ESG Glossary
ESG Terms
Benchmarking
A benchmark is a way to measure your ESG performance and understand where your company aligns with your peers in comparison to other companies in the same industry or region. Alignment with ESG frameworks, standards and measurement methodologies is essential for accurate benchmarking.
Carbon Footprint
A carbon footprint is an estimate of the carbon dioxide produced to support a lifestyle or organization. Essentially, it measures climate impact by the amount of carbon dioxide produced. Factors that contribute to carbon footprint include transportation methods and overall energy use.
Carbon Offsets
Carbon offsets are used to offset the amount of carbon that an individual or institution emits into the atmosphere. Companies and institutions mostly use carbon offsets to reduce their carbon footprint without reducing pollution. Most offsets contain renewable energy.
CDP - Carbon Disclosure Project
Founded in 2000, CDP is a non-profit charity that operates a global disclosure system for investors, businesses, cities, states and regions to manage their environmental impact. CDP provides reports and resources in his three areas of focus:
Climate change, water, forests. Organizations fill out questionnaires and using this information, CDP assigns each a rating (A+, B, C, etc.). Graded surveys can be exported and shared with key stakeholders.
With the world’s most comprehensive collection of self-reported data, the world’s economy looks to CDP as the gold standard of environmental reporting.
Climate
Climate refers to the average weather and patterns measured over a defined period of time such as number of years, decades, or centuries.
Climate Risk
Climate risks that can affect the financial performance of investments can be broadly categorized in two ways - Physical risks and Transition risks. Physical risks may have financial implications for organisations, such as direct damage to assets and indirect impacts
from supply chain disruption. Regardless, the transition to a low-carbon economy involves a wide range of political, legal, technological and market changes to address mitigation and adaptation needs related to climate change.
CMAP - Climate Management and Accounting platform
CMAP is a software platform that simplifies the carbon calculation process. These platforms use codified guidelines such as GHGP and PCAF to calculate carbon emissions and provide data-driven solutions for your organization. CMAP enables companies to track emissions, set carbon reduction targets, measure progress, and compare to competitors. This means that organizations can measure their emissions reduction progress over time. CMAP is just one of a growing number of ESG software tools to help collect and report ESG data.
CSR - Corporate Social Responsibility
CSR is a voluntary way for companies to commit to ethical business practices and improve environmental, economic and social sustainability. ESG is how companies measure their own CSR.
Decarbonization
Decarbonization is the process of reducing or eliminating carbon emissions. In this case, we refer to decarbonization when we talk about efforts to reduce carbon emissions on a global scale. Complete decarbonization requires eliminating carbon production and removing the carbon that is currently in the atmosphere.
Emission Factors
GHG emissions are released into the atmosphere by economic activities or processes that emit hydrocarbons. To measure this, carbon dioxide equivalents (CO2e) are given for activities related to greenhouse gas emissions. This is called the emission factor.
ESG - Environmental, Social, and Governance
ESG are three overarching pillars by which an organization's impact on the environment and society can be measured. Initially used as a tool for investors to understand the long-term financial performance of companies, ESG is now central to business strategy. It assesses a company's ability to address the issues related with the climate crisis, environmental degradation, social injustice and inequality.
Fossil Fuel
Fossil fuels are the general term for organic matter (made from decaying plants and animals) that has been subjected to heat and pressure from the earth's crust over hundreds of millions of years and turned into oil, coal, or natural gas.
Geothermal Energy
Geothermal energy is electricity generated using hot water and steam in the earth's interior.
GHGP - Greenhouse Gas Protocol
Created in 1997, the GHGP was the first carbon accounting standard. Provides guidelines for organizations to develop a greenhouse gas (GHG) emissions inventory. Under GHGP, all emissions are divided into three areas. Scopes 1 and 2 must be measured, but scope 3 is currently optional.
Scope 1 refers to direct emissions from an organization's operations, such as company vehicles and buildings. Scope 2 categorizes indirect emissions from purchased electricity, heating and cooling.
