- Active Ownership
The use of shareholder rights to promote good corporate governance, debate environmental and social concerns with the company, and produce long-term value is known as active ownership. This can be demonstrated through voting activities such as proxy voting, interacting with corporate management, and shareholder involvement.
- Active Investing
Active investing is a hands-on investment strategy that entails investing in and continuously monitoring specific investments to surpass an index or a target return.
- Asian Corporate Governance Association
Asian Corporate Governance Association
ACGA, founded in 1999, is an independent, non-profit membership organization dedicated to assisting investors, firms, and regulators throughout Asia in the implementation of strong corporate governance standards.
- Assurance, external (audit)
Assurance, external (audit)
Assurance on sustainability information is a process in which an independent practitioner obtains either reasonable or limited assurance about the accuracy and reliability of the sustainability information and then based on the assurance obtained either expresses an opinion or a conclusion.
- Best in Class Investment
Best in Class Investment
Best-in-class investment refers to investments in companies or sectors that have been chosen for their good ESG performance in comparison to industry peers. A best-in-class investor invests in companies that strive to achieve the ESG criteria applicable to their specific industry.
Biocapacity describes the ability of ecosystems to produce biologically useful material and to absorb man-made waste. Furthermore, an “ecological deficit” is defined as the ecological footprint of a population exceeding its biocapacity.
- Blue Bond
Blue bonds are financial instruments that are issued to maintain and protect the oceans. The Seychelles Sovereign Blue Bond, which debuted in October 2018, was the world's first sovereign blue bond scheme. The goal of this program is to rescue the 115 Seychelles islands that are surrounded by coral species. The bond, which raised USD 15 million from international investors, demonstrates how countries may use financial markets to preserve marine resources.
- Business Responsibility Report (BRR)
Business Responsibility Report (BRR)
BRR is a disclosure to stakeholders of the adoption of responsible business practices by Indian listed firms. It has been designed to provide fundamental non-financial information about the company as well as information about the organization's operations, principles, and responsible business practices. SEBI implemented the BRR format in a circular dated August 13, 2012. Initially, the top 100 listed firms were required to include BRR in their Annual Report; however, this duty was expanded to the top 500 listed businesses with effect from 1 April 2016 and, eventually, to the top 1000 listed companies by notification dated 26 December 2019. BRR is an India-specific disclosure.
- Business Responsibility and Sustainability Report (BRSR)
Business Responsibility and Sustainability Report (BRSR)
The Ministry of Corporate Affairs implemented BRSR on August 11, 2020, through the Committee on Business Responsibility Reporting Report. The Business Responsibility Sustainability Report (BRSR) is a new reporting format introduced to broaden the scope of the Business Responsibility Report (BRR) to better reflect the objective and scope of reporting on non-financial factors. The BRSR is a disclosure that is only applicable to India. The Ministry of Corporate Affairs proposes a phased introduction of this reporting requirement so that smaller businesses can adapt and learn from the larger ones. Currently, the top 1000 publicly traded firms may report.
- CDP (formerly the Carbon Disclosure Project)
CDP (formerly the Carbon Disclosure Project)
CDP, founded in 2000, is a non-profit organization that manages the global disclosure system enabling investors, companies, cities, states, and regions to manage their environmental impacts. CDP has regional offices and local partners in 50 countries. CDP now has 39 signatories from India's top 100 listed companies.
- Carbon Budget
The carbon budget indicates the amount of greenhouse gases that humanity “is allowed” to emit into the atmosphere in order to reach the 1.5°C target of the Paris Climate Convention.
- Carbon Dioxide Equivalent (CO2e)
Carbon Dioxide Equivalent (CO2e)
Carbon dioxide equivalent, or CO2e, is a metric measure representing all greenhouse gases by converting them to the equivalent amount of CO2.
- Carbon Credit
A carbon credit is a generic term for any tradable certificate or permit that represents the right to release one tonne of CO2 or an equal amount of another greenhouse gas (GHG). The GHG is measured in tCO2e units. Carbon credits are a market-based method that attempts to reduce GHG concentrations. Companies or governments are assigned a certain quantity of credits, which diminish over time. Companies or nations can sell any extra carbon credits because they are traded.
- Carbon Disclosure Project
Carbon Disclosure Project
The Carbon Disclosure Project (CDP) is an independent and non-commercial organisation. The organisation has the largest database on companies’ greenhouse gas emissions and their climate change strategies. The aim of the project is to provide information for investors, companies and governments. The organisation asks companies, cities and countries for data on their respective environmental impact. This data includes, for example, greenhouse gas emissions and the use of resources such as water. Submission of the data is voluntary. In addition to a critical review, suggestions are made on how the company or city can act even more sustainably.
- Carbon Pricing
Carbon pricing is a strategy for reducing carbon emissions by levying a price on a company's carbon emissions. Carbon pricing is classified into two types: external and internal.
- Carbon Monitoring
Carbon monitoring is the process of recording how much carbon dioxide or methane is created by any activity at any given moment. This can be accomplished, for example, by tracking carbon dioxide emissions from deforestation or the use of fossil fuels. Carbon Monitoring for Action (CARMA), Emissions Trading Scheme Workflow Automation Project (ETSWAP), and Forms Management System (FMS), which is a system used in Germany that reports emissions by the European Union Emissions Trading Scheme, are some of the popular systems used for carbon monitoring around the world (EU ETS).
- Carbon Tracker Initiative
Carbon Tracker Initiative
Carbon Tracker is a London-based independent financial think tank that conducts in-depth analyses on the impact of the energy transition on capital markets and possible investment in high-cost, carbon-intensive fossil fuels.
- Carbon Sink
A carbon sink is any natural or man-made reservoir that absorbs and stores carbon. Carbon sinks are natural (oceans and forests) or man-made (landfills and carbon capture and storage systems) deposits that absorb and trap carbon dioxide (CO2) from the atmosphere and reduce its concentration in the atmosphere.
- Circular Economy
The circular economy is an economic system focusing on waste reduction by extracting the greatest value from resources and reusing and recycling existing resources for as long as possible.
