ESG terminology

benchmarking (noun): the practice of comparing a business's performance with that of other companies within a given industry – A new ESG benchmarking scheme has been implemented to guide potential investors.

board diversity (noun): representation on a company's board of directors of individuals from different backgrounds, experiences and perspectives — The organization is committed to improving board diversity by actively recruiting women and underrepresented minorities.

bottom line (noun): in accounting, the last line of a financial statement showing profit or loss; (idiom) the most important thing – The rise in sales failed to improve the company's bottom line. | Despite all the expensive new players, the bottom line was that they lost the game.

carbon footprint (noun): a measure of the carbon dioxide released into the atmosphere through the activities of a particular organization (or person) – The company's top priority is to reduce its carbon footprint. | The company conducted a carbon footprint assessment to identify areas for emission reduction.

carbon offsets (noun): actions on one hand intended to compensate for a company's carbon dioxide emissions on the other hand – For many companies, carbon offsets such as tree-planting are little more than virtue signalling.

climate change (noun): long-term changes in temperatures and weather conditions in a particular region or globally – Temperatures and sea-levels can rise or fall because of climate change.

community impact investing (noun): an investment strategy intended to generate social and environmental benefits alongside profit; a subset of "socially responsible" investing — Through community impact investing I can do good, have a positive impact on the community, and make money at the same time.

corporate governance (noun): system of rules, practices and processes by which a company is directed and controlled — The board of directors plays a crucial role in ensuring effective corporate governance.

corporate social responsibility / CSR (noun): a self-monitoring strategy adopted by businesses to encourage social responsibility by making them aware of, and therefore accountable for, the impact of their actions on the community at large – As investors, we will only consider companies who follow CSR practices.

decarbonisation (noun): a process by which carbon emissions are either reduced or eliminated – Whilst it may not be easily achievable, total decarbonisation is a goal we should all be striving towards.

diversity (noun): the presence of individuals from various backgrounds, cultures and identities within a group or organization — The company promotes diversity by actively recruiting employees from different ethnicities and genders.

emissions (noun): gases, heat, and light that are released into the atmosphere – We are making a conscious effort to reduce our emissions.

emission factor / EF (noun): a figure that describes the rate at which a given activity or resource releases greenhouse gases (GHGs) into the atmosphere – What is the CO2 emission factor of coal?

employee well-being (noun): the state of physical, mental and emotional health and satisfaction of employees — The company prioritizes employee well-being by providing wellness programs and a supportive work environment.

environmental (adjective): relating to the natural world and its ecosystems — The company implemented various environmental initiatives to reduce its carbon footprint.

environmental impact (noun): the effect of human activities on the environment, including resource depletion and pollution — The construction project's environmental impact was carefully assessed to minimize harm to ecosystems.

environmental justice (noun): a social movement that strives to protect poor and underprivileged communities from the dangers of hazardous waste. – We hope that villages near the factory will receive environmental justice.

environmental, social, and governance / ESG (noun): these terms refer to the three central factors currently used in evaluating the sustainability and ethical impact of a company or an investment – Monitoring their ESG practices helps us analyze a company's performance prior to investing.

ESG / Environmental, Social, and corporate Governance (noun): non-financial factors increasingly applied by investors as part of their analysis to identify material risks and growth opportunities — Critics say ESG is just the latest example of the world trying to get woke.

ESG verification (noun): a process performed by an independent party to validate a company's ESG credentials and ensure the security of a potential investment – ESG verification is essential for an investor's peace of mind.

ethical practices (noun): actions and behaviors that align with moral principles and standards — The organization has a strict code of ethics that guides employees' conduct in all business dealings.

fossil fuels (noun): non-renewable fuel sources that are derived from the remains of plants and animals under the earth's surface – Oil and gas are fossil fuels that few of us can currently live without.

fugitive emissions (noun): gases and vapours that are accidentally released into the atmosphere – The explosion of the factory resulted in significant fugitive emissions.

geothermal energy (noun): heat that is generated and extracted from under the earth's surface, for example from volcanic activity – The villagers rely on geothermal energy for cooking and heating their homes.

global warming (noun): a cyclical increase in temperature of the earth's air and oceans caused by complex factors such as solar activity, earth's bearing relative to the sun, lunar posture, geo-vulcanism and more recently man-made gases – Sea levels generally rise at times of global warming.

governance (noun): the system of rules and practices that guide organizational decision-making and accountability — The company's governance framework emphasizes transparency and ethical practices.

greenhouse effect (noun): the process by which heat is trapped in the earth's atmosphere as greenhouse gases block reflected sunlight from escaping back into space – Rising global temperatures are one of the consequences of the greenhouse effect.

greenhouse gases / GHGs (noun): gases that contribute to the greenhouse effect by absorbing infrared radiation from the sun – Carbon dioxide and methane are among the greenhouse gases that become trapped in the earth's atmosphere.

carbon sink (noun): anything (natural or man-made) that removes carbon dioxide from the atmosphere by storing it in another form – Tropical rain forests such as the Amazon jungle form important carbon sinks that are part of the natural carbon cycle.

greenhouse gas source (noun): a process, event or activity that releases greenhouse gases into the atmosphere – As emitters of carbon dioxide, volcanoes are a greenhouse gas source with the potential to promote global warming.

greenwash, greenwashing (noun): deceptive or misleading publicity issued by a company to create an environmentally responsible public image | when a company spends more energy promoting itself as sustainable than it does adopting real environmentally friendly practices – The company lost many potential investors when it was discovered that they had been greenwashing.

