ESG and Sustainable Investing Glossary

The environmental, social and governance (ESG) investing landscape is described using a variety of specialised terms. Shoreline has developed an ESG and Sustainable Investing Glossary which defines 118 of these terms and groups them into six categories that ESG and sustainable investors should be familiar with.

Environmental

1. Cc = Climate Change: Climate change is a change in the pattern of weather, and related changes in oceans, land surfaces and ice sheets, occurring over time scales of decades or longer.
2. Ce = Clean Energy: Energy sources that are not derived from fossil fuels (such as coal, oil and natural gas). These include biomass, geothermal, hydroelectric, solar and wind.
3. Cf = Carbon Footprint: The measurement of an entity’s total greenhouse gas emissions. It is measured in equivalent tons of carbon dioxide are emitted per year and takes into consideration all other noxious greenhouse gases like methane or nitrous oxide, for example.
4. Cl = Climate Funds: Climate funds are investment portfolios that seek to buy the equities or bonds of companies that are aligned with the goals of the Paris Agreement.
5. Cn = Carbon Neutral: Being Carbon Neutral means to offset the sum of greenhouse gas (CO2 equivalent) produced by natural carbon sinks and/or carbon credits. Carbon Trust Certification certifies organisations and products to PAS 2060—the internationally recognised certification standard for the demonstration of carbon neutrality.
6. Cp = Carbon Pricing: The assignment of a value to greenhouse gas emissions, particularly carbon dioxide emissions, as a mechanism to account for and quantify such emissions and the ultimate responsibility for the environmental cost.
7. Cr = Climate Risk: The risk relating to the impact on natural and human systems from the adverse effects of climate change.
8. Cs = Carbon Sinks: Natural environments with the ability to absorb more carbon dioxide from the atmosphere than they release.
9. Ct = Clean Technology: Cleantech, is any process, product, or service that reduces negative environmental impacts through significant energy efficiency improvements, the sustainable use of resources, or environmental protection activities.
10. Cu = Carbon Trust Certification: The Carbon Trust is an independent, global certification body for carbon footprints and certifies organisations and products to PAS 2060.
11. Cy = Circular Economy: The circular economy is an economic model that places greater reliance on reusing existing materials in a series of loops. It aims to replace the current linear economy, which is based on the take-make-waste system of extracting minerals, turning them into manufactured products and then disposing of them at the end of their useful life.
12. De = Decarbonisation: Decarbonisation is the reduction in the carbon intensity of worldwide energy use. In line with this development, investment portfolios can also be decarbonised.
13. Ef = Environmental Factors: The “E” in ESG: one of the three key factors to watch in Sustainable Investing, together with social and governance considerations. They incorporate factors relating to environmental performance used in the investment evaluation process. These include data points encompassing areas such as emissions, water use, energy consumption, waste generation, etc.
14. Ff = Fossil Fuels: An all-encompassing term used to describe coal, oil, petroleum, natural gas and other hydrocarbons used to generate energy.
15. Gb = Green Bonds: Bonds whose proceeds are used to fund new or existing environmental or climate projects.
16. Gg = Greenhouse Gas Emissions: Greenhouse Gas Emissions are the levels of carbon dioxide, carbon monoxide, sulphur dioxide and other gaseous byproducts of the industrial processes of a company in its business operations.
17. Gp = Grid Parity: Grid parity occurs when an alternative energy source can generate power at a levelised cost of electricity (LCOE) that is less than or equal to the price of purchasing power from the electricity grid.
18. Gw = Global Warming: Global Warming is a gradual and increasingly irreversible rise in average world temperatures at sea level, caused mostly by human activities since the industrial revolution of the 18th century.
19. Lc = Low Carbon Economy: A Low Carbon Economy, low-fossil-fuel economy, or decarbonised economy is an economy based on low-carbon power sources that therefore has a minimal output of greenhouse gas emissions into the atmosphere, specifically carbon dioxide.
20. Nz = Net Zero Carbon: Achieved by balancing a measured amount of carbon released with an equivalent amount sequestered or offset. Typically, the term is used in relation to buildings. A net-zero carbon building is highly energy efficient and fully powered from on-site and/or off-site renewable energy sources.
21. Re = Renewable Energy: Energy derived from renewable sources such as wind, solar, hydro and geothermal.
22. Rs = Resource Sustainability: Resource sustainability refers to the long-term availability of a raw material that is either renewable (it can naturally replenish itself) or non-renewable (it will eventually run out). It is an important metric for sustainable investors in understanding how quickly humans are using the Earth’s dwindling resources, how much can be replaced or recycled, and how long other materials have left before they are exhausted.
23. S6 = Science-based Targets: Science-based targets are a set of goals developed by a business to provide it with a clear route to reduce greenhouse gas emissions. An emissions reduction target is defined as “science-based” if it is developed in line with the scale of reductions required to keep global warming below 2C from pre-industrial levels.
24. Sa = Stranded Assets: An asset that loses value or turns into a liability before the end of its expected economic life. In the context of fossil fuels, stranded assets are those fuel reserves that will not be able to be extracted if action is taken to address climate change. As a result, investments with significant exposure to stranded assets may be negatively affected.
25. St = Sustainable Technology: Sustainable Technology is that which can contribute to a more resource-efficient future and is mainly found in four areas: renewable energy, digitalisation, decarbonisation, and the circular economy.
26. Tc = Thermal Coal Exposure: Thermal coal exposure measures the proportion of a company’s operations that is linked to the mining, processing or sale of this common but increasingly environmentally unacceptable fossil fuel.
27. Tr = Transition Risk: The financial risks that could result from significant policy, legal, technology and market changes as we transition to a lower-carbon global economy and climate resilient future.
28. Ws = Water Sustainability: Water sustainability refers to the availability of fresh water for human consumption and use in agriculture and industrial processes.
29. Zw = Zero Waste: A set of principles that focus on preventing the generation of waste by redesigning products, rethinking how products are used, and reusing products with the goal that no waste is sent to landfills.

