In this workout, we've been asked to determine which FTSE 100 companies in the list below we can invest in depending on our investment strategy. Now, the first of these strategies is ethical screening and we've been asked to exclude tobacco companies and weapons manufacturers. Now, these are relatively straightforward activities to exclude as we can simply look at the sectors which each company is based in and we've been given those in column C. Therefore, any companies based in the tobacco sector or the aerospace and defense sector are companies that we're gonna need to exclude. However, if these criteria were more subtle, for example, we would want to exclude only companies which were involved in the manufacturer of offensive weapons, rather than defensive weapons, we would need extra information. Now, the second investment strategy is best in class screening to include only companies with an ESG score above the sector average. And fortunately, you can see in column F that we've been given some ESG scores for each company, and those scores are out of 100 and they're based on various ESG metrics. Now, you can also see this in column G, we have the average ESG score for each sector reflecting the average score for all UK companies, not just FTSE 100 ones. And we can therefore use these scores to determine which companies are investible, looking at the difference between the company score and the average score. So let's work out which companies we can invest in, starting with our ethical screening strategy. Now, looking at the sectors, right at the top, you can see immediately, we have two aerospace and defense companies. That's BAE Systems and Rolls Royce. And both of those companies have large defense operations which produce weapons. And therefore, we're gonna conclude that these are not investible to us.

So those are not investible. But what about the other companies in the list? Well, looking down the sector list, you can see the next one's commercial banking, then oil and gas, metals and mining, then pharmaceuticals and beverages. Now, all of those sectors, they're absolutely fine to us based on our criteria. So yes, we can invest in those. But then right at the bottom, you can see we have two tobacco companies, British American Tobacco and Imperial Brands. And no, we can't invest in either of those because we're not gonna invest in tobacco companies. Now let's have a look at our next investment strategy, which is best in class screening. Now, I'm gonna use an IF function to calculate whether these companies are investible to us or not. So I'm gonna say if the company's ESG score is greater than the average sector score, then yes, that company is investible. Otherwise no.

And this automatically tells us whether the ESG score is greater than the average score. And if we copy that down for all the companies, we can then have a look and see which companies we can invest in. Now, immediately at the top of this list, you can see that we've got completely the opposite for our two aerospace and defense companies. Both of those companies have scores which are higher than the sector average and we can invest in both of those companies. Whereas if we look at metals and mining, this time, actually two of the three companies are no longer investible to us because two of those companies have scores below the sector average. So presumably there's some other companies outside the FTSE 100 which perform better on these ESG criteria. And then finally, at the bottom, for the tobacco companies, one of those two tobacco companies is actually investible to us this time and so we can include those in our list this time. So this really highlights the difference in approach between the two strategies. With the best in class approach, all sectors are potentially investible, whereas with ethical screening, it often excludes entire sectors. It's also worth noting that purely using these strategies alone, there is no consideration of the company valuation relative to its market price. It's simply about meeting the criteria set.