ESG Investing Glossary

Urbanization refers to the process of the increasing concentration of population in urban areas, resulting in the growth and expansion of cities. It involves the movement of people from rural areas to cities and the transformation of rural landscapes into urbanized environments. Urbanization is a global phenomenon driven by various social, economic, and demographic factors.

Unmanageable risk refers to risks that are difficult or impossible to address or mitigate through conventional risk management practices. These risks pose significant challenges because they cannot be easily controlled or managed by the affected parties or through specific actions or initiatives.

Universal ownership refers to the concept that large institutional investors, such as pension funds or sovereign wealth funds, hold diversified portfolios that represent a significant portion of the entire market or economy. These investors are considered ''universal owners'' because their investments span multiple sectors, industries, and geographic regions.

The United Nations Global Compact (UNGC) is a voluntary initiative launched in 2000 that brings together companies, organizations, and other stakeholders committed to sustainable and responsible business practices. It is the largest corporate sustainability initiative in the world, with thousands of participating companies and organizations from various sectors and countries.

The United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between the United Nations Environment Programme (UNEP) and the global financial sector. It was established in 1992 to mobilize the finance industry towards sustainable development. UNEP FI works with over 400 member institutions, including banks, insurance companies, investment firms, and other financial institutions, to promote sustainable finance practices and integrate environmental, social, and governance (ESG) factors into their decision-making processes.

A unitary board, also known as a single-tier board, is a type of corporate governance structure where both executive and non-executive directors serve on the same board. In contrast to a two-tier board system, which separates executive management and oversight functions into separate boards, a unitary board combines both roles into a single governing body.

The United Nations Framework Convention on Climate Change (UNFCCC) is an international treaty adopted in 1992 with the objective of addressing climate change. It was a response to growing concerns about the impact of human activities on the Earth's climate system. The UNFCCC aims to stabilize greenhouse gas concentrations in the atmosphere and prevent dangerous anthropogenic interference with the climate system.

The triple bottom line (TBL) is an accounting framework that considers three dimensions of performance: social, environmental (or ecological), and financial. It recognizes that businesses have impacts and responsibilities beyond just generating profit. The three dimensions, often referred to as the ''3Ps,'' stand for People, Planet, and Profit.

- People: The social dimension of the triple bottom line focuses on the well-being of people, both within and outside the organization. It encompasses factors such as labor practices, human rights, employee welfare, diversity and inclusion, community engagement, and social equity. Companies that prioritize the ''people'' aspect strive to create positive social impacts and contribute to the betterment of society.

- Planet: The environmental dimension of the triple bottom line addresses the impact of business activities on the natural environment. It involves considerations such as resource consumption, waste management, pollution control, greenhouse gas emissions, biodiversity conservation, and sustainable use of natural resources. Businesses that emphasize the ''planet'' aspect aim to operate in an environmentally responsible and sustainable manner.

- Profit: The financial dimension of the triple bottom line focuses on economic performance and profitability. It recognizes that businesses need to be financially viable to sustain their operations and create value for shareholders. While profit is an essential aspect, it is viewed within the context of social and environmental responsibilities. The goal is to achieve long-term profitability while simultaneously considering the well-being of people and the planet.

Transition risk refers to the potential financial risks that arise from the transition to a low-carbon and sustainable economy. It is primarily associated with the shift away from fossil fuels and the adoption of cleaner and more sustainable technologies and practices.

Tracking error is a metric used to measure the deviation of a portfolio's performance from its benchmark index. It quantifies the volatility of a portfolio's relative returns to its benchmark.

Thematic investment refers to an investment approach that focuses on specific themes or trends expected to drive long-term growth and create investment opportunities. It involves identifying and targeting investment opportunities related to specific social, economic, or technological trends that are expected to have a significant impact on industries and markets.

The Task Force on Climate-related Financial Disclosures (TCFD) is an international initiative that aims to enhance transparency and disclosure of climate-related risks and opportunities in financial markets. It was established in 2015 by the Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system.