Social

30. C3 = Corporate Social Responsibility (CSR): An approach to business which takes into account economic, social, environmental, and ethical impacts for a variety of reasons, including mitigating risk, decreasing costs, and improving brand image and competitiveness.
31. Fs = Food Sustainability: Food sustainability aims to promote more sustainable food production and address problematic issues such as overfishing, deforestation and the loss of biodiversity.
32. Ge = Gender Equality: Gender Equality is the concept of providing the same opportunities for men and women in the workplace, and has become a major sustainability theme.
33. Hn = Health and Nutrition: Health and nutrition is a theme that aims to improve the nutritional value of the food and beverages that we consume, led by a global campaign to reduce their sugar content.
34. Hr = Human Rights: Moral principles or norms that describe standards of human behaviour and are protected as natural and legal rights in municipal and international law.
35. Ms = Modern Slavery: Modern Slavery is the exploitation of people who are coerced into an activity by someone who “controls” them, often with violence. It can take many forms including forced or bonded labour, early or forced marriage or human and organ trafficking.
36. S4 = Social Enterprises: Companies that are both financially sustainable and bring about positive social and/or environmental impact.
37. S7 = Sin Stocks: Shares in companies engaged in activities that are considered to be morally or ethically unacceptable.
38. Se = Social Equity: A broad term used to encompass issues related to the provision of equal opportunity and access to traditionally disadvantaged populations including women, minorities, LGBTQ+, veterans, and individuals with disabilities, as well as regionally disadvantaged populations.
39. Sf = Social Factors: Factors related to social performance used in the investment evaluation process. These include data points encompassing areas such as diversity, human rights, labour relations, etc.
40. Sl = Social Impact Bonds: Bonds designed to improve the social outcomes of publicly funded services.
41. Ss = Social Sustainability: Social Sustainability – the “S” in ESG – relates to the rights, well-being and interests of people and communities. These issues include human rights, labour standards in the supply chain, child and forced labour, workplace health and safety, and relations with local communities.