- Clean Technology
Clean technology is also known as green technology or cleantech (Greentech). It refers to a range of technologies that decrease or optimize the use of natural resources while minimizing the detrimental impact of technology on ecosystems.
- Community Investing
Community investing is an ESG investing strategy that directs investments to benefit local businesses as well as vulnerable and low-income areas. It seeks to improve people's quality of life while also earning returns for investors by contributing to noble organisations.
- Climate Bonds
Climate bonds are fixed-income financial securities with environmental and/or climate benefits. They adhere to green bond standards, and the proceeds from the issuing are to be used to finance pre-specified sorts of climate change solutions, such as GHG reduction projects, clean energy, and energy efficiency projects, among others. Climate bonds, like traditional bonds, can be issued by governments, banks, and enterprises.
- Companies Act 2013
Companies Act 2013
Parliament passed the Companies Act 2013, which deals with the Indian company law. It governs the formation, operation, and dissolution of businesses in India. It also addresses a company's and its directors' obligations. It was authorised by the President of India in August 2013. Also, see the Indian Corporate Governance Codes.
- Conference Of Parties (COP)
Conference Of Parties (COP)
The COP is the United Nations Framework Convention on Climate Change's decision-making body. It brings together the 197 nations and territories that have signed on to the Framework Convention as parties. Its goal is to keep global warming considerably below 2 degrees Celsius, preferably 1.5 degrees Celsius, compared to pre-industrial levels. The evaluation of national communications and emission inventories presented by Parties is a critical duty for the COP. The COP meets once a year.
- Corporate Governance Codes
Corporate Governance Codes
Corporate governance regulations provide the criteria that corporate boards should follow to protect shareholder investments. Local regulators set these requirements on a country-by-country basis.
- Corporate In India Governance Codes
Corporate In India Governance Codes
The Companies Act, 2013, is the fundamental piece of legislation controlling businesses in India. SEBI has notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for listed entities (LODR). The SEBI LODR contains both corporate governance principles and norms, as well as principles and rules governing firms' periodic and event-based disclosures.
- Corporate Social Responsibility (CSR)
Corporate Social Responsibility (CSR)
CSR is a company's moral and ethical obligation to its stakeholders, the environment, and the society in which it operates. It assists corporations in being socially accountable and good corporate citizens' by becoming aware of the impact they have on several sectors of society, including economic, social, and environmental.'
- Council of Institutional Investors (CII)
Council of Institutional Investors (CII)
The Council of Institutional Investors is a nonpartisan, nonprofit organisation of public, corporate, and union employee benefit funds, other employee benefit plans, state and local entities charged with investing public assets, and foundations and endowments with a combined asset under management of approximately $4 trillion in the United States. It is a major advocate for good corporate governance, robust shareholder rights, and prudent financial rules that promote fair and vibrant capital markets. CIl advocates for policies that increase long-term value for institutional asset owners and their beneficiaries in the United States.
- Diversity and Inclusion
Diversity and Inclusion
Diversity refers to the various aspects and characteristics that distinguish people from one another, such as age, race, gender, caste, ethnicity, sexual orientation, socioeconomic background, religious ideals, or beliefs. Inclusion is the act of giving all people equal chances and accepting and appreciating them despite their differences in qualities and characteristics.
- Economically Targeted Investments
Economically Targeted Investments
Economically targeted investments are those that provide social benefits in addition to the investment return, such as Environmental advantages of funding a renewable energy project.
- Emission Intensity
Emission intensity (also known as carbon intensity, C.l.) is the rate of a certain pollutant's emission relative to the intensity of a specific activity or industrial production process, such as grams of carbon dioxide released per megajoule of energy produced. Furthermore, emission intensity can be defined as the ratio of a country's greenhouse gas (GHG) emissions to its GDP. India has vowed to reduce its GDP's emission intensity by 33 to 35 percent by 2030 compared to 2005 levels.
- Emission Rights
The measures set out by the Kyoto Protocol limited the amount of carbon that can be emitted and decided that greenhouse gases can only be released into the atmosphere with a permit. The required carbon certificate allows a company to emit one ton of carbon dioxide in a certain period. At the end of the period, the issuer must prove that all emissions of the company were covered by certificates.
Engagement is the effective connection between a corporation and its shareholders to involve the investors in the firm's decision-making process.
- Environmental Funds
Environmental funds are investment funds that make investment decisions based on environmental standards and practices. These funds typically invest in companies that seek to benefit from activities that result in positive environmental changes around the world. For example, companies engaged in renewable energy, water purification, waste management, energy efficiency, carbon emissions, or forestry.
- Environmental Management System (EMS)
Environmental Management System (EMS)
An Environmental Management System (EMS) is a framework that helps an organisation achieve its environmental goals through consistent review, evaluation, and improvement of its environmental performance. The assumption is that this consistent review and evaluation will identify opportunities for improving and implementing the environmental performance of the organisation. The EMS itself does not dictate a level of environmental performance that must be achieved; each organisation’s EMS is tailored to its own individual objectives and targets. One of the best known examples of an EMS is ISO 14001, a set of international standards and guidance documents for environmental management developed by the International Organisation for Standardisation (ISO).
- Environmental, Social, and Corporate Governance (ESG)
Environmental, Social, and Corporate Governance (ESG)
ESG in the investment universe is shorthand for investors using a set of environmental, social, and corporate governance (ESG) criteria to screen and monitor investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company's leadership, executive pay, audits, internal controls, and shareholder rights.
- ESG integration
ESG integration is defined as the explicit and systematic inclusion of ESG issues in investment analysis and investment decisions. Put another way, ESG integration is the analysis of all material factors in investment analysis and investment decisions, including environmental, social, and governance (ESG) factors.
- ESG Analysis
ESG analysis is the analysis carried out by investors wherein ESG parameters are considered while determining the material risks and growth opportunities of investment.
- ESG Indices
ESG indices serve as a benchmark for organizations that display exceptional ESG practices. A few examples are the MSCI World ESG Index, FTSE ESG Index Series, and NIFTY 100 ESG Index.
- ESG Investment Styles
ESG Investment Styles
ESG investment approaches include several investment types such as positive and negative screening, ethical investing, impact investing, and active ownership.
