Glossary

De-jargoned: Glossary of ESG terms

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There are currently 12 relevant ESG terms in this directory beginning with the letter B.
Best In Class / Positive Screening
Approach in which a company's or issuer's environmental, social and governance (ESG) performance is compared with the ESG performance of its peers (i.e. of the same sector or category) based on a sustainability rating. All companies or issuers with a rating above a defined threshold are considered as investable. The threshold can be set at different levels (e.g. 30% best performing companies or all companies that reach a minimum ESG score). [Source: Swiss Sustainable Finance]

Blank Check Preferred Stock
A class of unissued preferred stock that is provided for in the articles of incorporation and that the company can issue when threatened by a corporate raider. The purchaser of the preferred stock obtains an economic position senior to that of common shareholders and also typically receives significant voting rights. Combined, these are used to block a corporate raider seeking to take control of the company or its board of directors. [Source: Stanford: Corporate Governance Research Initiative]

Blended Finance
Blended finance refers to the complementary use of grants (usually from public sources) and non-grant financing from private and/or public sources. Such structures are used to make infrastructure and sustainability projects that would otherwise not be financially sustainable attractive for private investors. The IFC uses the term blended finance to distinguish it from ‘concessional finance’, which requires a minimum 25% grant element. Although blended finance has a concessional component, the subsidy portion of the investment is minimised in order to avoid crowding out private financing. [Source: Swiss Sustainable Finance]

Blockholder
An investor with a significant ownership position in a company’s common stock. No regulatory statute classifies an investor as a blockholder, although researchers generally define a blockholder as any shareholder with at least a 1 to 5 percent stake. A blockholder can be an executive, a director, an individual shareholder, another corporation, or an institutional investor. Blockholders with large ownership positions can exert significant influence (positive or negative) on the governance of a firm. [Source: Stanford: Corporate Governance Research Initiative]

Board Diversity
The degree to which individual directors on a board represent a wide range of personal or professional backgrounds, experiences, or viewpoints. [Source: Stanford: Corporate Governance Research Initiative]

Board of Directors
A group of individuals elected to represent the interests of shareholders and monitor the corporation and its management. Generally speaking, a board serves two roles: an advisory role and an oversight role. In its advisory capacity, the board consults with management regarding the strategic and operational direction of the company. Attention is paid to decisions that balance risk and reward. Board members are selected based on the skill and expertise they offer for this purpose, including previous experience in a relevant industry or function. In its oversight capacity, the board is expected to monitor management and ensure that it is acting diligently in the interests of shareholders. [Source: Stanford: Corporate Governance Research Initiative]

Board Quality
Boards play a critical role in crisis management, oversight, and risk management – setting the tone at the top before incidents occur. From an investment standpoint, issues such as director independence, board composition, experience, perspectives and tenure are important because they protect shareholder value. Board composition, executive compensation, business ethics and accounting practices all reflect a board’s judgment and priorities. [Source: Nuveen]

Board Structure
A description of a board based on its prominent structural attributes, such as size, professional and demographic information about the directors serving on it, their independence from management, number of committees, director compensation, etc. [Source: Stanford: Corporate Governance Research Initiative]

Broad SI
Sustainability criteria and approaches can be applied to mainstream products or the full asset base of a fund manager or institutional asset owner by integrating them in the investment process. The application of sustainability in these cases relies on a general sustainability policy/approach instead of a product-specific policy referred to in the product prospectus. Usually, such mainstream sustainable investments apply one of the following approaches or a combination thereof: exclusions, norms-based screening, ESG integration, ESG voting, ESG integration. [Source: Swiss Sustainable Finance]

Broker Nonvote
The shares held at a brokerage firm are registered under the name of the brokerage (“street name”), even though they are beneficially owned by the individual. Brokers are required to forward these shares to the beneficial owner and vote according to owner instructions. If the broker does not receive instructions within 10 days of the vote date, a broker nonvote is said to occur. The treatment of broker non votes can be important in determining the outcome of closely contested proxy battles. [Source: Stanford: Corporate Governance Research Initiative]

Bullet Dodging
The practice of waiting to award stock options to an executive or employee until after the release of unexpected negative news that is likely to drive down the price of a stock. [Source: Stanford: Corporate Governance Research Initiative]

Busy Boards
Companies whose directors sit on multiple boards. The numeric threshold that constitutes a “busy” director is subject to discretion, although researchers generally consider a director to be busy if he or she sits on three or more boards. Similarly, a “busy” board is one in which a significant number of directors are busy. This practice is also referred to as 'Overboarding'. [Source: Stanford: Corporate Governance Research Initiative]

Sources:

  1. Allianz Global Investors, ESG Glossary, Retrieved: September 12,2020
  2. First Affirmative Financial Network, Glossary of Responsible Investing Terms, Retrieved: September 12,2020
  3. Global Affairs Associates, ESG Glossary, Retrieved: September 12,2020
  4. Invesco Ltd., Glossary: Understanding ESG jargon, Retrieved: September 12,2020
  5. Nuveen, LLC., Glossary: Responsible investing, Retrieved: September 12,2020
  6. Schroders Investment Management North America Inc., Understanding sustainable investment and ESG investment terms, Retrieved: September 12,2020
  7. Stanford Graduate School of Business, Corporate Governance Research Initiative, Retrieved: September 12,2020
  8. Swiss Sustainable Finance, Glossary, Retrieved: September 12,2020

Disclaimer: This glossary is NOT intended to be an authoritative reference document. All information in this glossary is for educational use only. This glossary has been compiled based on public domain information available on the websites of the mentioned sources. While due care has been taken in compiling this glossary, ESGSense does not assume any liability for any inaccuracy or factual error. Any term or definition mentioned here does NOT constitute financial or investment advice. ESGSense assumes no liability for any financial decisions and/or investments made on the basis of information gained from this glossary.