Glossary

Established in 1999, ACGA is an independent, non-profit membership organization that is committed to supporting investors, companies, and regulatory bodies across Asia in adopting robust corporate governance standards. ACGA works towards the effective implementation of these standards, aiming to enhance transparency, accountability, and investor protection in the region.

Forestry entails the administration of forested areas, encompassing water bodies and unused land. The key activities in forestry involve clearing forests and reforesting them. The primary goal of forestry is to ensure a sustained and consistent supply of wood by employing well-planned practices for harvesting and subsequent replanting.

Active investing refers to a dynamic investment strategy that involves actively selecting and diligently monitoring individual investments with the aim of outperforming a benchmark or achieving a specific target return. It involves proactive analysis, decision-making, and portfolio management to achieve superior returns

Active ownership refers to the utilization of shareholder rights as a means to foster sound corporate governance, engage in discussions regarding environmental and social issues with the company, and generate lasting value. This proactive approach is exemplified through various actions, including proxy voting, direct interaction with corporate management, and active participation by shareholders.

Best-in-class investment refers to the practice of investing in companies or sectors that exhibit superior Environmental, Social, and Governance (ESG) performance when compared to their industry peers. A best-in-class investor selects companies that actively work towards meeting the specific ESG criteria relevant to their respective industries. By focusing on these top-performing entities, best-in-class investors aim to align their investments with sustainable and responsible business practices.

Biocapacity refers to the inherent capacity of ecosystems to generate biologically valuable resources and absorb human-generated waste. On the other hand, an "ecological deficit" occurs when the ecological footprint of a population surpasses its available biocapacity, indicating an unsustainable demand on natural resources and environmental systems.

The Business Responsibility Report (BRR) serves as a disclosure mechanism for Indian listed companies to communicate their adoption of responsible business practices to stakeholders. It is designed to provide essential non-financial information about the company, including details about its operations, principles, and responsible business practices. The Securities and Exchange Board of India (SEBI) introduced the BRR format through a circular issued on August 13, 2012. Initially, it was mandatory for the top 100 listed firms to include the BRR in their Annual Reports. However, from April 1, 2016, this requirement was extended to the top 500 listed companies, and subsequently, to the top 1000 listed companies based on a notification issued on December 26, 2019. It is important to note that the BRR is specific to companies in India.

On August 11, 2020, the Ministry of Corporate Affairs introduced the Business Responsibility Sustainability Report (BRSR) through the Committee on Business Responsibility Reporting Report. The BRSR serves as an expanded reporting framework, aiming to enhance the coverage of non-financial factors in the Business Responsibility Report (BRR). This reporting format is specifically applicable to companies operating in India. To facilitate a smooth transition and promote learning, the Ministry proposes a phased implementation approach, starting with the top 1000 publicly traded firms. This enables smaller businesses to gradually adapt and gain insights from larger entities that have already embraced the reporting requirements.

Established in 2000, CDP is a non-profit organization that operates a global disclosure system, facilitating the management of environmental impacts by investors, companies, cities, states, and regions. With regional offices and local partners in 50 countries, CDP plays a crucial role in enabling transparent reporting and accountability. Notably, CDP has garnered participation from 39 signatories among India's top 100 listed companies, showcasing their commitment to environmental disclosure and sustainability practices.

The carbon budget signifies the permissible quantity of greenhouse gases that can be released into the atmosphere by humanity to achieve the 1.5°C target outlined in the Paris Climate Convention. It serves as a crucial benchmark for measuring and managing emissions in order to mitigate climate change effectively.

Carbon dioxide equivalent (CO2e) is a standardized metric used to quantify the total impact of various greenhouse gases by converting them into an equivalent amount of carbon dioxide (CO2). This measure enables a comprehensive assessment of greenhouse gas emissions, considering the varying potency and longevity of different gases in contributing to climate change.

Carbon Tracker is an independent financial think tank headquartered in London. It specializes in conducting comprehensive analyses that examine the implications of the energy transition on capital markets. Its primary focus is to evaluate potential investments in high-cost and carbon-intensive fossil fuels.

The Carbon Disclosure Project (CDP) is an independent and non-commercial organization that maintains the largest database of companies' greenhouse gas emissions and climate change strategies. The primary objective of the project is to offer valuable information to investors, companies, and governments. The organization requests data from companies, cities, and countries regarding their environmental impact, encompassing aspects such as greenhouse gas emissions and resource utilization like water. Participation in submitting the data is voluntary. Alongside a thorough assessment, the CDP provides recommendations on how companies or cities can further enhance their sustainability efforts.