- ESG Research Providers
ESG Research Providers
ESG research providers such as liAS, MSCI, CP, and Bloomberg provide ESG ratings to investors. Each service provider may use a different process for providing company-specific ratings. There is no standardization on the subject. While identifying new investment opportunities, institutional investors are increasingly incorporating the ratings supplied by ESG rating companies.
- European Sustainable Investment Forum (EUROSIF)
European Sustainable Investment Forum (EUROSIF)
EuroSIF is a pan-European Sustainable and Responsible Investment Association that advocates for a more environmentally friendly financial system. EuroSIF is a collaboration of national Sustainable Investment Forums established across Europe (SIFS).
- Extra - Financial Factors
Extra - Financial Factors
Extra-financial factors include factors, other than conventional financial factors that are used to analyze a potential investment. For example environmental, social,, or governance (ESG) factors.
- External Tilting
Tilting toward overweight companies with the strongest ESG characteristics (e.g., ESG ratings or pillar scores, carbon emission intensities) based on third-party data (e.g., liAS, MSCI, Sustainalytics, GRESB, S&P Global).
- External carbon pricing
External carbon pricing
External carbon pricing can be done through an Emissions Trading System (ETS), which caps total greenhouse gas (GHG) emissions and permits lower-emitting companies to sell excess allowances to bigger emitters.Internal carbon pricing refers to the method by which businesses take climate action by imposing their internal carbon price. An internal price assigns a monetary value to greenhouse gas emissions, which businesses can then consider when making investment decisions and running their operations. Some industries, such as oil and gas, minerals and mining, and electric power, have used internal carbon pricing as part of their risk mitigation strategy to assist prepare for future carbon-reduction legislation.
- Fund ESG Score/Sustainability Scores For Investment Funds/ Fund ESGQuality Score:
Fund ESG Score/Sustainability Scores For Investment Funds/ Fund ESGQuality Score:
All of these are ratings issued by an external entity that examines a company's level of ESG compliance and ESG strategy. This is a non-standardized grading approach that is based on the elements chosen by the external party evaluating the company.
- Fossil Fuels
Coal, crude oil, and natural gas are examples of fossil fuels. Fossil fuels are the buried, petrified remains of plants and animals that existed millions of years ago. They have a high carbon content and produce a lot of carbon dioxide when burned.
Forestry describes the management of forest land including associated water bodies and wasteland. Forest clearing and the replanting of trees are the primary activities of forestry. The main objective of forestry is to maintain a continuous supply of wood through carefully planned harvesting and replacement.
As opposed to standards, frameworks are a set of concepts and principles for how information is structured and prepared, and what broad topics are covered. Sustainability frameworks such as the TCFD recommendations, the CDSB Framework, and the
Framework establish useful conceptual schema for communicating the sustainability-related risks and opportunities faced by a business. Generally, frameworks help promote consistency of information, both between reporting entities and over time. Frameworks enable high-quality disclosure because they provide detailed guidance for preparing information related to governance, risk, and strategy, which helps companies report sustainability information with the same rigor as they do financial information.
- Global Reporting Initiative (GRI)
Global Reporting Initiative (GRI)
GRI is an international independent standards organization that assists businesses, governments, and other organizations in understanding and communicating their impacts on topics such as climate change, human rights, and corruption. They provide the world's most frequently utilized standards for sustainability reporting - the GRI standards.
- Global Reporting Initiative (GRI) Standards
Global Reporting Initiative (GRI) Standards
GRI standards are the standards for organizations to report on their sustainability impacts consistently and credibly. An organization that is preparing a report by GRI standards can choose one of the two options - Core or Comprehensive, depending on the degree to which the GRI Standards have been applied.
- Green Bonds
A green bond is a type of fixed-income instrument intended to raise funds for climate and environmental projects. Typically, these bonds are asset-linked. The European Investment Bank issued the first green bond in 2007 under the name Climate Awareness Bond, as a structured bond with revenues dedicated to renewable energy and energy efficiency projects. After China, India became the second-largest emerging green bond market in 2019.
- Green Building
Green building (also known as green construction or sustainable building) refers to both a structure and the application of environmentally responsible and resource-efficient processes throughout the life cycle of a building: from planning to design, construction, operation, maintenance, renovation, and demolition. LEED (Leadership in Energy and Environmental Design) is a set of rating systems developed by the US Green Building Council for the design, construction, operation, and maintenance of green buildings.
- Greenhouse Effect
The greenhouse effect refers to the warming of the Earth's surface and troposphere (the lowest layer of the atmosphere) produced by the presence of water vapor, carbon dioxide, methane, and other gases in the atmosphere.
- Green Investing
Green investing is an ESG investment strategy that involves investing in activities that are either directly or indirectly beneficial to the environment.
- Greenhouse Gas
A greenhouse gas is any gas that absorbs infrared radiation (net heat energy) released from the Earth's surface and reradiates it back to the Earth's surface, contributing to the greenhouse effect. Carbon dioxide, water vapor, methane, nitrous oxide, and ozone are the principal greenhouse gases in the Earth's atmosphere.
- GHG emissions (Scope 1, Scope 2, Scope 3)
GHG emissions (Scope 1, Scope 2, Scope 3)
A greenhouse gas (GHG) is a gas that contributes to the greenhouse effect, and thus has a direct effect on climate change, by absorbing infrared radiation. GHG includes carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), chlorofluorocarbons (CFCs), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). GHG emissions are measured in carbon dioxide equivalents (CO2e). When estimating its GHG emissions, an organization should differentiate between Scope 1, Scope 2, and Scope 3. Scope 1 emissions are direct emissions from owned or controlled sources (e.g. natural gas used to heat buildings, fuel for the organization’s fleet). Scope 2 emissions are indirect emissions from the generation of purchased energy. Depending on the country’s or state’s electric mix (share of nuclear, renewable, coal, oil, gas consumed to produce the electricity consumed), a same amount of electricity consumed can lead to different amount of Scope 2 GHG emissions. Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.