Governance

42. Ao = Active Ownership: Active ownership is the use of the rights and position of ownership to influence the activities or behaviour of investee companies. Active ownership can be applied differently in each asset class. For listed equities, it includes engagement and voting activities.
43. Bq = Board Quality: Boards Quality plays a critical role in crisis management, oversight, and risk management – setting the tone at the top before incidents occur.
44. C4 = Corporate Controversies: Corporate controversies occur when a company becomes embroiled in a scandal that is directly or indirectly of its own making.
45. Cg = Corporate Governance: The set of rules, practices and processes by which a company is managed (governed) and management is supervised.
46. Co = Corruption: Dishonest activities including bribery and fraud that can have a devastating effect on a company’s fortunes.
47. Di = Divestment: Selling or disposing of shares or other assets in full or part in certain assets based on corporate behaviour.
48. Dv = Diversity and Inclusion: Diversity refers to the differences people may have in terms of their gender, age, race, sexual orientation, disability, religion, beliefs or other characteristics. Inclusion is about welcoming and celebrating diversity, calling out inequality and ensuring people feeling valued and respected.
49. Em = Employee Relations: The policies and processes governing the relationship between an employer and its employers. Companies have a responsibility to treat employees fairly, with dignity and respect.
50. Et = Engagement: The practice of shareholders entering into dialogue with management of companies to change or influence the way in which that company is run.
51. Ev = Echo Voting: A system through which the proxies of a passive investment strategy are voted at the direction of an actively managed investment strategy.
52. Fd = Fiduciary Duty: A legal obligation of one party to act in the best interest of another. The obligated party—the fiduciary—is typically entrusted with the care of money or property.
53. G2 = Greenwashing: The practice of seeking to gain an unfair competitive advantage by overstating or overemphasising the extent to which an investment or business’s practices are “green” or “sustainable”.
54. Gf = Governance Factors: Factors related to the governance structure of an investment opportunity. These include data points such as executive compensation, board composition, shareholder access, etc.
55. Ov = Over-boarding: When a board member takes on too many board roles such that his/her ability to appropriately distribute their time, and effectively discharge their responsibilities to each board, is questioned.
56. Pv = Proxy Voting: The process by which shareholders exercise their right to vote shares in companies held within their investment portfolios without attending company annual meetings (voting by proxy, or mail-in ballot). This can involve shareholders with voting rights delegating their votes to others who vote on their behalf.
57. Sb = Share Blocking: When restrictions are placed on the trading of shares which are to be voted on prior to an annual general meeting.
58. Sh = Shareholder Engagement: The process of engaging with an entity as a shareholder to begin or continue a dialogue related to issues of concern to investors including ESG practices, disclosure, and other corporate behaviours.
59. Sw = Stewardship Code: The stewardship code is a code requiring institutional investors to be transparent about their investment processes, engage with investee companies and vote at shareholders’ meetings.
60. Sy = Sustainable Supply Chains: Sustainable Supply Chains focuses on the production of the ingredients or components that go into the product, rather than the end-product itself and the labour standards involved in the supply chain.
61. Vo = Voting: Voting at Annual General Meetings of shareholders (AGMs), aiming to influence a company’s governance or operations.
62. Vr = Voting Rights: Equity investors typically have the right to vote at annual and extraordinary general meetings (AGMs and EGMs) on issues such as an individual director’s appointment, remuneration or mergers and acquisitions (depending on a country’s legal framework).