A carbon credit refers to a transferable certificate or permit that represents the authorization to emit one tonne of carbon dioxide (CO2) or an equivalent quantity of another greenhouse gas (GHG). The GHG emissions are measured in units of tCO2e (metric tons of carbon dioxide equivalent). Carbon credits form part of a market-based approach aimed at curbing GHG concentrations. Initially allocated to companies or governments, these credits gradually decrease over time. If there is an excess supply, companies or nations have the option to sell the surplus carbon credits since they are tradable on the market.

The circular economy is an economic system that places emphasis on minimizing waste by maximizing the value extracted from resources. It involves a deliberate approach of reusing and recycling existing resources to their fullest extent, aiming to prolong their lifespan within the economic cycle.

Clean technology, also known as green technology or cleantech (greentech), encompasses a diverse set of technologies aimed at reducing or optimizing the utilization of natural resources. Its primary goal is to minimize the adverse environmental impact of technology on ecosystems.

Carbon monitoring involves the systematic measurement and tracking of carbon dioxide or methane emissions resulting from various activities at any given time. It encompasses monitoring emissions from sources such as deforestation and the utilization of fossil fuels. Several widely used systems for carbon monitoring worldwide include Carbon Monitoring for Action (CARMA), Emissions Trading Scheme Workflow Automation Project (ETSWAP), and the Forms Management System (FMS) utilized in Germany for reporting emissions under the European Union Emissions Trading Scheme (EU ETS). These systems play a crucial role in providing accurate and comprehensive data on carbon emissions, aiding in the assessment and management of environmental impact.

A carbon sink refers to a reservoir, whether natural or human-made, that has the ability to absorb and retain carbon. These sinks can take the form of natural entities such as oceans and forests, as well as man-made structures like landfills and carbon capture and storage systems. Their function is to effectively capture carbon dioxide (CO2) from the atmosphere and store it, thereby helping to decrease its concentration in the atmosphere. Carbon sinks play a vital role in mitigating greenhouse gas emissions and balancing the carbon cycle.

Carbon pricing is an effective strategy aimed at mitigating carbon emissions by implementing a cost mechanism that assigns a price to a company's carbon emissions. This approach can be categorized into two types: external and internal carbon pricing.

Climate bonds are a type of fixed-income financial securities that offer environmental and climate-related advantages. These bonds conform to green bond standards, and the funds raised from their issuance are dedicated to financing specific climate change solutions. These solutions encompass a range of initiatives, including projects focused on greenhouse gas (GHG) reduction, clean energy, energy efficiency, and other environmentally beneficial endeavors. Similar to traditional bonds, climate bonds can be issued by governments, banks, and businesses, providing investors with an opportunity to support sustainable investments while also earning financial returns."

The Conference of the Parties (COP) serves as the decision-making body for the United Nations Framework Convention on Climate Change. It unites the 197 nations and territories that have become parties to the Convention. The primary objective of the COP is to collectively strive for limiting global warming to well below 2 degrees Celsius, preferably 1.5 degrees Celsius, compared to pre-industrial levels. A crucial responsibility of the COP involves reviewing and assessing the national communications and emission inventories submitted by the Parties. The COP convenes annually to address these matters and advance global climate action.

The Companies Act 2013 is a legislation passed by the Parliament of India that regulates company law in the country. It encompasses provisions related to the establishment, functioning, and winding up of businesses in India. The Act sets out the obligations of companies and their directors, ensuring compliance with legal requirements. It received authorization from the President of India in August 2013. For further guidance, reference the Indian Corporate Governance Codes that complement the Companies Act.

Community investing is an ESG (Environmental, Social, and Governance) investment strategy that channels funds towards supporting local businesses and underserved communities, particularly those with low-income populations. Its objective is to enhance the quality of life for individuals residing in these areas while also generating financial returns for investors. Community investing aims to make a positive social impact by directing investments towards organizations and initiatives that address societal needs, promote economic development, and uplift disadvantaged communities.

orporate governance regulations establish the guidelines that corporate boards must adhere to in order to safeguard shareholder investments. These requirements are determined by local regulators on a country-specific level.

The Companies Act of 2013 serves as the primary legislation governing businesses in India. In relation to listed entities, the Securities and Exchange Board of India (SEBI) has issued the SEBI (Listing Obligations and Disclosure Requirements) Regulations of 2015 (LODR). The SEBI LODR encompasses a set of corporate governance principles and norms, along with guidelines and regulations concerning the periodic and event-based disclosures of companies.

Corporate Social Responsibility (CSR) represents a company's ethical and moral responsibility towards its stakeholders, the environment, and the broader society in which it conducts business. It enables corporations to demonstrate social accountability and fulfill their role as responsible corporate citizens by recognizing the influence they exert on various aspects of society, including the economy, social well-being, and the environment.

