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  • Glossary of Terms

Glossary of Terms


Assurance, external

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.



CDP (which was known as the Carbon Disclosure Project until the end of 2012) is a not-for-profit organization which aims to study the implications of climate change for the world’s principal publicly traded companies. It runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts, by helping persuade companies throughout the world to measure, manage, disclose and ultimately reduce their greenhouse gas emissions.


In the ESG space, a controversy relates to an ESG-related event impacting negatively a company sustainability performance and exposes investments to a variety of risks including reputational, operational, legal, social, or of greenwashing. These controversies are monitored and analyzed by investors and external data providers screening all type of reliable and public sources.

Corporate Sustainability Reporting Directive (CSRD)

On 21 April 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend the existing reporting requirements of the Non-Financial Reporting Directive (NFRD). Compared to the NFRD, the CSRD extends the scope of requirements, requires audit, introduces more detailed reporting requirements , and requires companies to digitally “tag” the reported information.

Corporate [social] responsibility (CSR), Corporate sustainability

Corporate social responsibility (CSR, sometimes referred to as corporate responsibility or corporate citizenship) is a broad concept that can take many forms depending on the company and industry. In general, it is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public.


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.


Interactions between an investor (or an engagement service provider) and current or potential investees (e.g. companies), conducted with the purpose of improving practice on an ESG issue, changing a sustainability outcome, or improving public disclosure. Engagements can also be carried out with non-issuer stakeholders, such as policymakers or standard setters. Interactions that are not seeking change or an improvement in public disclosure are not considered engagement.

Environmental Management System (EMS)

An Environmental Management System (EMS) is a framework that helps an organization 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 organization. The EMS itself does not dictate a level of environmental performance that must be achieved; each organization’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 Organization for Standardization (ISO).

Environmental factors (E)

Issues relating to the quality and functioning of the natural environment and natural systems. These include: biodiversity loss; greenhouse gas (GHG) emissions, climate change, renewable energy, energy efficiency, air, water or resource depletion or pollution, waste management, stratospheric ozone depletion, changes in land use, ocean acidification, and changes to the nitrogen and phosphorus cycles.


Fiduciary duty

A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests. For investors, fiduciary duty has been widely interpreted as the obligation of trustees and other fiduciaries to maximize investment returns. It is now commonly recognized that the pursuit of maximum investment returns requires the integration of environmental, social, and governance considerations, including the impacts on society and the environment, in making investment decisions.


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.


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.

GHG emissions

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.

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is an independent, international, and non-governmental organization that helps businesses and other organizations take responsibility for their impacts, by providing them with the global common language to communicate those impacts. They provide standards for sustainability reporting called the GRI Standards.

Governance factors (G)

Issues relating to the governance of companies and other investee entities. In the listed equity context these include: board structure, size, diversity, skills and independence, executive pay, shareholder rights, stakeholder interaction, disclosure of information, business ethics, bribery and corruption, internal controls and risk management, and, in general, issues dealing with the relationship between a company’s management, its board, its shareholders and its other stakeholders. This category may also include matters of business strategy, encompassing both the implications of business strategy for environmental and social issues, and how the strategy is to be implemented. In the unlisted asset classes governance issues also include matters of fund governance, such as the powers of Advisory Committees, valuation issues, fee structures, etc.


The act of making false or misleading claims about the environmental benefits or performance of a product, service, technology, or organization.



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.

Integrated reporting

A process founded on integrated thinking that results in a periodic integrated report by an organization about value creation over time and related communications regarding aspects of value creation. Integrated reporting brings together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how the organization demonstrates stewardship and how it creates value, now and in the future.

International Capital Markets Association (ICMA)

The International Capital Markets Association (ICMA) is a not-for-profit membership association committed to serving the needs of its wide range of member firms active in the international debt capital markets. It mainly aims to provide a basis for joint examination and discussion of questions relating to the international capital and securities markets and to issue rules and make recommendations governing their operations. ICMA currently has more than 600 members active in all segments of the sell-side and buy-side international debt capital markets in over 60 jurisdictions.

International Financial Reporting Standards (IFRS)

The IFRS Foundation is a not-for-profit international organization responsible for developing a single set of high-quality global accounting standards, known as IFRS Standards. Their mission is to develop standards that bring transparency, accountability and efficiency to financial markets around the world. IFRS Standards are now required in more than 140 jurisdictions, with many others permitting their use.

International Integrated Reporting Council (IIRC)

The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession, academia and NGOs. Together, this coalition shares the view that communication about value creation, preservation or erosion is the next step in the evolution of corporate reporting. In June 2021, the IIRC merged with SASB to become the Value Reporting Foundation.

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 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.



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.


Net zero

Net zero refers to a state in which the amount of greenhouse gases (GHGs) going into the atmosphere as a result of human activity is balanced by the removal of GHGs out of the atmosphere. The term, which is also sometimes applied to CO2 alone, is important because this is the state at which global warming stops accelerating and will eventually stabilize.

The Paris Agreement underlines the need for net zero, requiring states to “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.”

