Step 1: Understanding Penman’s Equation.
Penman’s evapotranspiration equation incorporates both energy balance and mass transfer approaches. It uses energy balance to calculate the energy available for evaporation and the mass transfer approach to calculate the transfer of water vapor from the surface.
Step 2: Conclusion.
Thus, Penman’s equation is based on both energy balance and mass transfer approaches, making option (4) the correct answer.
Final Answer:
\[
\boxed{4. \, \text{Energy balance and mass transfer approach}}
\]