- GHG Protocol
The Greenhouse Gas Protocol (GHGP) provides accounting and reporting standards, sector guidance, calculation tools and trainings for businesses and local and national governments. It has created a comprehensive, global, standardized framework for measuring and managing emissions from private and public sector operations, value chains, products, cities and policies to enable greenhouse gas reductions across the board.
Greenwashing occurs when a company or organization spends more time and money presenting itself as environmentally friendly rather than decreasing its environmental impact. It is an unsupported or misleading assertion regarding an organization's products or services' environmental advantages
- Human Rights
Human rights are rights that all people have, regardless of race, gender, nationality, ethnicity, language, religion, or another status. International human rights law establishes governments' obligations to act in particular ways or refrain from acting in certain ways to promote and defend people's and groups' human rights and basic freedoms.
In short, hydropower is the energy obtained from moving water. Hydropower was one of the first sources of energy to be used to generate electricity. Its principle is based on the water cycle, which consists of three steps: Solar energy heats water on the surface of rivers, lakes and oceans, causing the water to evaporate. The water vapor condenses and falls as precipitation, which collects in streams and rivers and the cycle repeats. The amount of precipitation that accumulates in an area, in rivers and other streams, determines the amount of water available that can be used for hydropower. This form of energy production is therefore susceptible to seasonal fluctuations in precipitation or long-term changes in the amount of precipitation. The amount of energy depends on the volume flow and the gradient. In general, the greater the water flow and the drop height, the more electricity a hydropower plant can produce. In hydropower plants, the water flows through a pipe or a pressure pipe socket, which presses against a turbine and thus sets the blades in motion, which in turn drives a generator. Pumped storage power plants can store excess energy in the network: The energy is used to pump the water from a water source to a higher storage basin. If the electrical energy is needed, the water can flow down the slope to the power plant or the turbine.
A member of the World Bank Group, IFC advances economic development and improves the lives of people by encouraging the growth of the private sector in developing countries.
- Impact Investing
Impact investing, an ESG investing style refers to investments made in companies, organizations, and funds to have a purposeful and identifiable social and environmental impact in addition to a financial return.
A result or effect that is caused by or attributable to a project or program. Impact is often used to refer to higher level effects of a program that occur in the medium or long term, and can be intended or unintended and positive or negative.
- Internal carbon pricing
Internal carbon pricing
Internal carbon pricing refers to the method by which businesses take climate action by imposing their internal carbon price. An internal price assigns a monetary value to greenhouse gas emissions, which businesses can then consider when making investment decisions and running their operations. Some industries, such as oil and gas, minerals and mining, and electric power, have used internal carbon pricing as part of their risk mitigation strategy to assist prepare for future carbon-reduction legislation.
- Indian Institute Of Corporate Affairs (IICA)
Indian Institute Of Corporate Affairs (IICA)
IICA is a subordinate office under the Ministry of Corporate Affairs which handles and deals with various subjects, matters, and affairs in the spectrum of corporate affairs regulation, governance, and policy.
- Institutional Investor Advisory Services India (IIAS)
Institutional Investor Advisory Services India (IIAS)
Institutional Investor Advisory Services India Limited (IIAS) is an advisory firm, dedicated to providing participants in the Indian market with independent opinions, research, and data on corporate governance and ESG issues as well as voting recommendations on shareholder resolutions for about 800 companies that account for over 95% of market capitalization. Refer to the front inside cover and the website for more.
- International Organization of Securities Commissions (IOSCO)
International Organization of Securities Commissions (IOSCO)
The International Organization of Securities Commissions (IOSCO) is the international body that brings together the world’s securities regulators and is recognized as the global standard setter for the securities sector. Its membership regulates more than 95% of the world’s securities markets in more than 130 jurisdictions: securities regulators in emerging markets account for 75% of its ordinary membership. IOSCO develops, implements and promotes adherence to internationally recognized standards for securities regulation. It works intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda.
- International Corporate Governance Network (ICGN)
International Corporate Governance Network (ICGN)
ICGN, established in 1995, is an investor-led organization, whose mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide.
- International Integrated Reporting Council (IIRC)
International Integrated Reporting Council (IIRC)
IIRC is a global coalition of regulators, investors, companies, standard setters, academia, and nongovernmental organizations. The coalition promotes communication about value creation as the next step in the evolution of corporate reporting. IRC's mission is to establish integrated reporting and thinking within the mainstream business practice as the norm in the public and private sectors.
- International Sustainability Standards Board (ISSB)
International Sustainability Standards Board (ISSB)
On 3 November 2021, the IFRS Foundation Trustees announced the creation of a new standard-setting board—the International Sustainability Standards Board (ISSB). The intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions. The IFRS Foundation will also complete consolidation of the Climate Disclosure Standards Board (CDSB-an initiative of CDP) and the Value Reporting Foundation (VRF-which houses the Integrated Reporting Framework and the SASB Standards) by June 2022.
- Integrated Reporting
Integrated Reporting combines material information about an organization's strategy, governance, financial performance, and prospects to represent the commercial, social, and environmental context in which it operates. The International Integrated Reporting Council is widely acknowledged as the gold standard in this field.
- Indirect Emissions
Indirect emissions includes Scope 2 and Scope 3 emissions. Indirect GHG emissions result from the activities of the reporting company, but occur elsewhere and are owned or controlled by another company. The reporting organization has no direct influence on the emissions.
- Joint Implementation
Joint Implementation (JI) is a project-based mechanism based on Article 6 of the Kyoto Protocol. A project that is carried out jointly by two developed countries, both of which have pledged to an emission mitigation target under the Kyoto Protocol, falls within the scope of Joint Implementation.
- Kyoto Protocol
The Kyoto Protocol was adopted on 11 December 1997 and is an additional protocol to the United Nations Framework Convention on Climate Change (UNFCCC). It was the first agreement to provide legally binding commitments for developed countries to limit and reduce emissions.
- Low Carbon Funds
Low Carbon Funds
Low-carbon funds invest in companies that are seeking to combat climate change by reducing deforestation and the usage of fossil fuel reserves.
