ESG A to Z: A Glossary of Key Terms for Investors

ESG considerations go beyond traditional financial metrics and take into account a company's impact on the environment, society, and governance practices. With the growing awareness of the importance of ESG, there is a need for investors to be well-versed in the terminology associated with these factors.

In this alphabetically organized glossary of ESG terms, we provide a comprehensive list of key terms related to ESG. From "Accountability" to "Water management," this glossary covers a range of terms that investors should be familiar with when considering ESG factors in their investment decision-making. By understanding the meaning of these terms, investors can better evaluate a company's ESG performance and make informed investment decisions that align with their values and sustainability goals.

Whether you are a seasoned investor or new to the world of ESG investing, this glossary can serve as a valuable resource to help you navigate the complex terminology associated with ESG. So, let's dive into the world of ESG and explore the key terms that are essential to understanding this important investment approach.

• Accountability: the process of accepting responsibility for the outcomes of decisions and actions.

• Active ownership: the exercise of shareholder rights, such as voting on corporate resolutions or engaging with management on ESG issues.

• Adverse impact: a negative effect on the environment, society, or governance practices.

• Anti-bribery: policies and procedures designed to prevent and detect bribery.

• Asset management: the management of investment portfolios to meet specified financial goals and objectives.

• Biodiversity: the variety of living organisms in an ecosystem.

• Carbon footprint: the total amount of greenhouse gas emissions caused by an individual, organization, or product.

• Climate change: a long-term change in global weather patterns, caused primarily by increased levels of carbon dioxide in the atmosphere.

• Corporate governance: the system of rules, practices, and processes by which a company is directed and controlled.

• Cybersecurity: the protection of computer systems and networks from theft, damage, or unauthorized access.

• Diversity and inclusion: policies and practices that promote a diverse workforce and create an inclusive workplace.

• Emissions: the release of gases or particles into the atmosphere, often as a result of human activity.

• Energy efficiency: the use of technology and practices that reduce the amount of energy required to perform a specific task.

• Environmental impact: the effect of human activities on the environment, including pollution, habitat destruction, and climate change.

• ESG: environmental, social, and governance factors that are considered in investment decision-making.

• Ethics: moral principles that guide behavior and decision-making.

• Fossil fuels: non-renewable resources, such as coal, oil, and natural gas, that are used to generate energy.

• Gender diversity: the representation of women and men in leadership positions and throughout an organization.

• Green bonds: fixed-income securities issued to finance environmentally sustainable projects.

• Human rights: the basic rights and freedoms to which all humans are entitled, such as the right to life, liberty, and security of person.

• Impact investing: investments made with the intention of generating a positive social or environmental impact, as well as financial returns.

• Investor engagement: the process of investors communicating with companies to influence their behavior on ESG issues.

• Labor standards: policies and practices related to working conditions, wages, and labor rights.

• Materiality: the significance of an issue or factor in relation to a company's operations, financial performance, or reputation.

• Natural resources: the resources provided by nature, such as water, land, and minerals.

• Renewable energy: energy generated from natural resources, such as solar, wind, and hydro power.

• Responsible investment: the practice of integrating ESG factors into investment decision-making.

• Social impact: the effect of a company's activities on society, including its employees, customers, and the communities in which it operates.

• Supply chain management: the management of the flow of goods and services from suppliers to consumers.

• Transparency: the degree to which a company discloses information about its operations, finances, and governance practices.

• Water management: the management of water resources, including conservation, treatment, and distribution.

Note: This list is not exhaustive and there are plenty of additional terms related to ESG that are not included in this glossary.