Glossary

De-jargoned: Glossary of ESG terms

All | # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
There are currently 18 relevant ESG terms in this directory beginning with the letter E.
Echo Voting
A system through which the proxies of a passive investment strategy are voted at the direction of an actively managed investment strategy. [Source: Invesco]

Economically Targeted Investing
Investments that seek to promote economic development in local communities and organizations, in addition to competitive financial returns. The investments may be targeted at job creation, generating small business loans, improvement in the affordable housing stock or enhancing infrastructure. [Source: Schroders]

Empire Building
A situation in which management seeks to acquire another company primarily for the sake of managing a larger enterprise. Empire building is a type of agency problem that effective corporate governance systems are expected to prevent. [Source: Stanford: Corporate Governance Research Initiative]

Engagement
The use of shareholder power to influence corporate behaviour, including through direct corporate engagement (i.e., communicating with senior management and/or boards of companies) is guided by comprehensive ESG guidelines. Engagement is an integral part of active ownership. [Source: Allianz]

Engagement Clearinghouse
Platform offered by the Principles for Responsible Investments (PRI) for institutional investors and asset managers to collaborate on engagement activities with investee companies. An investor posts planned engagement activities and seeks other investors to co-sign letters or actively contribute to engagement activities. Accessible for PRI signatories only. [Source: Swiss Sustainable Finance]

Engagement Overlay Service
A third-party service that engages investee companies on ESG issues on behalf of shareholder clients. [Source: Swiss Sustainable Finance]

Environmental Funds
Funds that are primarily exposed to sustainable environmental themes such as clean energy, water and waste, or invest in companies with positive environmental management. [Source: Schroders]

Environmental Lending
Refers to lending activities for environmental projects or companies often provided by multinational development banks. The term also covers lending activities with clear procedures to assess environmental risks of projects or companies. In some cases, banks provide preferential interest rates for environmental projects (i.e. environmental mortgages for low energy buildings). [Source: Swiss Sustainable Finance]

Equator Principles
The Equator Principles is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in project finance and is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. [Source: Swiss Sustainable Finance]

ESG - Environmental, Social, Governance
A wide spectrum of environmental, social, and corporate governance considerations that may impact a company’s ability to execute its business strategy and create value over the long term. ESG analysis includes collecting information on how an investment target manages environmental, social and governance factors. When an investment institution wishes to track how potential investments (i.e. companies, countries and issuers) actively manage ESG risks and opportunities they carry out an ESG Analysis. There is growing evidence suggesting that companies with a strong performance in managing environmental, social and governance factors manage their risks and opportunities more effectively and have lower costs of capital. ESG factors, when integrated into investment analysis and decision-making, may therefore offer investors better insights into opportunities and risks. [Source: Global Affairs Associates]

ESG Engagement
Engagement is an activity performed by shareholders with the goal of convincing management to take account of environmental, social and governance criteria. This dialogue includes communicating with senior management and/or boards of companies and filing or co-filing shareholder proposals. Successful engagement can lead to changes in a company' s strategy and processes so as to improve ESG performance and reduce risks. [Source: Swiss Sustainable Finance]

ESG Integration
The explicit inclusion by investors of ESG risks and opportunities into traditional financial analysis and investment decisions based on a systematic process and appropriate research sources. In the context of Sustainable Investment, this refers to ensuring that environmental, social and governance factors are given full consideration and research support, as an integral part of the investment decision-making process. This analysis therefore becomes fully integrated into the overall financial analysis of standard investment products. [Source: Swiss Sustainable Finance]

ESG Voting
This refers to investors addressing concerns of environmental, social and governance (ESG) issues by actively exercising their voting rights based on ESG principles or an ESG policy. [Source: Swiss Sustainable Finance]

ETF - Exchange Traded Fund
A security that tracks an index, a commodity, or a basket of assets like a mutual fund, but trades like a stock on an exchange. Like a stock, ETFs experience intradaily price changes. [Source: First Affirmative Financial Network]

Ethical Investment
Investments where the main motivation is aligning the ethical values of an organisation or a person with investments. In comparison to sustainable investments which are based on the conviction that an active management of environmental, social and governance risks and opportunities improves the long-term performance of a company, an ethical investment is mainly guided by ethical codes, religious beliefs or personal values and is often carried out using exclusionary screening. [Source: Swiss Sustainable Finance]

Eurosif
Eurosif is the European association whose mission is to promote sustainability through European financial markets. It works as a partnership of several Europe-based national Sustainable Investment Forums (SIFs).  Eurosif engages in a range of promotional activities such as public events or discussion fora, both with the industry and policy- makers. [Source: Swiss Sustainable Finance]

Exclusionary Screening
An investment strategy excluding companies, countries or issuers on the grounds of activities considered as not investable. Exclusion criteria can refer to product categories (e.g. weapons, tobacco) activities (e.g. animal testing) or practices (e.g. severe violation of human rights, corruption). They can also be based on personal values (e.g. gambling) or on risk considerations (e.g. nuclear power). Exclusionary screening is also known as negative screening. It is a common mistake to assume that SRI “screening” is simply exclusionary, or only involves negative screens. In reality, SRI screens are being used more and more frequently to identify and invest in companies that are leaders in adopting clean technologies, managing environmental impacts, and integrating exceptional social and governance practices. [Source: Swiss Sustainable Finance]

Extra-financial factors
Factors that are not the usual, fi nancial variables considered in investment analysis and whose monetary impacts are typically hard to quantify. The term can be applied to any measure whose unit of measurement is not monetary. [Source: Schroders]

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.