Sustainable investment, also known as socially responsible investment (SRI), responsible investment, or ESG (Environmental, Social, and Governance) investing, refers to an investment approach that considers not only financial returns but also the impact of investments on environmental, social, and governance factors.

The Sustainable Development Goals (SDGs) are a set of 17 global goals established by the United Nations in 2015. The SDGs aim to address the world's most pressing social, economic, and environmental challenges, and provide a roadmap for sustainable development by the year 2030.

The Sustainability Accounting Standards Board (SASB) is an independent nonprofit organization that focuses on developing and disseminating industry-specific sustainability accounting standards for companies. The aim of SASB is to provide investors and companies with a standardized set of metrics and disclosures related to financially material sustainability issues.

Strategic asset allocation is a long-term investment strategy that involves determining the optimal mix of different asset classes in a portfolio based on an investor's financial goals, risk tolerance, and time horizon. It is the process of allocating investments across broad asset classes, such as stocks, bonds, cash, real estate, and commodities, with the objective of achieving a desired risk-return profile.

Stranded assets refer to assets that have become or are projected to become obsolete, uneconomical, or non-productive before the end of their expected useful life. These assets can no longer generate the expected economic returns or value due to various factors, such as changes in technology, market conditions, regulations, or societal shifts.

Stewardship refers to the responsible and accountable management or oversight of resources, assets, or interests entrusted to an individual or organization. It involves taking care of and making decisions in the best interest of the stakeholders, the environment, or the broader society. Stewardship can be applied to various contexts, including financial management, environmental conservation, corporate governance, and social responsibility.

Stakeholder opposition refers to the resistance or disagreement expressed by individuals, groups, or organizations who have a vested interest or concern in a particular issue or decision. These stakeholders may hold opposing views, interests, or concerns that are contrary to the actions or plans of another party.

Socially responsible investment (SRI), also known as sustainable, responsible, or ethical investment, is an investment approach that considers both financial returns and the impact of investments on social and environmental factors. It aims to align investment decisions with an investor's values and promote sustainable and responsible business practices.

Social topics encompass a wide range of issues and concerns related to society, human interactions, and the well-being of individuals and communities. These topics often reflect the challenges, values, and aspirations of a society and are crucial for shaping social policies, fostering inclusivity, and promoting positive change.

Social opportunities refer to positive circumstances or prospects that arise from addressing social challenges and advancing societal well-being. These opportunities emerge when individuals, organizations, and communities actively engage in activities that contribute to social progress, inclusivity, and positive change.

Social megatrends are long-term, transformative shifts in society that have significant and wide-ranging impacts on various aspects of human life. These megatrends shape the way people think, behave, and interact with each other, and they have implications for businesses, governments, and communities.

Social investment refers to the practice of making investments with the intention of generating both financial returns and positive social or environmental impact. It is a form of responsible investing that seeks to align financial goals with social and environmental objectives.

Shariah-compliant funds, also known as Islamic funds, are investment vehicles that adhere to the principles of Islamic finance. These funds are structured and managed in accordance with Shariah law, which is based on the principles and teachings of Islam.

The Shareholder Rights Directive (SRD) is a European Union directive that aims to strengthen the rights of shareholders in companies listed on EU stock exchanges. It sets out certain requirements and provisions to enhance shareholder engagement, transparency, and corporate governance practices.

Shareholder engagement refers to the process by which shareholders of a company actively participate in discussions and interactions with company management and board of directors. It involves shareholders using their ownership rights and influence to communicate their expectations, concerns, and suggestions to the company's leadership.

Secularism is a principle or ideology that advocates for the separation of religious institutions and religious beliefs from the affairs of the state and public life. It promotes the idea of a neutral public space where individuals of different religious and non-religious backgrounds can coexist and participate in society on an equal footing.

