns perfectly with negative screening as it involves excluding an entire sector from the portfolio based on environmental concerns.