The quality of being relevant or significant. The SASB Standards define information as financially material “if omitting, misstating, or obscuring it could reasonably be expected to influence investment or lending decisions that users make on the basis of their assessments of short-, medium-, and long-term financial performance and enterprise value.” Double materiality: refers to the consideration of both sustainability issues that affect companies’ activities and the effect of companies’ activities on society and the environment. Dynamic materiality: refers to the recognition that the issues considered to be material may evolve over time. Embedded materiality: refers to varying scope of material issues depending on the perspective selected, e.g. from the narrow scope of issues reflected in financial statements, to the broader scope of issues affecting enterprise value, or to those having positive or negative impacts on the environment and society
- Ministry of Corporate Affairs
Ministry of Corporate Affairs
The MCA is an Indian Government Ministry, responsible mainly for the regulation of Indian enterprises in the industrial and services sector. It is primarily concerned with the administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act, 2008 & other allied Acts and rules & regulations framed there-under mainly for regulating the functioning of the corporate sector by the law.
- Modern Slavery
Modern slavery, also known as contemporary slavery, refers to institutional slavery that still exists in today's society. It is the ruthless exploitation of others for personal or commercial gain. Human trafficking, debt bondage/bonded labor, child slavery, and other kinds of modern slavery exist.
- Mission-Related Investing
Mission-linked investing is an ESG investing approach that refers to investments made by foundations and/or organizations to achieve their philanthropic goals.
- MSCI World ESG Index
MSCI World ESG Index
The MSCI World ESG Indexes are intended to represent the performance of the most popular ESG investment methodologies by including, re-weighting, or eliminating businesses based on ESG criteria.
- Natural Gas for Vehicles (NGV)
Natural Gas for Vehicles (NGV)
NGV is an alternative vehicle fuel that uses compressed natural gas (CNG) to provide cleaner transportation. It may be utilized in a variety of transportation applications such as automobiles, buses, trucks, cranes, and so on.
- National Guidelines on Responsible Business Conduct (NGRBC)
National Guidelines on Responsible Business Conduct (NGRBC)
NGRBC has been designed to assist businesses to perform above and beyond the requirements of regulatory compliance. The primary rationale of these guidelines is to capture key national and international developments in the sustainable development agenda and business responsibility field. NGRBC is an India-specific disclosure.
- National Guidelines on Responsible Business Conduct (NGRBC) Principle
National Guidelines on Responsible Business Conduct (NGRBC) Principle
In 2018 the Ministry of Corporate Affairs revised the National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business and formulated the National Guidelines on Responsible Business Conduct Principles. The NGRBC Principles have been designed around nine thematic pillars of business responsibility called 'the Principles'. These are designed to help businesses govern themselves with integrity, include transparency, sustainability, and responsiveness across the value chain as well as promote and protect the environment and human rights. NGRBC Principles are an India-specific disclosure.
- Negative Screening
Negative screening entails excluding companies or industries that do not meet specified, pre-determined social and/or environmental criteria utilized in the investment decision-making process. This approach is used by investors to align their portfolios with their ideals.
- Net Zero Carbon
Net Zero Carbon
Net zero carbon means that all man-made greenhouse gas emissions must be eliminated from the atmosphere through reduction methods, resulting in a net carbon balance of zero for the Earth. Any leftover GHG emissions would be offset by an equal quantity of carbon removals, such as forest restoration and afforestation. To satisfy the Paris Agreement's 1.5 degree Celsius global warming objective, global carbon emissions should be nil by mid-century.
- Network of Central Banks and Supervisors for Greening the Financial Systems (NGFS)
Network of Central Banks and Supervisors for Greening the Financial Systems (NGFS)
NGFS was launched at the Paris One Planet Summit on 12 December 2017. NGFS is a group of central banks and supervisors willing to share best practices and contribute to the development of environment and climate risk management in the financial sector.
- Norms-Based Investing
Norms-based investing, an ESG investing strategy, is the screening of investments against minimum standards of corporate behavior based on international norms. The United Nations Global Compact Principles, the Universal Declaration of Human Rights, and the OECD Guidelines for Multinational Enterprises are examples of such principles.
Carbon offsetting is a way to pursue carbon neutrality. Therefore, emissions from one company / country / industry sector are countered by an emission reduction somewhere else. Examples include investments in renewable energy, energy efficiency and other low-carbon (clean) technologies, restoring forests, or sequestering carbon in soil.
- Organization Cooperation (OECD) for Economic and Development
Organization Cooperation (OECD) for Economic and Development
The Organisation for Economic Co-operation and Development is an an international organization that works to build better policies for better lives. Their goal is to shape policies that foster prosperity, equality, opportunity, and well-being for all.
- Organisation Cooperation (OECD) for Economic and Development Principles
Organisation Cooperation (OECD) for Economic and Development Principles
The OECD principles of Corporate Governance reflect a global consensus regarding the importance of good corporate governance in contributing to the economic vitality and stability of financial markets. These principles cover six key areas of corporate governance: ensuring the basis for an effective corporate governance framework, the rights of shareholders, the equitable treatment of shareholders, the role of stakeholders in corporate governance, disclosures and transparency, and the responsibilities of the board.
A director is considered to be over-boarded when he serves on multiple company boards, resulting in an excessive time commitment and incapacity to accomplish his obligations.
- Ozone-Depleting Substance (ODS)
Ozone-Depleting Substance (ODS)
Substances that have a positive ozone depletion potential (ODP) can thin the stratospheric ozone layer. Most of the ozone-depleting substances (ODS) are controlled by the United Nations Environment Programme (UNEP): The "Montreal Protocol on Substances that Deplete the Ozone Layer”. ODS include chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), halons, and methyl bromide. The most commonly used HCFCs today are HCFC-22 or R-22, which are still used in existing air conditioning and refrigeration equipment. Nevertheless, many ODSs are banned today and more are following.
- Physical risk
Physical risks resulting from climate change can be event-driven (acute) or longer-term shifts (chronic) in climate patterns. Physical risks may have financial implications for organizations, such as direct damage to assets and indirect impacts from supply chain disruption. Organizations’ financial performance may also be affected by changes in water availability, sourcing, and quality; food security; and extreme temperature changes affecting organizations’ premises, operations, supply chain, transport needs, and employee safety.
