Glossary

De-jargoned: Glossary of ESG terms

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There are currently 40 relevant ESG terms in this directory beginning with the letter S.
SASB - Sustainability Accounting Standards Board
Sustainability Accounting Standards Board (SASB) is a voluntary sustainability reporting framework for U.S. publicly listed companies with a unique sector-based materiality approach. It is an investor-driven and business focused framework. SASB encourages integrated disclosure in a company's financial filings. [Source: Global Affairs Associates]

Say-on-Pay
The practice of giving shareholders a vote to approve executive and/or director compensation programs. In most countries (such as the U.S. and U.K.), say-on-pay votes are advisory (nonbinding), which means that companies are not required to adhere to the outcome. In other countries, such as the Switzerland, the results are binding. [Source: Stanford: Corporate Governance Research Initiative]

SBTs - Science Based Targets
Targets adopted by companies to reduce greenhouse gas (GHG) emissions are considered “science-based” if they are in line with the level of decarbonization required to keep global temperature increase below 2 degrees Celsius compared to pre- industrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5). The Science Based Targets initiative (SBTi) is a collaboration between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF) and one of the We Mean Business Coalition commitments, to champion science-based target setting as a powerful way of boosting companies' competitive advantage in the transition to a low carbon economy. [Source: Global Affairs Associates]

Scope 1 Emissions
Direct carbon emissions from owned or controlled sources. [Source: Schroders]

Scope 2 Emissions
Indirect carbon emissions from the generation of purchased energy. [Source: Schroders]

Scope 3 Emissions
All indirect carbon emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions. [Source: Schroders]

Screening
An investment approach used to filter companies based on pre-defined criteria before investment. As an investor, you can use a negative screen (in which you deliberately exclude certain companies because of their involvement in undesirable activities or sectors) or a positive screen (in which you select companies based on their sustainability practices). In the jargon, this can also be a “best-in-class investment” – where you only invest in companies that lead their peer groups in terms of sustainability practices and performance. [Source: Allianz]

Shareblocking
A practice whereby restrictions are placed on the trading of shares which are to be voted upon prior to an annual general meeting. [Source: Schroders]

Shareholder Activism
A public form of engagement whereby investors use their shareholdings to engender change at a company. This can be done through submitting shareholder resolutions or a public media campaign against a company. Shareholder activism tends to be a more confrontational approach to promoting change. Shareholder activism is also known as shareholder advocacy. [Source: Schroders]

Shareholder Democracy
A movement that advocates greater shareholder influence over corporate governance systems. Advocates of shareholder democracy believe that expanded voting rights on corporate matters make board members more accountable to shareholders (and possibly stakeholders). Elements of shareholder democracy include majority voting in uncontested director elections, restricted discretion over broker nonvotes, say on pay, proxy access, and a reduction of antitakeover protections. [Source: Stanford: Corporate Governance Research Initiative]

Shareholder Proposal / Resolution
A legal right of shareholders to create a proposal for change in corporate policies and actions. Shareholder proposals are tools of corporate engagement and shareholders reserve the right to circulate proposals, and vote on them at the company’s Annual General Meeting (AGM). [Source: Swiss Sustainable Finance]

Shareowner / Shareholder Advocacy
Responsible investors often take an active role as the owners of corporations, including talking with companies on social, environmental, governance, (ESG) and transparency issues. Shareowner advocacy also frequently involves filing, and co-filing shareholder resolutions on such topics as corporate governance, climate change, political contributions, gender/racial discrimination, pollution, problem labor practices, and a host of other issues. [Source: First Affirmative Financial Network]

SI - Sustainable Investment
Sustainable investment (analogous to responsible investment) refers to any investment approach integrating environmental, social and governance factors (ESG) into the selection and management of investments. There are many different approaches of sustainable investing, including best-in-class, ESG integration, exclusions and impact investing. [Source: Swiss Sustainable Finance]

SIF - Sustainable Investment Forum
A sustainable investment forum is an association promoting sustainable investments and finance in a national or multinational financial market. There are many SIFs in Europe, most of which are partners and founders of Eurosif. Eurosif together with other regional and national SIFs has founded the Global Sustainable Investment Alliance (GSIA) to align activities and gain a market overview on sustainable investments globally. [Source: Swiss Sustainable Finance]