The Roundtable on Sustainable Palm Oil (RSPO) is a global, multi-stakeholder initiative established in 2004 to promote the production and use of sustainable palm oil. It brings together various stakeholders, including palm oil producers, processors, traders, consumer goods manufacturers, retailers, banks, and NGOs, with the aim of transforming the palm oil industry towards sustainability.

Risk premia, also known as risk premiums, are the additional returns or compensation that investors expect for taking on specific types of risks. In the context of investing, risk premia are the excess returns investors demand for holding risky assets compared to relatively safer assets.

Risk mitigation refers to the actions taken to reduce or minimize the potential negative impact of risks on an individual, organization, or project. It involves identifying, assessing, and managing risks to prevent or lessen their consequences.

Responsible investment, also known as sustainable investment or socially responsible investment (SRI), refers to an investment approach that incorporates environmental, social, and governance (ESG) factors into investment decisions.

A proxy voting adviser, also known as a proxy advisory firm or proxy advisory service, is an independent entity that provides research, analysis, and voting recommendations to institutional investors and asset managers regarding proxy voting matters.

Proxy voting is a process by which shareholders delegate their voting rights to another person or entity, typically a proxy advisory firm or a proxy agent, to vote on their behalf at a company's general meeting or annual general meeting (AGM).

Product liability refers to the legal responsibility that manufacturers, distributors, suppliers, and retailers have for injuries or damages caused by their products. It is a branch of tort law that holds these parties accountable for any harm that may arise from the use of their products.

The Principles for Responsible Investment (PRI) is a global initiative that aims to promote and encourage responsible investment practices among institutional investors. It was launched in 2006 by a group of institutional investors in partnership with the United Nations.

Pollution refers to the introduction of harmful substances or contaminants into the environment, causing adverse effects on the natural ecosystem, human health, and overall well-being. It can take various forms, including air pollution, water pollution, soil pollution, and noise pollution. Pollution is primarily caused by human activities, such as industrial processes, transportation, agriculture, and improper waste disposal.

Physical climate-related risks refer to the potential adverse impacts that arise from climate change on natural and human systems. These risks result from changes in temperature, precipitation patterns, sea-level rise, extreme weather events, and other climate-related phenomena. They can have significant implications for various sectors, including agriculture, infrastructure, health, water resources, and ecosystems.

A minimum variance portfolio is a type of investment portfolio constructed with the goal of minimizing the portfolio's overall volatility or risk. It is designed to achieve the lowest possible level of risk for a given set of securities or assets.

Millennials, also known as Generation Y, are individuals born between the early 1980s and the mid-1990s to early 2000s, although the exact time frame can vary depending on sources.

Materiality refers to the significance or importance of information or factors in the context of a particular subject or decision-making process. In various fields, including finance, sustainability, and corporate reporting, materiality plays a crucial role in determining what information should be disclosed, considered, or acted upon.

In the context of finance and investment, a mandate refers to the authority or permission given to an individual or entity to manage a specific investment portfolio or asset on behalf of a client or organization. It sets out the guidelines, objectives, and constraints within which the manager operates.

The management gap refers to the discrepancy or difference between the skills, competencies, and capabilities of current managers and the skills required to effectively manage and lead in a changing business environment. It is often used to describe the challenge organizations face when their management practices and skills are not aligned with the evolving needs of the organization or industry.

Manageable risks are risks that can be identified, assessed, and effectively managed or mitigated by individuals, organizations, or institutions. These risks are typically within the control or influence of the risk owner, and appropriate measures can be taken to reduce their potential negative impact.

Longevity refers to the length of an individual's life, typically measured in terms of the number of years lived. It is a concept that is often associated with discussions about aging, healthcare, and population demographics.

A living wage is a wage level that enables workers to meet their basic needs and maintain a decent standard of living. It goes beyond the minimum wage, which is often set at a level that covers only the basic subsistence needs of workers.

Labour rights refer to the fundamental rights and protections of workers in the workplace. These rights are based on the principles of social justice, equality, and human dignity.

