No. Exposure to a small listed universe does not prevent responsible investment.
Negative screening and exclusion are only a sub-set of the available tools for responsible investment where divestment is a related and powerful tool to send a strong signal about a particular company or sector.
However, there are a variety of other tools you can use. Active ownership is one of the most powerful tools. It means actively communicating with companies about your expectations on key issues and collaborating with other investors to influence change.
Importantly, the Acting in Concert regulations do not prevent collaborative engagement on responsible investment strategies.
Additionally, research conducted on behalf of Credit Suisse, indicates that any performance deviation from the benchmark associated with traditional exclusions of so-called “sin stocks”, such as tobacco, alcohol and gambling, which historically, have performed well, can be explained by factor returns. Thus investors can compensate for their exclusion by choosing “virtuous” stocks with the same factor exposures. In other words, for pension funds that wish to use negative screening to express their investment beliefs, it can still be an economically viable option if appropriately corrected for.