The Council of Institutional Investors (CII) is a nonpartisan and nonprofit organization comprising public, corporate, and union employee benefit funds, as well as other employee benefit plans, state and local entities responsible for investing public assets, foundations, and endowments. Together, these members manage a collective asset worth around $4 trillion in the United States. CII serves as a prominent proponent of effective corporate governance, strong shareholder rights, and responsible financial regulations that foster fair and dynamic capital markets. CII actively advocates for policies aimed at enhancing long-term value for institutional asset owners and their beneficiaries in the United States.

Diversity encompasses the multitude of aspects and traits that set individuals apart from one another, including age, race, gender, caste, ethnicity, sexual orientation, socioeconomic background, religious ideals, and personal beliefs. Inclusion, on the other hand, involves providing equitable opportunities to all individuals and embracing and valuing them irrespective of their distinctive qualities and characteristics.

Engagement refers to the meaningful connection established between a corporation and its shareholders, enabling active involvement of investors in the decision-making processes of the company.

Environmental funds are investment funds that prioritize environmental standards and practices when making investment decisions. These funds typically invest in companies that aim to make positive environmental contributions on a global scale. This may include companies involved in renewable energy, water purification, waste management, energy efficiency, carbon emissions reduction, or forestry, among other environmentally beneficial activities.

The Kyoto Protocol introduced regulations that imposed restrictions on carbon emissions, stipulating that greenhouse gases can only be discharged into the atmosphere through authorized permits. These permits, known as carbon certificates, grant companies the right to emit a specific quantity of carbon dioxide within a designated timeframe. By the end of this period, the issuing entity must provide evidence that all of the company's emissions were appropriately offset by these certificates.

Economically targeted investments are investments that not only yield financial returns but also deliver social benefits, such as supporting environmentally friendly initiatives like funding renewable energy projects.

ESG integration refers to the deliberate and methodical incorporation of ESG issues into the process of investment analysis and decision-making. In simpler terms, it involves considering and evaluating all relevant factors, including environmental, social, and governance (ESG) factors, during investment analysis and decision-making. By integrating ESG considerations, investors can comprehensively assess the material aspects that impact investments, thereby making more informed and holistic investment decisions.

ESG analysis is the process undertaken by investors to evaluate and assess the material risks and growth opportunities associated with an investment, taking into account ESG parameters.

An Environmental Management System (EMS) is a structured framework designed to assist organizations in attaining their environmental objectives by continually assessing, evaluating, and enhancing their environmental performance. Through consistent review and evaluation, an EMS helps identify opportunities for improvement and facilitates the implementation of effective environmental practices within the organization. It is important to note that an EMS does not impose a predetermined level of environmental performance; instead, each organization tailors its EMS to align with its specific objectives and targets. ISO 14001, developed by the International Organization for Standardization (ISO), is a widely recognized example of an EMS, offering a set of international standards and guidance documents for environmental management.

ESG investment approaches encompass various investment types, including positive and negative screening, ethical investing, impact investing, and active ownership.

Emission intensity, also referred to as carbon intensity (C.I.), quantifies the level of pollutant emissions in relation to a particular activity or industrial process. It is typically measured as the amount of a specific pollutant, such as carbon dioxide, released per unit of energy produced (e.g., grams of CO2 per megajoule). Additionally, emission intensity can be expressed as the ratio of a country's greenhouse gas (GHG) emissions to its gross domestic product (GDP). India has committed to reducing its GDP's emission intensity by 33 to 35 percent by 2030, compared to the levels recorded in 2005.

ESG, short for Environmental, Social, and Corporate Governance, is a term used in the investment world to describe the application of specific criteria to screen and monitor investments. Environmental criteria assesses a company's performance as a custodian of nature, considering factors such as its environmental impact, sustainability practices, and efforts to mitigate climate change. Social criteria focus on how a company manages its relationships with various stakeholders, including employees, suppliers, customers, and the communities in which it operates. Governance examines the company's leadership, executive compensation, internal controls, auditing practices, and the protection of shareholder rights.

ESG indices function as benchmarks for organizations that demonstrate outstanding ESG practices. Notable examples include the MSCI World ESG Index, FTSE ESG Index Series, and NIFTY 100 ESG Index.

External carbon pricing is implemented through an Emissions Trading System (ETS), which sets a limit on total greenhouse gas (GHG) emissions and allows lower-emitting companies to sell excess allowances to higher-emitting entities. On the other hand, internal carbon pricing involves businesses taking proactive climate action by establishing their own internal carbon price. This internal price assigns a monetary value to greenhouse gas emissions, enabling businesses to consider the financial implications of emissions when making investment decisions and managing their operations. Certain industries, such as oil and gas, minerals and mining, and electric power, have adopted internal carbon pricing as a risk mitigation strategy, preparing themselves for potential future carbon-reduction regulations.