The International Renewable Energy Agency (IRENA) is an intergovernmental organization that promotes the widespread adoption and sustainable use of renewable energy worldwide.

The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, and other stakeholders. It was an international organization that existed from 2010 to 2020 and worked to promote integrated reporting as a means to enhance corporate reporting and transparency.

The International Corporate Governance Network (ICGN) is a global organization that promotes and facilitates effective corporate governance practices worldwide. It is a leading authority in the field of corporate governance, bringing together investors, companies, and governance experts to collaborate and advocate for responsible and sustainable corporate practices.

Internal social factors refer to the social aspects and dynamics within an organization or company that influence its operations, culture, and interactions among employees. These factors are shaped by the organization's values, policies, leadership, and the relationships among its employees.

The Intergovernmental Panel on Climate Change (IPCC) is a scientific body established by the United Nations (UN) and the World Meteorological Organization (WMO) in 1988. Its purpose is to provide policymakers with objective and up-to-date scientific assessments of climate change, its impacts, and potential adaptation and mitigation options.

The Integrated Reporting Framework (IRF) is a global framework that provides guidance and principles for organizations to prepare and present integrated reports. Integrated reporting aims to provide a holistic view of an organization's performance, strategy, governance, and value creation in a concise and comprehensive manner. It goes beyond traditional financial reporting by incorporating non-financial information, such as environmental, social, and governance (ESG) factors.

The Institutional Investors Group on Climate Change (IIGCC) is a collaboration of institutional investors and asset managers who are committed to addressing the risks and opportunities associated with climate change. It was established in the year 2001 and operates as a forum for collaboration, knowledge sharing, and engagement with policymakers and companies.

Inequality refers to the unequal distribution of resources, opportunities, and wealth among individuals or groups within a society. It can manifest in various forms, such as income inequality, wealth inequality, educational inequality, and social inequality.

Impact investing refers to investments made with the intention of generating positive social or environmental impact alongside financial returns. It is an investment approach that seeks to align financial goals with broader societal and environmental objectives.

Human rights are fundamental rights and freedoms inherent to all individuals, regardless of their nationality, race, religion, gender, or any other status. They are considered universal, inalienable, and indivisible.

Human capital development refers to the process of investing in and enhancing the knowledge, skills, abilities, and overall potential of individuals within a society or organization. It involves activities and initiatives aimed at developing human resources to increase productivity, innovation, and competitiveness.

Health and safety refers to the measures and practices implemented to protect the well-being and physical integrity of individuals in various settings, such as workplaces, public spaces, and residential areas.

Hazardous wastes are substances that pose a significant risk to human health, the environment, or both. They are generated from various industrial processes, manufacturing activities, and everyday household activities.

Habitat refers to the natural environment or the specific place where a particular organism or community of organisms lives. It encompasses the physical and biological factors that provide the necessary conditions for the survival, growth, and reproduction of living organisms.

Greenwashing refers to the deceptive practice of misleading consumers or investors by presenting a company, product, or service as more environmentally friendly or sustainable than it actually is. It involves using misleading or unsubstantiated claims, symbols, or marketing techniques to create a false perception of environmental responsibility.

Greenhouse gases (GHGs) are gases in the Earth's atmosphere that contribute to the greenhouse effect and, consequently, to global warming. These gases absorb and emit infrared radiation, trapping heat within the Earth's atmosphere and raising the temperature of the planet.

The greenhouse effect refers to the process by which certain gases in the Earth's atmosphere trap heat and contribute to the warming of the planet.

Green investment, also known as sustainable investment or environmentally responsible investment, refers to the practice of allocating capital to companies, projects, or funds that promote environmental sustainability and address climate change.

Green bonds are a type of fixed-income financial instrument that are specifically issued to fund environmentally sustainable projects. These projects aim to address climate change, promote renewable energy, enhance energy efficiency, support sustainable land use, or contribute to other environmentally beneficial initiatives.

