GLOSSARY

*Acronyms aplenty*

Glossary

Carbon footprint: total carbon emissions for a portfolio normalised by the market value of the portfolio, expressed in tons CO2e/£M invested. This allows portfolios to be compared to one another/a benchmark. The metric answers the question: how carbon efficient is my portfolio per million pounds invested?Source: TCFD (Task Force on Climate-related Financial Disclosures)Climate-related opportunity: the potential positive impacts related to climate change on an organisation. Efforts to mitigate and adapt to climate change can produce opportunities for organisations, such as through resource efficiency and cost savings, the adoption and utilisation of low-emission energy sources, the development of new products and services and building resilience along the supply chain.Source: TCFD (Task Force on Climate-related Financial Disclosures)Climate-related risk: the potential negative impacts of climate change on an organisation. Physical risks emanating from climate change can be event-driven (acute) such as increased severity of extreme weather events (e.g. cyclones, droughts, floods and fires). They can also relate to longer-term shifts (chronic) in precipitation and temperature and increased variability in weather patterns (e.g. sea-level rise). Climate-related risks can also be associated with the transition to a lower-carbon global economy, the most common of which relates to policy and legal actions, technology changes, market responses and reputational considerations. Climate-related risk: Climate-related risk: Source: TCFD (Task Force on Climate-related Financial Disclosures)Environmental, social and governance (ESG): factors that are identified or assessed in responsible investment processes.

Environmental factors are issues relating to the quality and functioning of the natural environment and natural systems.

Social factors are issues relating to the rights, well-being and interests of people and communities.

Governance factors are issues relating to the governance of companies and other investee entities.

Source: PRI (Principles for Responsible Investment)Engagement: 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. Source: PRI (Principles for Responsible Investment)Greenhouse gas (GHG) emissions: the seven gases mandated under the Kyoto Protocol and to be included in national inventories under the United Nations Framework Convention on Climate Change (UNFCCC) – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride.Source: PCAF (Partnership for Carbon Accounting Financials)Impact Investing: investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.Source: GIIN (Global Impact Investing Network)Net zero: when total greenhouse gas emissions would be equal to or less than the emissions removed from the environment. This can be achieved by a combination of emission reduction and emission removal. For example, the UK has committed to become a net-zero country by 2050.Source: ONS (Office for National Statistics)Paris Agreement: to tackle climate change and its negative impacts, 197 countries adopted the Paris Agreement at the COP21 in Paris on 12 December 2015. It aims to substantially reduce global greenhouse gas emissions and to limit the global temperature increase in this century to 2°C while pursuing means to limit the increase even further to 1.5°C.Source: UN (United Nations)Portfolio alignment: metrics that determine the overall level of alignment of a portfolio to the goals of the Paris Agreement by assessing the performance of its underlying companies. While many tools exist, ambivalence exists around the best metric to determine alignment and compare the resulting outputs. The most common portfolio alignment metrics are Implied Temperature Rise (ITR) measures or analyses based on the work of the Science Based Targets initiative (SBTi) or Transition Pathway initiative. Source: SBTi (Science Based Targets initiative).Responsible investment: incorporating environmental, social and governance (ESG) factors in investment decisions and active ownership.Source: PRI (Principles for Responsible Investment)Scope 1, 2 and 3 emissions:

Scope 1: direct emissions that occur from sources owned or controlled by the reporting company (e.g. emissions from combustion in owned or controlled boilers, vehicles, etc.)

Scope 2: indirect emissions from the generation of purchased or acquired electricity, steam, heating, or cooling consumed by the reporting company. Scope 2 emissions physically occur at the facility where the electricity, steam, heating, or cooling is generated.

Scope 3: all other indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company. Scope 3 can be broken down into upstream emissions that occur in the supply chain (for example, from production or extraction of purchased materials) and downstream emissions that occur as a consequence of using the organisation’s products or services.

Scope 3 Category 15 (Investments) emissions: Scope 3 emissions associated with the reporting company’s loans and investments not already included in Scope 1 or Scope 2. These emissions will typically be the most material for an asset owner as they represent the sum of the emissions of the investment portfolio.

Source: PCAF (Partnership for Carbon Accounting Financials)Stewardship: the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.Source: FRC (Financial Reporting Council)Sustainability: development that meets the needs of the present without compromising the ability of future generations to meet their own needs.Source: World Commission on Environment and Development.Sustainable Development Goals (SDGs): a United Nations initiative to promote sustainable development at the country level, which the investment community has increasingly adopted to assess its impact in delivering positive development outcomes in the real world. There are 17 SDGs covering broad themes such as Life Below Water and Gender Equality. Underlying each are much more specific targets for delivery (169 in total) and progress indicators.Sustainable investing: investment approaches that select and include investments on the basis that fulfil certain sustainability criteria and/or deliver on specific and measurable sustainability outcomes.Source: The IA (Investment Association)Task Force on Climate-related Financial Disclosures (TCFD): the TCFD was set up by the International Financial Stability Board in 2015 and its members are senior individuals from across the G20 covering a broad range of economic sectors and financial markets. It has developed a set of recommendations for consistent climate-related financial risk disclosures for use by companies and financial institutions.Source: TCFD (Task Force on Climate-related Financial Disclosures)Voting: the exercise of voting rights on management and/or shareholder resolutions to formally express approval (or disapproval) on relevant matters. In practice, this includes taking responsibility for the way votes are cast on topics that management raise, as well as submitting resolutions as a shareholder for other shareholders to vote on (in jurisdictions where this is possible).Source: PRI (Principles for Responsible Investment)

CA100 (Climate Action 100+)	An investor-led initiative to ensure the world’s largest corporate greenhouse-gas emitters take necessary action on climate change.
GRESB (The Global ESG Benchmark for Real Assets)	An investor-led organisation providing standardised and validated environmental, social and governance (ESG) data to the capital markets.
SASB (Sustainability Accounting Standards Board)	SASB Standards guide the disclosure of financially material sustainability information by companies to their investors.
PRI (Principles for Responsible Investment)	The world’s leading proponent of responsible investment working 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.
UKSC (UK Stewardship Code)	Sets high stewardship standards for those investing money on behalf of UK savers and pensioners, and those that support them.
IIGCC (The Institutional Investors Group on Climate Change)	Works with businesses, policy makers and fellow investors to help define the investment practices, policies and corporate behaviours required to address climate change.
UNGC (United Nations Global Compact)	A call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.
UKSIF (UK Sustainable Investment and Finance Association)	Brings together the UK’s sustainable finance and investment community, supporting their members to expand, enhance and promote this key sector.
UNEPFI (United Nations Environment Programme Finance Initiative)	A partnership between UNEP and the global financial sector to mobilise private sector finance for sustainable development.