Glossary

De-jargoned: Glossary of ESG terms

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There are currently 24 relevant ESG terms in this directory beginning with the letter C.
Carbon Finance
Generic term for financial services related to mitigation of and adaptation to climate change. It specifically refers to investments in greenhouse gas emission reduction projects and the related creation of CO2-certificates, financial instruments that are tradable on carbon markets. [Source: Swiss Sustainable Finance]

Carbon Footprint
A measure of the total greenhouse gas emissions, expressed in tons of carbon dioxide. It is one way to assess the potential impact of climate change on a portfolio. Emissions can be classified as Scope 1,2 and 3. [Source: Schroders]

Carbon Neutral
This occurs when an organisation’s net carbon emissions is equal to zero. The process requires measuring total CO2 emissions, taking active steps to reduce emissions where the company can, and then purchasing CO2-certificates to offset CO2 emissions that cannot be eliminated from a company's operations. The CO2- certificates contribute to financing projects reducing CO2-emissions (i.e. by replacing fossil power generation with renewable energy projects). [Source: Swiss Sustainable Finance]

Carbon Pricing
The cost of emitting CO2 into the atmosphere, either in the form of a fee per tonne of CO2 emitted, or an incentive that’s offered for emitting less. Putting an economic cost on emissions is widely considered the most efficient way to encourage polluters to reduce what they release into the atmosphere. [Source: Allianz]

Carbon Tracker
An initiative working to align capital markets with climate change objectives. [Source: Schroders]

CDP - Carbon Disclosure Project
CDP is a voluntary survey and score for companies and governments to disclose their environmental impact. Investors are the primary audience. Disclosures are made via the CDP survey/database. [Source: Global Affairs Associates]

CDSB - Climate Disclosure Standards Board
A voluntary reporting framework for disclosing material environmental information in mainstream financial reports and natural capital and climate change-related information. CDSB was set up to promote greater alignment between natural and financial capital through disclosure standards, research and advocacy. [Source: Global Affairs Associates]

Ceres
Nonprofit organization that leads a national coalition of investors, environmental organizations, and other public interest groups working with companies to address sustainability challenges such as climate change and water scarcity. [Source: First Affirmative Financial Network]

Chairman of the Board
The director who presides over meetings of the full board of directors. The chairman is responsible for setting the agenda, scheduling meetings, and coordinating actions of board committees. Traditionally, the CEO has served as the chairman of the board in most U.S. corporations. In recent years, however, it has become more common for a nonexecutive director to serve as chair. [Source: Stanford: Corporate Governance Research Initiative]

Circular Economy
An economic system designed to produce no waste or pollution. [Source: Schroders]

Clawbacks and Deferred Payouts
Provisions in the executive compensation contract that enable a company to reclaim compensation in future years if it becomes clear that bonus compensation should not have been awarded previously. Clawbacks are intended to discourage executives from artificially inflating financial results to increase the value of their bonuses. The Dodd-Frank Wall Street Reform Act requires that companies develop, implement, and disclose clawback policies. [Source: Stanford: Corporate Governance Research Initiative]

Clean Technology
A range of products, services and processes that reduce the use of natural resources, cut or eliminate emissions and waste. It was considered a niche area of investment two decades ago but has become a focus for most major companies. [Source: Allianz]

Climate change
Significant long-term change in the climate of a given region. Global scientific consensus is that the planet is currently experiencing a change in climate with over 97% of actively publishing climate scientists agreeing that this is the case. [Source: Invesco]

Climate Risk
The investment risk resulting from a failure to keep global temperature rises to below 2°C above pre-industrial levels. [Source: Schroders]

Cluster Munitions And Anti-Personnel Mines
Cluster munitions are weapons designed to disperse multiple explosive sub-munitions. Anti-personnel mines are explosive devices designed to harm or kill civilians. Schroders fully supports the international conventions on cluster munitions and APMs. Consistent with this support, and in line with our commitment to responsible investment, we will not knowingly hold any security that derives revenue from or provides funding for either. [Source: Schroders]

Community Investing
Directing investment capital to communities that are underserved by traditional financial services institutions. Generally provides access to credit, equity, capital, housing, and basic banking products that these communities would otherwise lack. [Source: Swiss Sustainable Finance]

Compensation Committee
The committee of the board that is responsible for setting the compensation of the CEO and for advising the CEO on the compensation of other senior executives. [Source: Stanford: Corporate Governance Research Initiative]

Core SI
Sustainable investment products (investment funds and discretionary mandates) with a written sustainability investment policy as part of the prospectus or contract are considered Core SI. Usually, such sustainable investment products apply multiple approaches (i.e. exclusion criteria in combination with a best-in-class approach or an ESG integration approach in combination with ESG voting and engagement). [Source: Swiss Sustainable Finance]

Corporate Citizenship
The concept that corporations have both rights and obligations to the societies and jurisdictions in which they operate, and are themselves stakeholders within society. [Source: Global Affairs Associates]

Corporate Governance
Corporate Governance (or Governance factors) within ESG criteria in the context of investing refer to the system of policies and practices by which a company is directed and controlled. They include but are not limited to transparency on Board compensation, independence of Boards and shareholder rights. In broader terms, the need for corporate governance rests on the idea that when separation exists between the ownership of a company and its management, self-interested executives have the opportunity to take actions that benefit themselves, with shareholders and stakeholders bearing the cost of these actions. This scenario is typically referred to as the “agency problem,” with the costs resulting from this problem described as “agency costs.” Executives make investment, financing, and operating decisions that better themselves at the expense of other parties related to the firm. To lessen agency costs, some type of control or monitoring system is put in place in the organization. That system of checks and balances is called “corporate governance.” At a minimum, a governance system consists of a board of directors to oversee management and an external auditor to express an opinion on the reliability of financial statements. In most cases, however, governance systems are influenced by a much broader group of constituents, including owners of the firm, creditors, labor unions, customers, suppliers, investment analysts, the media, and regulators who all influence managerial behavior. [Source: Stanford: Corporate Governance Research Initiative]

Corporate Governance Codes
A set of standards detailing good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders. These purposeful dialogues are established by local regulators on a country-by-country basis. [Source: Schroders]

Corporate Responsibility
The responsibility of corporations to generate profit in an ethical way. [Source: Global Affairs Associates]

Council of Institutional Investors
An organization of asset managers and asset owners promoting effective US corporate governance practice. [Source: Schroders]

CSR - Corporate Social Responsibility
The responsibility of corporations to contribute positively to society. This term refers to the commitment of an organisation, beyond what is required by law, to ensure that the social, economic and environmental impacts of their actions create a net benefit to communities and society. This is founded on the belief that all corporations have a ‘duty of care’ to all their stakeholders in every area of their business operations and that being a responsible citizen improves the long-term business success of a company. [Source: Global Affairs Associates]

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.