Globalization refers to the increasing interconnectedness and interdependence of countries and their economies, cultures, and societies. It is driven by advances in technology, transportation, and communication, enabling the exchange of goods, services, ideas, and information on a global scale.

The Global Sustainable Investment Alliance (GSIA) is a collaboration of regional sustainable investment organizations from around the world. Its mission is to promote and support the growth of sustainable investment practices globally. The GSIA brings together leading sustainable investment organizations to share knowledge, collaborate on research, and advocate for the advancement of sustainable finance.

The Global Reporting Initiative (GRI) is an international independent standards organization that promotes sustainability reporting and corporate transparency. It has developed a widely recognized framework for reporting on an organization's economic, environmental, and social impacts, known as the GRI Standards.

The Global Impact Investing Network (GIIN) is a non-profit organization dedicated to promoting and advancing the practice of impact investing globally. Impact investing refers to investments made with the intention of generating positive social and environmental impact alongside financial returns.

Fundamental analysis is a method of evaluating investments by analyzing the underlying factors that affect the value of a security, such as a stock, bond, or commodity. It involves assessing the financial health, performance, and prospects of a company or asset to determine its intrinsic value and make investment decisions based on that assessment.

A fund of funds (FoF) is an investment strategy where a fund invests in other investment funds rather than investing directly in individual securities or assets. In other words, it is a mutual fund or an investment trust that holds a portfolio of other funds rather than holding individual stocks, bonds, or other assets.

Freedom of association is a fundamental human right that is recognized internationally. It refers to the right of individuals to join and form associations, organizations, or unions of their choice without interference or coercion.

Fossil fuels are energy resources that are derived from ancient organic materials, such as plants and animals, that have undergone geological processes over millions of years. The three main types of fossil fuels are coal, oil (petroleum), and natural gas.

The Forest Stewardship Council (FSC) is an international non-profit organization that promotes responsible forest management and the certification of forest products. It was established in 1993 as a response to concerns about deforestation, habitat destruction, and unsustainable logging practices.

Foreign Direct Investment (FDI) refers to the investment made by individuals, companies, or entities from one country into another country with the aim of establishing a lasting interest and controlling ownership in a business enterprise. FDI involves a direct ownership stake in a foreign company or the establishment of new operations in the foreign country.

Forced labor, also known as forced labor or involuntary servitude, refers to a form of labor in which individuals are compelled to work against their will, under the threat of punishment or harm. It is considered a serious violation of human rights and is prohibited under international law.

Fiduciary duty is a legal and ethical obligation that requires individuals in a position of trust to act in the best interests of another party. It is a fundamental concept in various relationships, such as between trustees and beneficiaries, financial advisors and clients, directors and shareholders, and attorneys and clients.

Fiduciary refers to a legal and ethical relationship of trust and confidence between two parties, where one party (the fiduciary) is entrusted with the duty to act in the best interests of the other party (the beneficiary). The fiduciary is expected to prioritize the interests of the beneficiary above their own and exercise a high standard of care, loyalty, and good faith in managing the affairs and assets entrusted to them.

Externalities refer to the unintended consequences or impacts of an economic activity on parties that are not directly involved in the transaction. These effects can be positive or negative and occur outside the market mechanism, resulting in costs or benefits that are not fully reflected in the prices of goods or services.

External social factors refer to the influences and conditions that originate from outside of an organization or individual and have an impact on their social environment. These factors can shape attitudes, behaviors, and societal norms, ultimately affecting various aspects of business operations, decision-making, and overall social dynamics.

Exposure, in the context of investing, refers to the degree to which an investment portfolio or individual security is exposed to certain risks or factors that can influence its performance. It represents the level of vulnerability or sensitivity of an investment to specific market conditions, sectors, regions, or other factors that may impact its returns.