Global Reporting Initiative / GRI (noun): an international independent standards body that helps organizations understand and communicate their effect on issues such as human rights, climate change and corruption – Without the GRI, companies would be less able to inform others of their emissions in a common language.

global warming potential / GWP (noun): a measure of the potency of a greenhouse gas relative to CO2; GWP is 1 for CO2 – The gas in question would have half the global warming potential of methane.

governance framework (noun): the structure and set of principles that outline how an organization is governed   — The organization developed a robust governance framework to ensure accountability and effective decision-making.

human rights (noun): basic rights and freedoms to which all individuals are inherently entitled, regardless of their nationality, ethnicity, gender or other characteristics — Human rights encompass fundamental principles such as the right to life, liberty, equality, and freedom of expression.

impact investing (noun): investing in companies, organizations, or funds with the intention of generating positive social and environmental impact alongside financial returns — The investor chose impact investing to support renewable energy projects that combat climate change.

integrated reporting (noun): a form of reporting that enables investors to understand how a company is performing ESQ-wise – Integrated reporting provided us with a clearer insight into the company's sustainability impact, causing us to reconsider our intentions to invest.

Kyoto Protocol (noun): a framework adopted in the 1990s with the intention of encouraging industrialised countries to reduce their emissions of greenhouse gases – Parties who do not adhere to the Kyoto Protocol will be brought to account.

negative screening (noun): the process of seeking out corporations that score poorly on ESG factors in comparison to other similar organisations, so that they can be avoided – Negative screening provides us with the security we need before making large investments.

net zero (emissions) (noun): the reduction of greenhouse gas emissions to as close to zero as possible. – They believe that net zero can only be achieved by reducing pollution and increasing energy efficiency.

physical risk (noun): risk that results from natural disasters such as floods, hurricanes, and earthquakes – Investors in companies in the region must consider the physical risk.

pollutant (noun): any substance that causes pollution or contamination of the atmosphere, waters or ground. – Since the factory opened there has been an increase in pollutants in the river.

positive screening (noun): The process of seeking out corporations that score highly on ESG factors in comparison to other similar organisations. – We rely on positive screening when researching companies to invest in.

R-factor (noun): a transparent ESG scoring system that offers companies guidance on how to manage their ESG risks – By reducing our emissions, we hope to improve our R-factor score.

renewable energy (noun): power that comes from natural sources (for example sun, wind, tide) that are replenished constantly and never run out. – The factory is powered by renewable energy. | The company invested in a large-scale solar farm to transition to renewable energy sources.

responsible investment (noun): the process of considering environmental, social and governance factors when making investment decisions — The fund manager focuses on responsible investment by analyzing companies' ESG performance.

double bottom line / DBL / 2BL (noun): a corporate strategy to measure both a company's traditional financial profit & loss bottom line as well as a second "bottom line" concerning the company's performance in terms of social impact – The double bottom line brought to light several practices by local companies that need to be addressed.

resiliency (noun): a strategy to protect companies in the event of man-made or natural disasters – Without resiliency, few companies would be able to recover from a disaster of this magnitude.

social (adjective): related to society and human interactions — The organization actively supports social causes such as education and healthcare.

social impact (noun): the effect that an organization's activities have on the well-being of society — The nonprofit organization's social impact can be seen through its community development projects.

social responsibility (noun): the duty of an organization to act in the best interests of society at large — The company demonstrates its social responsibility by supporting local community projects.

sustainability (noun): ability to meet present needs without compromising future generations' ability to meet their own needs — The company aims to achieve long-term sustainability by integrating environmentally friendly practices.

sustainable development goals / SDG (noun): a universal UN-driven strategy to "protect" the planet and abolish poverty to which states must adhere – Countries that do not adhere to SDG regulations will be penalised.

stakeholders (noun): individuals or groups that have an interest in or are affected by the actions and outcomes of an organization, typically investors, employees, customers and suppliers — The company regularly engages with its stakeholders to understand their concerns and priorities.

stranded assets (noun): assets that have decreased in value as a result of changes in the financial market – We lost a lot of money through stranded assets.

supply chain transparency (noun): extent to which information about a product's origin, production processes and distribution is openly available — The company promotes supply chain transparency by disclosing its suppliers and their labor practices.

sustainability reporting (noun): a form of non-financial reporting that lets companies convey their progress toward goals on a variety of sustainability measures, including environmental, social and governance metrics – Sustainability reporting enables us to understand the ESG aspects of a company's actions.

transition risk (noun): a risk related to the extent and rate at which a company deals with changes in regulations aimed at reducing greenhouse gas emissions and enabling the transition to renewable energy – Before investing in the company, we must consider the transition risk.

triple bottom line / TBL (noun): a framework that commits a company to focusing as much on social and environmental concerns as it does on profits (also known as the three Ps of people, planet and profit) – The triple bottom line alerted us to some of the company's less sustainable practices. | Our TBL tries to measure our commitment to corporate social responsibility and our impact on the environment.

value chain emissions (noun): all indirect emissions (that is, excluding direct emissions by the company itself and bought-in energy) that occur in a company's value chain, both upstream and downstream. Also called Scope 3 emissions – The company reduced its value chain emissions by switching from international executive travel to online meetings.

vice stocks / sin stocks (noun): investments in corporations profiting from products considered to be unethical such as alcohol, tobacco and firearms – We ran a check on the company to ensure that we wouldn't be investing in vice stocks.

woke (adjective): pejorative term often applied to people or companies presenting themselves as alert to and concerned about social injustice and discrimination — She's an activist and very woke, and the perfect example of woke culture infesting mainstream journalism.