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Distinguish the selection questions
CFA Institute describes best-in-class selection using a defined ESG ranking hurdle within a sector or industry. That does not require every issuer to remain eligible or guarantee that final sector weights match a benchmark. A portfolio’s weighting rules are a separate construction decision.
Apply two explicit rules to the same issuers
Four fictional issuers belong to two sectors. The negative rule excludes any issuer with prohibited-activity exposure. The best-in-class rule retains only the highest score in each sector. These are exercise definitions, not a universal specification of either strategy.
| Issuer | Sector | Score | Prohibited exposure | Negative rule | Top-one-per-sector rule |
|---|---|---|---|---|---|
| A | Utilities | 80 | Yes | Exclude | Retain |
| B | Utilities | 60 | No | Retain | Exclude |
| C | Industrials | 75 | No | Retain | Retain |
| D | Industrials | 55 | No | Retain | Exclude |
State the order if both rules apply
If the prohibited-exposure screen runs first, Utilities contains only B before the within-sector selection. If the ranking rule runs first and the exclusion then removes A, no Utilities issuer remains unless a replacement rule is specified. The combined process therefore needs an explicit order and treatment of empty peer groups.
Do not infer portfolio weights from eligibility alone
A retained issuer might receive an equal, capitalization-based or optimized weight, subject to other constraints. Two issuers being retained does not automatically assign 50% to each. Eligibility, ranking and weighting should be read as separate parts of the mandate.