An exclusion list, also known as a restricted list or a negative screening list, is a tool used in investment management to exclude certain companies, industries, or activities from an investment portfolio based on specific criteria. The purpose of an exclusion list is to align investment decisions with ethical, social, or environmental considerations by avoiding investments that do not meet predefined standards.

Ethical and faith-based investment, also known as values-based investment, is an investment approach that takes into consideration specific ethical or religious principles when making investment decisions. It allows investors to align their investment choices with their values, beliefs, and moral convictions.

ESG investing, also known as sustainable investing or socially responsible investing (SRI), is an investment approach that considers environmental, social, and governance (ESG) factors alongside financial factors when making investment decisions. The goal of ESG investing is to generate positive financial returns while also creating a positive impact on society and the environment.

ESG integration refers to the process of considering environmental, social, and governance (ESG) factors in investment decision-making and portfolio management. It involves incorporating ESG considerations alongside traditional financial analysis to assess the risks and opportunities associated with investments.

Escalation refers to the process of intensifying or increasing the level or severity of a situation or conflict. It typically occurs when efforts to resolve a problem or disagreement at a lower level are unsuccessful, leading to a progression towards higher levels of authority, involvement, or confrontation.

An environmental audit, also known as an environmental assessment, is a systematic evaluation of an organization's activities, processes, and operations to assess their impact on the environment. The purpose of an environmental audit is to identify potential environmental risks, evaluate compliance with environmental regulations, and recommend measures for improvement.

The environment refers to the natural world around us, including all living and non-living things, such as air, water, land, plants, animals, and ecosystems. It encompasses the physical, biological, and chemical factors that interact and shape the Earth's systems.

Engagement, in the context of various fields such as finance, sustainability, and corporate governance, refers to the process of actively interacting and communicating with companies, stakeholders, or other relevant parties to drive positive change, address concerns, and promote responsible practices. It involves dialogue, collaboration, and influence to achieve desired outcomes.

Emission refers to the release or discharge of substances, usually in the form of gases or particles, into the atmosphere or environment. Emissions can occur from various sources, including natural processes and human activities. When discussing environmental impact, emissions are often associated with pollutants that contribute to air pollution, climate change, and other environmental concerns.

An ecosystem refers to a complex network of living organisms, their physical environment, and the interactions between them. It encompasses both the biological and physical components of a specific area or habitat, ranging from a small pond to a vast forest or even the entire planet. Ecosystems can be found in various forms, including terrestrial (land-based), aquatic (water-based), and even aerial (air-based) systems.

Dynamic asset allocation is an investment strategy that involves periodically adjusting the allocation of assets in a portfolio based on changing market conditions, economic factors, and investment opportunities. It aims to optimize the risk and return profile of the portfolio by dynamically shifting investments across different asset classes.

Disposal refers to the process of getting rid of something or getting rid of waste materials in a proper and responsible manner.

Discounted Cash Flow (DCF) is a financial valuation method used to estimate the intrinsic value of an investment by determining the present value of its expected future cash flows.

Digital disruption refers to the transformative impact of digital technologies on industries, businesses, and traditional ways of doing things. It involves the use of digital technologies to create new business models, products, and services that significantly change the competitive landscape and customer expectations.

The Corporate Reporting Dialogue (CRD) is an initiative that brings together major standard-setting organizations and framework providers in the field of corporate reporting. It aims to enhance coherence and consistency in corporate reporting by promoting alignment and collaboration among these organizations.

A controversy case refers to a specific incident or situation that generates significant public debate, criticism, or concern due to ethical, legal, social, or environmental issues. These cases often involve companies, organizations, public figures, or events that have been involved in controversial actions or decisions that have garnered widespread attention and scrutiny.

Controversial sourcing refers to the practice of obtaining goods or materials from sources that are associated with ethical, social, or environmental concerns. It involves situations where the production or acquisition of a product may have negative impacts on human rights, labor conditions, the environment, or communities.