Scope 3 includes all other indirect emissions in a company's value chain.
Global Warming
An average increase in the temperature of the atmosphere near the Earth’s surface and in the troposphere can contribute to changes in global climate patterns. In general, "global warming" often refers to the warming that can occur as a result of increased greenhouse gas emissions from human activities.
Greenwashing
Greenwashing refers to companies presenting a more sustainable, ethical or "green" image for marketing purposes. Greenwashing occurs when companies misrepresent or make unsubstantiated claims of competitive advantage.
GWP - Global Warming Potential
Each GHG has a GWP which is a factor referring to its heat-trapping ability relative to that of CO2. Because GHGs vary in their ability to trap heat in the atmosphere, some are more harmful to the climate than others. For example, methane is 25 times more potent than CO2, so methane has a GWP of 25.
IPCC- Intergovernmental Panel on Climate Change
The IPCC is an intergovernmental body of the United Nations responsible for advancing knowledge on human-induced climate change. It regularly provides policy makers with scientific assessments of climate change, its impacts and potential future risks, and suggests options for adaptation and mitigation.
Kyoto Protocol
As an extension of the UNFCCC, the Kyoto Protocol applies to seven greenhouse gases.
Carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), nitrogen trifluoride (NF3).
While the treaty requires developed countries to adopt strategies to reduce greenhouse gas emissions, the Kyoto Protocol seeks to limit and reduce greenhouse gas emissions in line with agreed individual targets.
Materiality
ESG issues or information are considered material if they need to be accounted for when considering an organization`s risks and opportunities. Materiality is a topic that cannot be ignored when evaluating a company's sustainability. Meanwhile, materiality has evolved into the concept of “double materiality.” Dual materiality suggests that an ESG topic or information may be material from both financial and non-financial perspectives.
Net Zero
Net zero is a common goal that organizations must commit to by 2050, as mandated by the IPCC. It means to negate the amount of carbon your company emits by withdrawing the same amount of carbon through offsets and having it stored permanently in carbon sinks.
Paris Agreement
The Paris Agreement is a legally binding international agreement on climate change. It aims to limit global warming to well below 1.5°C, compared to pre-industrial levels.
Principles of Responsible Investment (PRI)
These are global advocates for responsible investment. The PRI is a truly independent organization, acting in the long-term interests of its signatories, the financial markets and economies in which they operate, and ultimately the environment and society at large. PRI is supported by the United Nations
Renewable Energy
Energy derived from naturally renewable sources such as solar, wind, water and geothermal energy.
Social factors
Issues related to how a company engages with the communities in which it operates, suppliers, employees and customers. These include, for example, labor standards, health and safety, supply chain management, nutrition and obesity.
Sustainable and Responsible Investing(SRI)
SRI funds seek to build a portfolio with an above average ESG quality; in practice most often use a combination of a positive and a negative screening.
Stewardship
Stewardship, also known as active ownership, is defined as taking an active role as a shareholder to foster the long-term success of a company in a way that society and the ultimate investors also thrive. This can be done through engagement and proxy voting. Stewardship therefore benefits companies, investors and the economy at large.
TCFD - Task Force for Climate Related Financial Disclosures
Founded in 2017, the TCFD is a non-industry climate data disclosure framework that has established 11 recommendations in four key areas of interest.
Governance, strategy, risk management, metrics and targets. This recommendation is intended to help companies provide better quality data to support more informed capital allocation decisions.
Thematic Investing
Investing in companies that can be classified under a particular investment theme such as renewable energy, waste and water management, education or healthcare innovation.
Transition Risk
Financial risks that may arise from significant political, legal, technological and market changes as we move towards a low-carbon global economy and a climate-resilient future.
UN Sustainable Development Goals
(SDG)
A collection of 17 goals that reflect the major challenges facing global society, the environment and the economy today.
Values based Investing
An investment that prioritizes the ethical goals of the investor rather than just maximizing returns.