Responsible Investment Glossary
A
Active ownership
The use of the rights and position of ownership to influence the activity or behaviour of investee companies — through voting, dialogue and engagement. Source: UN PRI
B
Biodiversity
The variety of life on Earth at all its levels, from genes to ecosystems, and the ecological and evolutionary processes that sustain it. Loss of biodiversity is increasingly recognised as a systemic financial risk. Source: WWF
C
Carbon footprint
The total greenhouse gas emissions caused directly and indirectly by an individual, organisation, event or product, expressed in tonnes of CO₂ equivalent. Source: Greenhouse Gas Protocol
Climate Action 100+
An investor-led initiative to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change. Source: Climate Action 100+
COP
The Conference of the Parties — the supreme decision-making body of the UN Framework Convention on Climate Change (UNFCCC), held annually since 1995. Source: UNFCCC
CSRD
Corporate Sustainability Reporting Directive — EU legislation requiring large companies to publish detailed sustainability reports following the European Sustainability Reporting Standards (ESRS). Source: European Commission
CSDDD
Corporate Sustainability Due Diligence Directive — EU legislation establishing a corporate due-diligence duty to identify, prevent and mitigate adverse human-rights and environmental impacts. Source: European Commission
E
ESG
Environmental, Social and Governance — the three central factors used to measure the sustainability and ethical impact of an investment. Source: UN PRI
Engagement
Dialogue with investee companies on ESG issues to seek improved disclosure or behaviour. Source: UN PRI
ESRS
European Sustainability Reporting Standards — a set of reporting standards under the CSRD that define what companies must disclose on sustainability matters. Source: EFRAG
EU Taxonomy
A classification system establishing a list of environmentally sustainable economic activities, used by financial-market participants to disclose alignment. Source: European Commission
Exclusion screening
An approach that excludes specific companies, sectors, countries or activities from a portfolio based on ESG criteria. Source: UN PRI
External assurance
Independent third-party verification of ESG data or reports to enhance their credibility. Source: ICAEW
Engagement (collaborative)
Multiple investors working together to engage with companies or policymakers, increasing influence and reducing the burden on individual investors. Source: UN PRI
G
Global Investor Statement to Governments on the Climate Crisis
A collective statement, typically published annually, to encourage governments to develop and implement policies for a climate-resilient net zero transition. Source: The Investor Agenda
GFANZ
Glasgow Financial Alliance for Net Zero — a global coalition of financial institutions committed to accelerating the transition to a net-zero economy. Source: GFANZ
Greenhouse Gas Protocol
Provides international greenhouse gas accounting standards and a global framework to help countries measure and manage greenhouse gas emissions from both the private and public sector, and track progress towards climate goals. Source: Greenhouse Gas Protocol
I
Implied Temperature Rise (ITR)
Forward-looking metrics attempting to simulate a global temperature rise associated with a single company's greenhouse gas emissions. Source: UN PRI
K
Key Performance Indicator (KPI)
A measurable value used to track a company's progress toward defined sustainability targets.
L
Lobbying disclosure
Public reporting of a company's engagement with policymakers, including direct lobbying and trade-association memberships.
M
Materiality
The principle that investors should focus on ESG factors most likely to affect the financial performance of an issuer. Source: SASB
N
Net Zero Asset Managers initiative (NZAM)
An international group of asset managers committed to supporting the goal of net-zero greenhouse gas emissions by 2050 or sooner. Source: NZAM
Net zero
The state in which global greenhouse gas emissions from human activity are in equilibrium with emissions reductions. Source: World Economic Forum
P
Paris Agreement
A legally binding international treaty on climate change, adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, in 2015. The Paris Agreement aims to limit global average temperature rise to well below 2°C above pre-industrial levels, and to pursue efforts of limiting this to 1.5°C. Source: UNFCCC
Proxy voting
The casting of votes by investors at shareholder meetings to influence corporate decisions and governance.
R
Responsible investment
A strategy and practice to incorporate environmental, social and governance (ESG) factors in investment decisions and active ownership. Source: UN PRI
Reporting standards
Frameworks (such as ISSB, GRI, SASB) that provide guidelines for companies to disclose sustainability-related information consistently.
S
SASB
The Sustainability Accounting Standards Board (SASB) provides a set of standards to support companies across 77 industries in identifying sustainability-related risks and opportunities and then disclose them to investors. Source: SASB
SBTi
The SBTi supports companies and financial institutions by defining emissions target best practice. It develops tools and guidance to enable companies to set and validate emission reduction and net-zero targets in line with the Paris Agreement. Source: SBTi
Scope 1 emissions
Emissions from sources owned or controlled directly by an organisation, such as burning of gas in on-site boilers. Source: National Grid
Scope 2 emissions
Emissions from indirect sources used or bought by the organisation, such as energy produced elsewhere but used by the organisation's buildings. Source: National Grid
Scope 3 emissions
Emissions from indirect sources upstream and downstream of the value chain of an organisation that it is responsible for, such as product-level emissions or those from business travel. Source: National Grid
Scope 4 (avoided emissions)
Emissions 'avoided' by an organisation, or a reduction in emissions that occurs outside of a product's life cycle or value chain but as a result of the use of that product. Source: World Economic Forum
Stewardship
The responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society. Source: UK Stewardship Code
SFDR
Sustainable Finance Disclosure Regulation — the EU framework requiring financial-market participants to disclose how sustainability risks are integrated into their decisions. Source: European Commission
Sustainability-linked
A class of financial instruments where terms (e.g. coupon, margin) vary based on the issuer's achievement of pre-defined sustainability KPIs.
Sustainability Disclosure Requirements (SDR)
The UK regime for sustainability-related labels and disclosures applicable to UK-domiciled funds. Source: FCA
Sustainable Development Goals (SDGs)
The 17 Sustainable Development Goals were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. Source: UNDP
Stranded assets
Assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities, often as a result of climate-related changes in the regulatory or physical environment.
T
TCFD
The TCFD, established in 2015 by the Financial Stability Board (FSB), provides a framework for companies and financial institutions to disclose information related to climate-related risks and opportunities. These can help investors to appropriately assess and price climate-related risks. Source: TCFD
TNFD
Taskforce on Nature-related Financial Disclosures — a market-led initiative providing a framework for organisations to report and act on evolving nature-related risks. Source: TNFD
Transition plan
A high-level action plan that outlines how a company intends to align its business with a low-carbon economy. Source: Transition Plan Taskforce
U
UN Global Compact
A voluntary initiative based on CEO commitments to implement universal sustainability principles across human rights, labour, environment and anti-corruption. Source: UN Global Compact
UN PRI
The United Nations Principles for Responsible Investment — six voluntary principles that signatories adopt to incorporate ESG into their investment decision-making. Source: UN PRI
UK Stewardship Code
The Financial Reporting Council's framework for good practice in stewardship. The UK Stewardship Code 2026 sets out six principles for asset owners and asset managers. Source: FRC
Universal owner
An institutional investor whose holdings are so diverse and broad that they effectively own a slice of the entire economy and therefore have an interest in the long-term health of the system. Source: UN PRI
W
Water risk
The probability of an entity experiencing a deleterious water-related event, such as droughts, flooding, or pollution, that could affect operations or value chain. Source: WWF
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