Sin Stocks
Stocks of companies either directly or indirectly associated with activities considered to be unethical or immoral, such as tobacco, alcohol, gambling and adult entertainment. Also known as 'vice stocks'. [Source: Schroders]

SOCAP
An organization that is dedicated to accelerating a new global market at the intersection of money and meaning. SOCAP seeks to create a platform where social impact leaders can connect and present their ideas to a global audience [Source: First Affirmative Financial Network]

Social Equity
A broad term used to encompass issues related to the provision of equal opportunity and access to traditionally disadvantaged populations including women, minorities, LGBTQ+, veterans, and individuals with disabilities, as well as regionally disadvantaged populations. [Source: Invesco]

Social Factors
Social factors within ESG criteria in the context of investing include, but are not limited to, worker rights, safety, diversity, education, labour relations, supply chain standards, community relations, and human rights. [Source: Swiss Sustainable Finance]

Social impact bonds
Investments designed to improve the social outcomes of publicly funded services. Providers are typically charities that are often pioneering a new approach to a specific social problem. The investment is used to fund the working capital needs of the project. [Source: Schroders]

Socially Screened or SRI Mutual Funds
SRI mutual funds integrate ESG analysis into the investment process—generally seeking to avoid owning companies with a harmful impact on society, and seeking to own the most responsible companies with the highest profit potential. Such funds may represent any asset class and many different investment strategies, including domestic and international investments. A growing range of products is available, including hedge funds and ETFs (exchange traded funds). [Source: First Affirmative Financial Network]

Spring-Loading
The practice of awarding stock options immediately before the release of positive news that is likely to drive up the price of a stock. [Source: Stanford: Corporate Governance Research Initiative]

SRI - Responsible Investment / Sustainable Investment
Responsible investment (analogous to sustainable investment) refers to any investment approach, integrating environmental, social and governance factors (ESG) into the selection and management of investments. There are many different forms of responsible investing, such as best-in-class investments, ESG integration, exclusionary screening, thematic investing and impact investing. They are all components of responsible investments and have played a part in its history and evolution. 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. [Source: Swiss Sustainable Finance]

SRI - Socially Responsible Investing
Socially Responsible Investing (SRI) is the term previously used for sustainable or responsible investing. SRI had its origin in the Anglo-Saxon investment world, where it originally referred to investments based on exclusionary screening and later to investments with a best-in-class approach and other forms of sustainable investments. Some players still use it as a generic term for sustainable investing. Socially responsible investing is the practice of investing money in companies and funds that have positive social impacts. It is investment strategy which seeks to consider both financial return and social/environmental good. [Source: Swiss Sustainable Finance]

Staggered Board Structure
A board structure in which directors are elected to multiple-year terms, with a only subset of directors standing for reelection each year. Under a typical staggered board, directors are elected to three-year terms, with one-third of the board standing for reelection every three years. As a result, it is not possible for the board to be ousted in a single year. Two election cycles are needed for a majority of the board to turn over. Staggered boards are an effective antitakeover defense. Staggered boards can be effective antitakeover defenses (if they are part of the corporation charter), and especially when combined with a “poison pill.” [Source: Stanford: Corporate Governance Research Initiative]

Stakeholders
Stakeholders believe that corporations or organizations have a societal obligation beyond increasing shareholder value and that obligations to constituents such as employees, suppliers, customers, and local communities should be held in equal importance to shareholder returns (e.g., environmental sustainability, corporate social responsibility). [Source: Stanford: Corporate Governance Research Initiative]

Stewardship / Active Investing
Stewardship, also referred to as Active Ownership, is defined as taking an active role as a shareowner to promote the long-term success of companies in such a way that society and the ultimate providers of capital also prosper. This can be done through engagement and proxy voting. Stewardship therefore benefits companies, investors and the economy as a whole. [Source: Allianz]

Stock Options
A contract that grants the recipient the right to buy shares in the future at a fixed exercise price, generally equal to the stock price on the grant date. Stock options typically have vesting requirements (i.e., they are “earned” in even batches over time or in blocks). [Source: Stanford: Corporate Governance Research Initiative]