- Principles for Responsible Banking (PRB)
Principles for Responsible Banking (PRB)
The Principles for Responsible Banking (PRB) are a unique framework for ensuring that signatory banks’ strategy and practice align with the vision society has set out for its future in the Sustainable Development Goals and the Paris Climate Agreement. Over 240 banks have now joined this movement for change, leading the way towards a future in which the banking community makes the kind of positive contribution to people and the planet that society expects. The Principles provide the framework for a sustainable banking system, and help the industry to demonstrate how it makes a positive contribution to society. The framework identifies six principles that embed sustainability at the strategic, portfolio and transactional levels, and across all business areas.
- Paris Accord
The Paris Agreement is a legally enforceable international climate change accord. It was adopted by 196 parties on December 12, 2015, at the 21st Conference of Parties (COP) in Paris. The Paris Agreement intends to improve the global response to climate change by limiting the global temperature rise to less than 2 degrees Celsius above pre-industrial levels, and pursue efforts to limit the temperature increase to 1.5 degrees Celsius.
- Passive Investing
Passive investing is a method that entails holding investments for an extended period with little market trading. Investing in an index is an example of a passive investment.
- Positive Screening
Positive screening is when investors choose companies that set a good example, such as being environmentally friendly and/or having socially responsible corporate practices, among other things.
- Principles for Responsible Investment (PRI)
Principles for Responsible Investment (PRI)
The Principles of Responsible Investment (PRI) is an investor initiative in partnership with UNEP Finance Initiative and UN Global Compact. The PRI is the world’s leading proponent of responsible investment. It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, the financial markets and economies in which they operate, and ultimately the environment and society as a whole. The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice.
- Principles for Sustainable Insurance (PSI)
Principles for Sustainable Insurance (PSI)
Launched at the 2012 UN Conference on Sustainable Development, the UNEP FI Principles for Sustainable Insurance serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities. Endorsed by the UN Secretary-General, the Principles have led to the largest collaborative initiative between the UN and the insurance industry—the PSI Initiative. Over 180 organizations worldwide have adopted the four Principles for Sustainable Insurance, including insurers representing more than 25% of world premium volume and USD 14 trillion in assets under management. The Principles are part of the insurance industry criteria of the Dow Jones Sustainability Indices and FTSE4Good. As risk managers, risk carriers and investors, the insurance industry has a vital interest and plays an important role in fostering sustainable economic and social development. PSI believes that better management of ESG issues will strengthen the insurance industry’s contribution to building a resilient, inclusive and sustainable society.
A company’s purpose can be defined as its core reason for being and its impact on the world. The British Academy defines purposes as “producing profitable solutions from the problems of people and planet, and not profiting from creating problems.” In Larry Fink’s famous 2019 letter to CEOs, he outlines corporate purpose as “the higher purpose of a company that goes beyond the sole profit orientation…purpose is to define and deliver a long-term value-creating promise, either in the company’s local environment or in the global market environment, that is directly related to the company’s value creation.”
- Ranking (ESG)
Lists that classify companies based on their performance and put them in a certain order or grouping based on a specified grading system.
- Rating (ESG)
The evaluation of a company based on a comparative assessment of their quality, standard, or performance on environmental, social, and/or governance (ESG) issues.
- Representative Concentration Pathway (RCP)
Representative Concentration Pathway (RCP)
The Representative Concentration Pathways (RCPs) were developed for the 5th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). They are values which represent four future scenarios of changes in radiative forcing due to anthropogenic greenhouse gasses: RCP2.6, RCP4.5, RCP6 and RCP8.5. These values stand for the change in radiative forcing expected in 2100 in contrast to pre-industrial forcing (1850).
- Radiative Forcing
Radiative forcing is the difference between solar irradiance absorbed by the Earth (or any other planet) and energy reflected out into space. It is a measure of the impact of a specific greenhouse gas or another climatic element on the quantity of radiant energy impinging on the Earth's surface, as defined by the Intergovernmental Panel on Climate Change (IPCC). As a result, if the solar energy going out does not equal the energy coming in, a planet can become warmer or cooler.
REDD+ stands for Reducing Emissions from Deforestation and forest Degradation in developing countries. It was developed by the parties to the United Nations Framework Convention on Climate Change (UNFCCC).
- Renewable Energy
Renewable energy, often known as clean energy, is derived from naturally renewed resources or processes.
- Responsible Investing
Responsible investing is an ESG investment strategy that recognizes that long-term sustainable returns rely on stable, well-functioning, and well-governed social, environmental, and economic systems.
- Scope 1 Scope 2 and Scope 3 Emissions
Scope 1 Scope 2 and Scope 3 Emissions
Scope 1 emissions are direct greenhouse gas emissions that occur from sources owned or controlled by a company. For example, emissions from combustion in owned equipment. Scope 2 accounts for greenhouse gas emissions from the generation of purchased electricity consumed by a company. Scope 2 emissions physically occur at the facility where electricity is generated. Scope 3 are indirect emissions from activities of the organization, occurring from sources that they do not own or control, including emissions associated with business travel, procurement, waste, and water.
- Securities and Exchange Board of India (SEBI)
Securities and Exchange Board of India (SEBI)
The Securities and Exchange Board of India is the regulator of the securities and commodity markets in India. SEBI was established on 12 April 1992. It protects the interests of investors in securities and promotes the development and regulation of the securities market. SEBl is managed by its members, which consist of the following: The Chairperson was nominated by the Union Government of India. Two members are officers of the Union Ministries of Finance and Corporate Affairs. One member from the Reserve Bank of India. The remaining five members are nominated by the Union Government of India, out of which at least three should be whole-time members.
- Shareholder Activism
Shareholder activism refers to a variety of activities carried out by one or more shareholders of a publicly-traded firm to effect positive change in the corporation by exercising their rights as partial owners. These activities may include dialogue and participation with managers, as well as voting on concerns presented at a company's annual meeting.