Investment Approach

63. Ai = Activist Investing: An approach to equity investing that aims to bring about changes in corporate behaviour with a view to enhancing shareholder returns.
64. Bc = Best-in-Class: Focusing investments in companies that have historically performed better than their peers within a particular industry or sector based on analysis of environmental, social, and corporate governance (ESG) issues.
65. E2 = ESG Integration: An approach that explicitly considers ESG factors in research and integrates their economic impact into the fundamental investment analysis, which informs the final investment decision.
66. E3 = Environmental, Social and Governance (ESG): ESG is an acronym that stands for Environmental, Social and Governance. It is an umbrella term for the components of a responsible approach to investing. But as a term it is applied to a whole range of investment approaches and outcomes.
67. Eg = ESG Fund Ratings: ESG Fund Ratings creates a forward-looking analysis of mutual funds and ETFs on their capabilities to mitigate long term risks and create alpha opportunities arising from environmental, social and governance (ESG) issues.
68. Ei = ESG Indices: These indices represent the performance of the most common ESG investment approaches by including, re-weighting or excluding companies by leveraging ESG criteria.
69. El = Ethical Investing: An investment approach that is guided by the investor’s moral principles and values, including religious beliefs.
70. En = ESG Funds: ESG funds are portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process.
71. Er = ESG Ratings: ESG Ratings offer a means for investors to rank companies against ESG criteria, to value performance on the sustainability scale.
72. Es = Exclusionary Screening: The practice of excluding certain companies or sectors from an investment portfolio, which investors may choose to do for a variety of reasons, such as ethical concerns, or to meet specific investment criteria.
73. Ex = Extra-financial Factors: Elements of a company’s behaviour that may not be immediately apparent solely from an analysis of its financial data. Often ESG themes are associated with extra-financial factors.
74. Gl = Gender Lens Investing: The allocation of capital to investment strategies that directly benefit women and girls by enhancing their access to opportunities, contributing to their physical wellbeing, enhancing their safety and security, and/or promoting a better life.
75. Ii = Impact Investing: The allocation of capital to strategies seeking intentional and measurable positive economic, social, and/or environmental outcomes in addition to a market rate return.
76. Ir = Integrated Reporting: Communicating both sustainability and financial targets and results in one report, linking them to each other.
77. Ma = Materiality: In Responsible Investing, materiality helps identify the key ESG information to integrate into an investment.
78. Ns = Negative Screening: An approach that narrows the investment universe for a variety of reasons, such as ethical concerns, or to meet specific investment criteria.
79. Pb = Place Based Investing: The allocation of capital to investment strategies that directly benefit a defined geographic region.
80. Ps = Positive Screening: Investing in companies that show leadership in social and environmental issues, such as employee policies, environmental protection or human rights.
81. Ri = Responsible Investing: A term used to describe an approach to ESG investing that focuses largely on ESG integrated criteria. The term is often used to describe any strategy encompassing ESG factors.
82. S2 = Sustainability Risks: Risks to the value of an asset impacted by environmental, social or governance issues. For example, the price of an equity declining due to fines levelled against the issuer for environmental damages.
83. S3 = Socially Responsible Investing (SRI): An investment strategy that aims to take into consideration a positive social outcome alongside a financial return.
84. Sc = Screening: An investment approach used to filter companies based on pre-defined financial or ESG criteria before investment.
85. Si = Sustainable Investing: Often used interchangeably with responsible investing, a sustainable investment strategy takes a long-term view, aiming to generate returns from investments which simultaneously contribute to a positive environmental or societal outcome.
86. Sn = Sustainability: The characteristics that enable a defined entity, such as a company, industry or market, to continue indefinitely.
87. Ti = Thematic Investing: A top-down investment approach that focuses on investments in one or more specific social or environmental categories.
88. Vi = Values-based Investing: Investing that prioritises an investor’s ethical objectives, rather than simply maximising financial returns.