Network for Greening the Financial System (NGFS)

At the Paris “One Planet Summit” in December 2017, eight central banks and supervisors established the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Since then, the membership of the Network has grown dramatically, across the five continents. The Network’s purpose is to help strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development. To this end, the Network defines and promotes best practices to be implemented within and outside of the Membership of the NGFS and conducts or commissions analytical work on green finance.

Non-Financial Reporting Directive (NFRD)

The Non-Financial Reporting Directive (NFRD) is a directive implemented in the European Union (EU) member states in 2018. It lays down the rules on disclosure of non-financial and diversity information by certain large companies. This helps investors, civil society organizations, consumers, policy makers and other stakeholders to evaluate the non-financial performance of large companies and encourages these companies to develop a responsible approach to business.

EU rules on non-financial reporting currently apply to large public-interest companies with more than 500 employees. This covers approximately 11 700 large companies and groups across the EU, including listed companies, banks, insurance companies, and other companies designated by national authorities as public-interest entities.

Under Directive 2014/95/EU, large companies have to publish information related to: environmental matters; social matters and treatment of employees; respect for human rights; anti-corruption and bribery; and diversity on company boards (in terms of age, gender, educational and professional background).

Norms-based investing

Screening of investments according to their compliance with international standards and norms. This approach involves the screening of investments based on international norms or combinations of norms covering ESG factors. International norms on ESG are those defined by international bodies such as the United Nations (UN).


Physical risk, climate-related

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 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 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.

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.

Purpose, corporate

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.

Responsible investment

Responsible investment is a strategy and practice to incorporate environmental, social and governance (ESG) factors in investment decisions and active ownership. There are many ways to invest responsibly. Approaches are typically a combination of two overarching areas: considering ESG issues when building a portfolio and improving investees’ ESG performance.


S&P Global Corporate Sustainability Assessment (CSA)

The S&P Global Corporate Sustainability Assessment (CSA) is an annual evaluation of companies’ sustainability practices. It covers over 10,000 companies from around the world. Companies are selected for inclusion in the Dow Jones Sustainability Indices (DJSI), S&P 500 ESG and several other sustainability indices in part based on their results in the S&P Global CSA.

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.

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

Social factors (S)

Issues relating to the rights, well-being and interests of people and communities. These include: human rights, labour standards in the supply chain, child, slave and bonded labour, workplace health and safety, freedom of association and freedom of expression, human capital management and employee relations; diversity; relations with local communities, activities in conflict zones, health and access to medicine, HIV/AIDS, consumer protection; and controversial weapons.


As opposed to a Framework, a Standard is a set of specific, replicable, and detailed guidances for what should be disclosed. Standards such as those issued by SASB and GRI make frameworks action-able. While frameworks enable high-quality disclosure by providing guidance on how to prepare information, the specificity of standards enables apples-to-apples comparison among reporting companies. Standards can also help yield information that can be assured by an independent third party.


The PRI defines stewardship as the use of influence by institutional investors to maximize overall long-term value, including the value of common economic, social and environmental assets, on which returns and client and beneficiary interests depend.

Proxy voting is often associated with investment stewardship, however, voting is not the only form that stewardship can take. Engagement can also be an important component of asset owners’ and asset managers’ stewardship activities. Engagement can include one-on-one meetings with representatives of company boards and/or management, writing letters to companies, and a variety of other activities.

Sustainability Accounting Standards Board (SASB)

SASB was an independent, nonprofit organization established in 2011 to set standards for companies to use when disclosing sustainability or ESG information to investors and other providers of financial capital. In 2021, SASB and the International Integrated Reporting Council (IIRC) merged into the new Value Reporting Foundation (VRF).

SASB Standards have been developed for 77 industries, each of which includes disclosure topics and performance metrics for the sustainability risks and opportunities “reasonably likely to materially affect the financial condition, operating performance, or risk profile of a typical company within an industry” (i.e., material impacts on a company’s enterprise value). SASB Standards include disclosure topics and metrics across five dimensions of sustainability: Environment, Social Capital, Human Capital, Business Model and Innovation, and Leadership and Governance.

By providing transparency into how companies are managing the sustainability risks and opportunities most closely tied to the creation of enterprise value, SASB Standards help companies provide the ESG information investors require to effectively meet their risk and return objectives. The provision of material ESG information to investors is critical to ensuring that capital markets can efficiently price securities that derive an increasing portion of their value from intangibles not captured by traditional financial disclosure.

Sustainability [or ESG] reporting

Sustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development. Sustainability reporting is a broad term considered synonymous with others used to describe reporting on economic, environmental, and social impacts (e.g., triple bottom line, corporate responsibility reporting, etc.). A sustainability report should provide a balanced and reasonable representation of the sustainability performance of a reporting organization–including both positive and negative contributions.

An ESG report is a report published by a company or organization about environmental, social and governance (ESG) impacts. It enables the company to be more transparent about the risks and opportunities it faces. ESG reporting encompasses both qualitative disclosures of topics as well as quantitative metrics used to measure a company’s performance against ESG risks, opportunities, and related strategies. ESG reporting is an ideal and effective means of enabling companies to answer in a single document a wide variety of questions that stakeholders may raise.