- Scenario analysis and planning
Scenario analysis and planning
Scenario analysis is a process of examining and evaluating possible events or scenarios that could take place in the future and predicting the various feasible results or possible outcomes. In financial modeling, the process is typically used to estimate changes in the value of a business or cash flow, especially when there are potentially favorable and unfavorable events that could impact the company. Scenario analysis is also becoming more common in the context of climate change, in that it can help companies assess potential business implications of climate-related risks and opportunities and inform stakeholders about how the organization is positioning itself in light of these risks and opportunities.
- Science-based target
Targets are considered science-based if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement–limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.
Shariah is Islamic legislation that fosters trade and investment but forbids involvement in enterprises involved in the production of alcoholic beverages, gambling, adult entertainment, abortion, defence, traditional banks or insurers, and most industries related to pork.
- Shariah Investments
Shariah-compliant investments adhere to Shariah law standards. These investments are by Islamic religious values. These are similar to ESG investments in that they screen out enterprises that are not socially responsible by Shariah law and encourage better social fairness by sharing risk and benefit. Short selling, speculating, and derivatives are also prohibited in Shariah investments.
- Solar Power
Solar power uses the sun’s energy. To do this, photovoltaic (PV) cells convert sunlight into electricity. The process looks like this: Sunlight consists of photons or particles of solar energy. The photons contain different amounts of energy, depending on the wavelength. A PV cell consists of semiconductor material. If a photon hits a PV cell, there are three possibilities: Either they are reflected by the cell, pass through the cell or are absorbed by the semiconductor material. Only in the latter case do the photons provide usable energy. Electrons from the atoms of the material are removed, causing a current flow. This in turn leads to a potential difference and a current circuit is created.
- Sustainable finance
Sustainable finance generally refers to the process of taking due account of environmental, social and governance considerations when making investment decisions in the financial sector, leading to increased longer-term investments into sustainable economic activities and projects. Environmental considerations refer to climate change mitigation and adaptation, as well as the environment more broadly, such as preserving biodiversity, preventing pollution and promoting the circular economy. Social considerations refer to issues of inequality, inclusiveness, labour relations, investment in human capital and communities, and human rights issues. The governance of public and private institutions, including management structures, employee relations and executive remuneration, plays a fundamental role in ensuring the inclusion of social and environmental considerations in the decision-making process.
Sustainalytics, a Morningstar Company, provides environmental, social and governance (ESG) research, ratings and data to institutional investors and companies. Sustainalytics’ ESG Risk Ratings evaluates the degree to which a company’s enterprise value is exposed to material ESG issues. Specifically, they measure a company’s exposure to industry-specific material ESG risks, and how well that company is managing those risks. Combining the concepts of management and exposure they arrive at an absolute assessment of ESG risk that is comparable across subindustries, sectors, companies and regions.
- Sin Stocks
Sin stocks are shares of corporations engaging in unethical activities such as alcohol, cigarettes, gambling, or firearms. Ethical investors tend to avoid sin stocks since the companies involved are believed to profit from human vices.
- System-level investing
System-level investing is the intentional consideration by investors of the bigger-picture environmental, social, or financial system context of their security selection and portfolio construction decisions. Environmental, social, and financial systems refer to the three overarching systems that the financial community relies on for profitable investment opportunities and that support stable business operations and functioning financial markets.
- Social Impact Bonds
Social Impact Bonds
A social impact bond is a type of financial instrument that gives financing to the public sector to fund projects that improve social outcomes while saving money. It brings together the government, service providers, and investors to implement current and successful programs that are meant to achieve specific results. Social Finance Limited, based in the United Kingdom, issued the first social impact bond in September 2010. According to one estimate, 206 impact bonds worth more than USD 434 million have been issued in 35 countries as of January 2021.
Stewardship refers to working with publicly traded corporations to promote corporate governance standards that create long-term benefits for shareholders. Participation and voting at annual meetings allow shareholders to express their opinions.
- Stewardship Codes
The stewardship code is a principles-based framework that aids institutional investors in meeting their obligations to protect and increase the value of their beneficiaries. Adherence to the code by institutional investors improves the corporate governance of the companies in which they invest.
- Stranded Assets
Stranded assets are assets that are worth less than projected due to changes related to the transition to a low-carbon economy. It has risen to prominence in environmental and climate change discourses, where the emphasis has been on how environmental issues may strand assets in many sectors. For example, the German government is dismantling nuclear power plants to improve sustainability.
It entails addressing our wants without compromising future generations' ability to meet their own needs. It refers to activities performed by humanity to prevent the depletion of natural resources to maintain an ecological balance that does not allow the quality of life to decline over time.
- Sustainability Accounting Standards Boards (SASB)
Sustainability Accounting Standards Boards (SASB)
SASB is a non-profit organization that establishes rules for corporations to disclose financially important sustainability information to their investors. Sustainability accounting includes operations that have a direct impact on an organization's society, environment, and economic performance.
- The Six Capitals
The Six Capitals
Capitals are stocks of value that are affected or transformed by the activities and outputs of an organization. The Integrated Reporting Framework has categorized six capitals as financial, manufactured, intellectual, human, social and relationship, and natural. Across these six categories, all the forms of capital an organization uses or affects should be considered. An organization’s business model draws on various capital inputs and shows how its activities transform them into outputs. Financial capital: pool of funds that is (i) available to an organization for use in the production of goods or the provision of services or (ii) obtained through financing, such as debt, equity or grants, or generated through operations or investments Manufactured capital: Manufactured physical objects (as distinct from natural physical objects) that are available to an organization for use in the production of goods or the provision of services, including: buildings equipment, and infrastructure (such as roads, ports, bridges, and waste and water treatment plants) Intellectual capital: Organizational, knowledge-based intangibles, including: intellectual property, such as patents, copyrights, software, rights and licenses, “organizational capital” such as tacit knowledge, systems, procedures and protocols Human capital: People’s competencies, capabilities and experience, and their motivations to innovate, including their: alignment with and support for an organization’s governance framework, risk management approach, and ethical values, ability to understand, develop and implement an organization’s strategy, loyalties and motivations for improving processes, goods and services, including their ability to lead, manage and collaborate Social and relationship capital: The institutions and the relationships within and between communities, groups of stakeholders and other networks, and the ability to share information to enhance individual and collective well-being. Social and relationship capital includes: shared norms, and common values and behaviors, key stakeholder relationships, and the trust and willingness to engage that an organization has developed and strives to build and protect with external stakeholders, intangibles associated with the brand and reputation that an organization has developed, and an organization’s social license to operate Natural capital: All renewable and non-renewable environmental resources and processes that provide goods or services that support the past, current or future prosperity of an organization. It includes: air, water, land, minerals and forests, and biodiversity and eco-system health
In the context of climate change, transition risk is the risk inherent in changing strategies, policies, or investments as society and industry work to reduce its reliance on carbon and impact on the climate. Transitioning to a lower-carbon economy may entail extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. Depending on the nature, speed, and focus of these changes, transition risks may pose varying levels of financial and reputational risk to organizations.