Consumer protection refers to the measures and actions taken to safeguard the rights and interests of consumers in their interactions with businesses and the marketplace. It is a legal and ethical framework that aims to ensure fair and transparent business practices and to protect consumers from fraudulent, deceptive, or harmful activities.

The Conference of the Parties (COP) is the supreme decision-making body of the United Nations Framework Convention on Climate Change (UNFCCC). It is an international conference where representatives from countries that are Parties to the UNFCCC come together to assess progress in dealing with climate change and negotiate and adopt agreements to address the issue.

Commingled funds, also known as pooled funds or collective investment funds, are investment vehicles that pool together funds from multiple investors to create a diversified portfolio of assets. These funds are managed by professional investment managers or firms who make investment decisions on behalf of the investors.

Collective engagement, also known as collective action or collaborative engagement, refers to the collaborative efforts of multiple stakeholders, such as investors, companies, governments, and civil society organizations, to address environmental, social, and governance (ESG) issues and drive positive change.

In the context of responsible investment, collective engagement involves investors collectively engaging with companies to promote sustainable practices, improve corporate governance, and address ESG risks and opportunities. Rather than engaging individually, investors join forces to amplify their impact and increase their influence on companies' behavior and decision-making processes.

The circular economy is an economic model that aims to redefine how products are designed, produced, consumed, and disposed of in order to maximize resource efficiency and minimize waste. It is a departure from the traditional linear economy, which follows a ''take-make-dispose'' approach, leading to the depletion of resources and generation of significant waste. In contrast, the circular economy seeks to create a closed-loop system where resources are continuously used, reused, and regenerated.

The Climate Disclosure Standards Board (CDSB) is an international organization that focuses on advancing and promoting the integration of climate-related information into mainstream corporate reporting. The CDSB provides a framework for companies to disclose their climate-related financial information in a clear, consistent, and decision-useful manner.

Climate change mitigation refers to efforts and actions taken to reduce or prevent the emission of greenhouse gases (GHGs) into the atmosphere in order to mitigate the causes and impacts of climate change. The goal of mitigation is to limit the extent of global warming and reduce the risks associated with climate change.

Climate change adaptation refers to the actions and strategies undertaken to manage and adjust to the impacts of climate change. As the Earth's climate continues to change, societies and ecosystems need to adapt in order to cope with the challenges and risks associated with these changes.

CDP, formerly known as the Carbon Disclosure Project, is an international non-profit organization that operates a global disclosure system for companies, cities, states, and regions to measure and manage their environmental impacts, particularly in relation to climate change. The organization was founded in 2000 and has become one of the leading initiatives in promoting environmental transparency and corporate sustainability.

A carbon tax is a policy instrument that aims to reduce greenhouse gas emissions by placing a price on carbon dioxide (CO2) and other greenhouse gas emissions. It is designed to create an economic incentive for businesses and individuals to reduce their carbon footprint by making carbon-intensive activities more costly.

Carbon sequestration refers to the process of capturing and storing carbon dioxide (CO2) from the atmosphere and preventing it from being released back into the environment. It is an important strategy in mitigating climate change by reducing the concentration of greenhouse gases in the atmosphere.

A carbon market is a system that enables the trading of carbon credits, which represent the right to emit a certain amount of carbon dioxide (or other greenhouse gases) into the atmosphere. It is a market-based approach to reducing greenhouse gas emissions and addressing climate change.

The main goal of a carbon market is to create economic incentives for reducing emissions by putting a price on carbon. By assigning a monetary value to emissions, the market encourages companies, industries, and governments to find cost-effective ways to reduce their carbon footprint. It provides a mechanism for entities to buy and sell emissions allowances or offsets, allowing those who can reduce emissions at a lower cost to sell their excess allowances to those who face higher costs in reducing emissions.

Carbon footprint refers to the total amount of greenhouse gas emissions, specifically carbon dioxide (CO2) and other greenhouse gases, generated directly or indirectly by an individual, organization, event, or product throughout its lifecycle. It is a measure of the impact of human activities on climate change.