Sustainability-linked bond

Sustainability-linked bonds (“SLBs”) are any type of bond instrument for which the financial and/or structural characteristics can vary depending on whether the issuer achieves predefined sustainability/ ESG objectives. Issuers are thereby committing explicitly (including in the bond documentation) to future improvements in sustainability outcome(s) within a predefined timeline. SLBs are a forward-looking performance-based instrument. Those objectives are measured through predefined Key Performance Indicators (KPIs) and assessed against predefined Sustainability Performance Targets (SPTs).

Sustainable Development Goals (SDGs)

The UN Sustainable Development Goals (SDGs), also known as the Global Goals, are a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set up in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030. The 17 SDGs are integrated in that they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.

With 169 specific targets, the SDGs present a wide range of opportunities for businesses to make a difference, and they can be used to contextualize ESG reporting and create long-term value.

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.

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.


Task Force on Climate-related Financial Disclosures (TCFD)

The Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD) to develop recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks. In 2017, the TCFD published its recommendations on climate-related financial disclosures. The recommendations are structured around four thematic areas that represent core elements of how organizations operate: governance, strategy, risk management, and metrics and targets. They are used as a disclosure framework which has been made mandatory to report on in New Zealand and the UK.

Taskforce on Nature-related Financial Disclosures (TNFD)

Modeled on the TCFD, the Task Force on Nature-related Financial Disclosures (TNFD) is a global initiative which aims to give financial institutions and companies a complete picture of their environmental risks. The organization aims to deliver a framework for organizations to report and act on evolving nature-related risks, in order to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes. In March 2022, TNFD released the first beta version of its recommendation framework. Three more rounds of drafts for consultation will be submitted, with the final version of the framework expected to be released in September 2023.

Transition risk (climate-related)

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.

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.

Tripple bottom line

In 1994, in making a reference to the financial notion of bottom line (profits), John Elkington theorized the concept of triple bottom line (profit, people, planet), enjoining firms to measure their social and environmental impacts in addition to their financial results.


UN Environment Program Finance Initiative (UNEP-FI)

The United Nations Environment Programme Finance Initiative (UNEP-FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. It is a unit within the UN Environment’s Resources & Market Branch, based in Geneva, Switzerland. UNEP-FI aims to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP-FI accelerates sustainable finance.

UN Global Principles on Business and Human Rights (UNGPBHR)

The UN Guiding Principles on Business and Human Rights are a set of guidelines for states and companies to prevent, address and remedy human rights abuses committed in business operations. Widely known as “Protect- Respect-Remedy” framework, each of these pillars defined foundational and operational principles for strengthening the human rights agenda. Pillar 1 (“Protect”) defines the state duty to protect against human rights abuses within their jurisdiction by third parties including business enterprises. Pillar 2 (“Respect”) articulates the need for businesses to avoid infringement of human rights in their operations. Pillar 3 (Remedy) focuses on how they should address the negative human rights through remediation processes.

They were proposed by UN Special Representative on Business and Human Rights, John Ruggie, and endorsed by the UN Human Rights Council in June 2011. In the same resolution, the UN Human Rights Council established the UN Working Group on business and human rights.

United Nations Global Compact (UNGC)

The UN Global Compact (UNGC) aims to mobilize a global movement of sustainable companies and stakeholders. The UN Global Compact supports companies in: doing business responsibly by aligning their strategies and operations with Ten Principles on human rights, labour, environment and anti-corruption; and taking strategic actions to advance broader societal goals, such as the UN Sustainable Development Goals, with an emphasis on collaboration and innovation.

By incorporating the Ten Principles of the UN Global Compact into strategies, policies and procedures, and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet, but also setting the stage for long-term success. The Ten Principles of the United Nations Global Compact are derived from: the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.


Value Reporting Foundation (VRF)

The Value Reporting Foundation (VRF) is a global nonprofit organization that offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value—how it is created, preserved and eroded. It was created from the merger of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) in June 2021. Both the SASB Standards and the IIRC Integrated Reporting Framework remain standalone resources of the VRF.

Vigeo Eiris

Vigeo Eiris provides environmental, social and governance (ESG) research, ratings, and data to institutional investors and companies. Since 2019, the agency operates as a business unit of Moody’s Corporation. As part of the ESG Assessment, Vigeo Eiris analyzes companies’ ESG performance, identify risks and opportunities, and screens controversies.


World Economic Forum International Business Council (WEF-IBC)

The World Economic Forum International Business Council (WEF-IBC) is an annual convening of business leaders from around the world, brought together by the World Economic Forum (WEF) to discuss and address pressing political and economic issues and challenges around the globe. Although it began under a different name, the annual meeting was first held in 2007. Attending companies commit to upholding and promoting Stakeholder Capitalism Metrics – a set of universal, comparable disclosures that focus on people, planet, prosperity and governance that companies can report on, regardless of industry or region.



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