Policies & Standards

89. As = Australian Sustainable Finance Initiative (ASFI): The Australian Sustainable Finance Initiative (ASFI) is an industry collaboration formed to help shape an Australian economy that prioritises human well-being, social equity and environmental protection, while underpinning financial system resilience and stability.
90. C2 = Conference of the Parties (COP) and COP21: A UN conference on climate change that is held annually. The 21st conference (COP21) was held in Paris in December 2015. The conference negotiated the Paris Agreement, a landmark global treaty on the reduction of climate change. The treaty lays out a framework to limit global warming to less than 2°C compared to pre-industrial levels.
91. C5 = Coalition for Environmentally Responsible Economies (CERES): Ceres is a non-profit sustainability advocacy organisation founded in 1989 and based in Boston, Massachusetts. With the mission of “mobilising investor and business leadership to build a thriving, sustainable global economy”, Ceres brings together different stakeholders to accelerate the adoption of sustainable investing practices.
92. Cb = Climate Disclosure Standards Board (CDSB): A voluntary reporting framework for disclosing material environmental information in mainstream financial reports and natural capital and climate change-related information.
93. Cd = Carbon Disclosure Project (CDP): CDP is an international non-profit organisation based in the UK, Germany and the USA that helps companies and cities disclose their environmental impact. It aims to make environmental reporting and risk management a business norm, driving disclosure, insight, and action towards a sustainable economy.
94. Cv = Climate Value-at-Risk: Climate Value-at-Risk (Climate VaR) is designed to provide a forward-looking and return-based valuation assessment to measure climate related risks and opportunities in an investment portfolio.
95. Db = Double Bottom Line: Double Bottom Line seeks to extend the conventional bottom line, that measures fiscal performance—financial profit or loss—by adding a second bottom line to measure their performance in terms of positive social impact.
96. E4 = European Sustainable Investment Forum (Eurosif): Eurosif is the leading pan-European SRI membership organisation whose mission is to promote sustainability through European financial markets.
97. Ee = Edison Electric Institute (EEI): EEI has developed an environmental, social, governance, and sustainability (ESG/sustainability) reporting template, with the goal of helping electric and gas companies provide the financial sector with more uniform and consistent ESG/sustainability data and information.
98. Gi = Global Sustainable Investment Alliance (GSIA): It is a collaboration of membership-based sustainable investment organisations around the world. GSIA’s mission is to deepen and expand the practice of sustainable, responsible and impact investing through intentional international collaboration.
99. Gr = Global Reporting Initiative (GRI): A voluntary global reporting framework used by thousands of companies and governments worldwide. It is a modular reporting framework that covers economic, environmental, and social impacts addressing all stakeholder groups. Disclosures are typically made in sustainability reports.
100. Gs = Global Real Estate Sustainability Benchmark (GRESB): GRESB helps real estate investors assess the sustainability performance of commercial real estate portfolios around the globe.
101. Md = Millennium Development Goals (MDG): MDGs were eight goals to improve human society launched by the United Nations in 2000. They were mainly aimed at helping the world’s poorest people, led by the starvation that was seen in many developing countries. They were succeeded by the Sustainable Developments Goals (SDGs) launched in 2015.
102. Pa = Paris Agreement: An international agreement signed in December 2015 with the objective of combatting climate change and accelerating the investments needed for a sustainable low carbon future.
103. Pr = Principles for Responsible Investing (PRI): The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice. The Principles were developed by investors, for investors. In implementing them, signatories contribute to developing a more sustainable global financial system.
104. Ra = Responsible Investment Association Australasia (RIAA): RIAA is the largest network of people and organisations engaged in responsible, ethical and impact investing across Australia and New Zealand. Its membership includes super funds, fund managers, banks, consultants, researchers, brokers, impact investors, property managers, trusts, foundations, faith-based groups, financial advisers and individuals.
105. S5 = SASB: SASB Standards enable businesses around the world to identify, manage and communicate financially-material sustainability information to their investors.
106. Sd = Sustainable Development Goals (SDG): The Sustainable Development Goals are a collection of 17 global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs, set in 2015 by the United Nations General Assembly, have to be achieved by the year 2030.
107. Sg = SDG Alignment: Aligning business strategies and operations with the 17 Sustainable Development Goals created by the United Nations.
108. Sr = Sustainability Reporting: Sustainability reporting is the act of disclosing the environmental, social and governance (ESG) policies of an organisation, and the impact these policies have on both internal performance and on wider society.
109. T3 = Triple Bottom Line: This is an accounting framework which aims to measure the financial, social, and environmental performance of a company over time. The TBL consists of three elements: profit, people, and the planet.
110. Tf = Task Force on Climate-related Financial Disclosures (TCFD): TCFD is a market-driven initiative, set up to develop a set of recommendations for voluntary and consistent climate-related financial risk disclosures in mainstream filings. Companies will therefore be better guided in providing information to investors, lenders, insurers, and other stakeholders.
111. Ug = UN Global Compact: The United Nations Global Compact is an initiative that encourages businesses to adopt sustainable and socially responsible policies, and to report on their implementation.
112. Uk = UK Stewardship Code: A code first published by the Financial Reporting Council in 2010 to enhance the quality of engagement between asset managers and companies in the UK. Its principal aim is to make asset managers more active and engaged in corporate governance matters in the interests of their beneficiaries.

Specialist Data Provider

113. Ar = Arabesque S-Ray: Arabesque S-Ray is a global data provider that focuses on advisory and data solutions by combining big data and environmental, social and governance (ESG) metrics to assess the performance and sustainability of companies worldwide.
114. Ie = ISS ESG: ISS ESG is the responsible investment arm of Institutional Shareholder Services Inc., a leading global provider of environmental, social, and governance solutions for asset owners, asset managers, hedge funds, and asset servicing providers.
115. Sm = SAM: The SAM Corporate Sustainability Assessment (CSA), established by RobecoSAM, is now issued by S&P Global. RobecoSAM, an asset manager focused entirely on sustainable investing, had established the CSA in 1999.
116. Su = Sustainalytics: Sustainalytics is a leading independent global provider of ESG and corporate governance research and ratings to investors.
117. Tl = Truvalue Labs: TruValue Labs offer advanced analytics to create usable and real-time sustainability metrics for better investment decisions.
118. Ve = Vigeo Eiris: Vigeo Eiris is an independent international provider of environmental, social and governance (ESG) research and services for investors and public & private organisations.

Source: Schroders, Invesco, Nuveen, Robeco, AllianceBernstein