Stock-Option Backdating
Stock options whose grant dates have been retroactively changed to coincide with a relative low in the company’s share price. This practice reduces the strike price of the option and increases the potential payoff to its recipient. Existing shareholders bear the cost of backdating, because the company receives lower proceeds when the stock option is exercised. [Source: Stanford: Corporate Governance Research Initiative]

Stranded Assets
Stranded assets refers to a scenario in which the value of fossil fuel reserves falls due to rising operational costs associated with carbon prices. Fossil fuel assets could become ‘stranded’ as production becomes unprofitable. The possibility of increased regulation and public pressure, both domestic and international, poses additional risks. Stranded assets suffer from unanticipated or premature write-downs and are unable to operate to the end of their economic lives due to changes in the market and regulatory environment. The share price of fossil fuel companies could diminish considerably if political pressure to reduce carbon emissions strengthens. The risk of stranded assets is a growing concern for investors. [Source: Swiss Sustainable Finance]

Sustainability
Sustainability focuses on meeting the needs of the present without compromising the ability of future generations to meet their needs. The concept of sustainability is composed of three pillars: economic, environmental, and social—also known informally as profit, planet, and people. [Source: Global Affairs Associates]

Sustainability Index / Benchmark
A sustainability index / benchmark is a tool to measure the value of a section of the stock market. It is computed from the prices of stocks selected by applying a sustainable investment approach. Investors use this tool to describe the market and to compare the return on specific investments. [Source: Swiss Sustainable Finance]

Sustainability Ratings
Ratings reflecting a company's/country's/fund's performance with regards to environmental, social and governance (ESG) factors. Sustainability ratings enable investors to gain a quick overview of the sustainability performance of a company/country/fund and are the basis for a best-in-class investment approach. [Source: Swiss Sustainable Finance]

Sustainability Research Provider / Sustainability Rating Provider
Organisation providing research and/or ratings on the sustainability performance of companies, issuers, countries or sectors. Most investors and asset managers use such third-party information when preparing sustainable investment products. [Source: Swiss Sustainable Finance]

Sustainable
Balancing economic ecological and social goals in such a way that the people living on our planet today can meet their needs without compromising the ability of future generations to meet their own needs. [Source: Swiss Sustainable Finance]

Sustainable Assets Under Management
Widely applied key performance indicator referring to the total volume of sustainable investments of an investor, asset manager or country. Often expressed as a percentage of total assets under management. [Source: Swiss Sustainable Finance]

Sustainable Finance
Sustainable finance refers to any form of financial service integrating environmental, social and governance (ESG) criteria into the business or investment decisions for the lasting benefit of both clients and society at large. Activities that fall under the heading of sustainable finance include but are not limited to the integration of ESG criteria in asset management, sustainable thematic investments, active ownership, impact investing, green bonds, lending with ESG risk assessment and development of the whole financial system in a more sustainable way. [Source: Swiss Sustainable Finance]

Sustainable Financial Centre
A sustainable financial centre is a financial marketplace that, as a whole, contributes to sustainable development and value creation in economic, environmental and social terms. In other words, one that ensures and improves economic efficiency, prosperity, and economic competitiveness both today and in the long-term, while contributing to protecting and restoring ecological systems, and enhancing cultural diversity and social well-being. [Source: Swiss Sustainable Finance]

Sustainable Investment Mandate
Investment mandate based on an investment process integrating ESG criteria in different forms (i.e. best-in-class, ESG integration, exclusionary screening). [Source: Swiss Sustainable Finance]

Sustainable Thematic Investments / Thematic Investing
Investment in businesses contributing to sustainable solutions, both in environmental or social topics. In the environmental segment this includes investments in renewable energy, energy efficiency, clean technology, low-carbon transportation infrastructure, water treatment and resource efficiency. In the social segment this includes investments in education, health systems, poverty reduction, and solutions for an ageing society. [Source: Swiss Sustainable Finance]

SVVK - ASIR
The Swiss Association for Responsible Investments (SVVK - ASIR) is an association of large pension funds aiming to provide services to its members that enable them to invest responsibly. This entails the inclusion of ESG criteria in their investment decisions, where the association supports its members through norms-based and product- based portfolio screening and engagement. The normative standards applied are the Swiss constitution and Swiss law, ILO conventions and the Global Compact. The association was founded in December 2015. [Source: Swiss Sustainable Finance]

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.