- Task Force on Climate-Related Financial Disclosures (TCFD)
Task Force on Climate-Related Financial Disclosures (TCFD)
The TCFD was created in 2015 by the Financial Stability Board to develop consistent climate-related financial risk disclosures that could promote more informed investment, credit & insurance underwriting decisions and help stakeholders better understand the financial sector's exposure to climate-related risks.
- Tipping Points
A tipping point is described as a “point of no return” in the Earth’s climate system which denotes a threshold value - the exceeding of which leads to irreversible changes.
- Transition to a low carbon economy
Transition to a low carbon economy
A low-carbon economy (LCE) is an economic system where primary sources of energy used have minimal amount of GHG emissions associated (mainly solar, wind, hydro, nuclear, geothermal, etc). A transition to low-carbon economy implies a systemic switch in economic activities of production, consumption and trade, as well as the inter-relationships of these activities with natural asset base, public policy measures and mechanisms available to governments, and behaviors. In 2021, the International Energy Agency (IEA) published “Net Zero by 2050 – A Roadmap for the Global Energy Sector”, a report emphasizing seven key domains of action to transition to a low-carbon economy: energy efficiency; behavioral change; electrification; renewables; hydrogen and hydrogen-based fuels; bioenergy; and carbon capture, utilization and storage.
- Thematic Investing
The thematic investment aims to uncover long-term growth-generating structural trends. It entails building a portfolio based on a macro trend by assembling a group of companies that will outperform the market in the long run. It allows investors to invest in long-term trends or themes such as food, climate education, and so on.
- Transition Risk
Transition risks can occur when moving towards a less polluting, greener economy. Such transitions could mean that some sectors of the economy face big shifts in asset values or higher costs of doing business. Transition risks include policy and regulatory changes, reputational impacts, and shifts in market preferences, norms, and technology.
- Triple Bottom Line
Triple Bottom Line
The triple bottom line is an accounting system that considers three aspects of performance: social, environmental, and financial. This framework differs from typical reporting frameworks in that it covers environmental and social indicators that can be difficult to quantify.
- United Kingdom Sustainable Investment and Finance Association (UKSIF)
United Kingdom Sustainable Investment and Finance Association (UKSIF)
UKSIF, founded in 1991, is the UK's membership network for sustainable and responsible financial services. It has over 250 members including asset managers, pension funds, independent research advisors, and nongovernmental organizations. It promotes responsible investment and other forms of finance that support sustainable economic development along with safeguarding the society and the environment.
- United Nations programme Development (UNDP)
United Nations programme Development (UNDP)
The UNDP, formed in 1965, is the United Nations' global development network. It promotes technical and investment cooperation among nations. The UNDP provides expert advice, training, and grants support to developing countries and the least developed countries. UNDP works with nations on their solutions to global and national development challenges It also helps countries achieve the Sustainable Development Goals (SDGs) by offering them integrated solutions. UNDP has supported ~100 countries to incorporate SDGs into national planning.
- United Nations Guiding Principles on Business and Human Rights (UNGP)
United Nations Guiding Principles on Business and Human Rights (UNGP)
The United Nations Guiding Principles on Business and Human Rights is an instrument consisting of 31 principles implementing the United Nations' "Protect, Respect and Remedy" framework on the issue of human rights and transnational corporations and other business enterprises.
- United Nations Guiding Principles for Responsible Investments (UNPRI)
United Nations Guiding Principles for Responsible Investments (UNPRI)
The United Nations Principles for Responsible Investment (UNPRI) is an international network of investors working to implement six principles that encourage the incorporation of environmental, social, and governance considerations into investment decision-making.
- United Nations Sustainable Development Goals (UN SDG)
United Nations Sustainable Development Goals (UN SDG)
The Sustainable Development Goals or Global goals are a collection of 17 interlinked goals designed as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. These goals include interlinked issues such as climate action, zero hunger, clean water, quality education, life on land and below water, reducing inequalities, and sustainable cities amongst others.
- Value-Based Investing
Value-based investing is an ESG investing strategy that seeks to invest in firms that are environmentally sensitive and seek positive returns through sustainable and ethical activities.
- Water Funds
Population growth, climate change, and pollution are all disrupting the freshwater supply system. Water funds are scientific investment solutions that actively and favorably contribute to water-related public policies and promote corporate water management practices both inside and outside of businesses. These funds provide items or services to alleviate water scarcity and to convert water supply infrastructure from archaic ways to contemporary and robust solutions.
- Wind Power
Wind power or wind energy is mostly the use of wind turbines to generate electricity. Wind power is a popular, sustainable, renewable energy source that has a much smaller impact on the environment than burning fossil fuels. Wind farms consist of many individual wind turbines, which are connected to the electric power transmission network.
- World Business Council for Sustainable Development (WBCSD)
World Business Council for Sustainable Development (WBCSD)
The World Business Council for Sustainable Development (WBCSD) is a global, CEO-led association of over 200 international firms. The Council works on a wide range of issues including sustainable development. It works to meet the Sustainable Development Goals (SDGs) by implementing six work programs aimed at system reform. The Circular Economy, Cities and Mobility, Climate and Energy, Food, Land, and Water, People, and Redefining Value are among them. Each system change is organized as a WBCSD Program with multiple ancillary projects.