Carbon dioxide (CO2) is a colorless and odorless gas that is naturally present in the Earth's atmosphere. It is composed of one carbon atom bonded with two oxygen atoms, and its chemical formula is CO2. CO2 is an essential component of the Earth's carbon cycle, playing a crucial role in maintaining the planet's temperature and supporting life.

Best-in-class investment is an approach that involves selecting investments from a specific industry or sector based on their performance or sustainability relative to their peers. In this approach, investors aim to identify companies that are leaders in terms of their environmental, social, and governance (ESG) practices compared to others within the same industry.

Bayesian inference is a statistical approach used to update beliefs or knowledge about a hypothesis or parameter based on observed data. It is named after Thomas Bayes, an 18th-century mathematician.

Automation refers to the use of technology and machines to perform tasks or processes that were previously carried out by humans. It involves the use of various technologies, such as robotics, artificial intelligence (AI), and computer systems, to streamline and automate repetitive or labor-intensive activities.

Automation has the potential to significantly impact industries, businesses, and society as a whole. It aims to improve efficiency, productivity, accuracy, and safety by reducing human involvement in routine or mundane tasks. By automating these tasks, companies can free up human resources to focus on more complex, creative, and strategic activities.

Animal welfare refers to the ethical and compassionate treatment of animals, taking into consideration their well-being and quality of life. It encompasses the physical, mental, and emotional needs of animals, as well as their protection from cruelty, neglect, and unnecessary suffering.

Animal welfare is an important aspect of ethical and responsible behavior towards animals. It recognizes that animals have inherent value and deserve to be treated with respect and dignity. It extends to all animals, whether they are domesticated, farmed, or wild.

Alpha generation refers to the ability of an investment manager or strategy to generate returns that exceed the performance of a benchmark or the overall market. It is a measure of the manager's skill in selecting investments and making strategic decisions to outperform the market and generate positive returns.

AGM stands for Annual General Meeting, while EGM stands for Extraordinary General Meeting. Both AGMs and EGMs are formal meetings held by companies to engage with their shareholders or members.

- Annual General Meeting (AGM): An AGM is a mandatory meeting held by companies once a year. It provides an opportunity for shareholders or members to receive updates on the company's performance, financial statements, and future plans. The AGM typically covers various agenda items, including the election of directors, appointment of auditors, approval of financial reports, and any other matters specified in the company's constitution. Shareholders can also ask questions, express their concerns, and vote on resolutions during the meeting.

- Extraordinary General Meeting (EGM): An EGM is a special meeting called by a company outside of its regular AGM schedule. EGMs are held to address specific urgent matters or significant changes that require shareholder approval. These matters may include amendments to the company's constitution, approval of major transactions, changes in share capital, mergers or acquisitions, and other significant decisions that cannot be delayed until the next AGM. Shareholders have the right to vote on resolutions related to the specific matters discussed at the EGM.

Activism refers to the practice of taking action to bring about social, political, or economic change. It involves individuals or groups advocating for specific causes, voicing their opinions, and working towards influencing public opinion, policies, or practices.

Active risk refers to the potential for deviation or underperformance of an investment portfolio compared to its benchmark or intended target. It arises from the active management decisions made by portfolio managers who aim to outperform the market rather than passively replicating a benchmark.

Active risk is a measure of the volatility or variability of returns that can result from active investment strategies. It indicates the level of uncertainty or potential downside associated with pursuing active management.

Active ownership is an investment approach that goes beyond simply buying and selling stocks or other assets. It involves actively engaging with the companies in which investors hold ownership stakes to drive positive change and enhance long-term value.

Active owners, such as institutional investors and asset managers, recognize that they have influence and responsibility as shareholders. They believe that by actively participating in the decision-making processes of companies, they can promote better corporate governance, environmental sustainability, social responsibility, and ethical business practices.