Glossary
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Active Ownership |
Active Ownership refers to investors addressing concerns of environmental, social and governance (ESG) issues by voting on such topics or engaging corporate managers and boards of directors on them. Active ownership is utilised to address business strategy and decisions made by the corporation in an effort to reduce risk and enhance sustainable long-term shareholder value. |
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| Best In Class / Positive Screening | Best-in-Class is an approach in which a company's or issuer's environmental, social and governance (ESG) performance is compared with the ESG performance of its peers (i.e. of the same sector or category) based on a sustainability rating. Companies which meet certain criteria differentiating them positively from their peers (e.g. 30% best performing companies or all companies that reach a minimum ESG score) will be eligible for investment. | ||||
| Blended Finance |
Blended finance refers to the complementary use of grants (usually from public sources) and non-grant financing from private and/or public sources. Such structures are used to make infrastructure and sustainability projects that would otherwise not be financially sustainable attractive for private investors. The IFC uses the term blended finance to distinguish it from ‘concessional finance’, which requires a minimum 25% grant element. Although blended finance has a concessional component, the subsidy portion of the investment is minimised in order to avoid crowding out private financing. Blended finance is often used in the context of development finance, for the mobilisation of financial flows towards sustainable development in developing countries. See also "Development finance". |
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| Carbon Credit | See "Carbon Markets" | ||||
| Carbon Finance | Carbon finance is a generic term for financial services related to mitigation of and adaptation to climate change. It specifically refers to investments in greenhouse gas emission reduction projects and the related creation of carbon credits, financial instruments that are tradable on carbon markets. | ||||
| Carbon footprint of a portfolio | A carbon footprint refers to the entire greenhouse gas (GHG) emissions of a portfolio. It is calculated in tons of CO2 equivalents per million USD invested (tCO2e/mUSD). It expresses the amount of annual GHG emissions which can be allocated to the investor per million USD invested in a portfolio and is therefore probably the most intuitive carbon metric available at the portfolio level. | ||||
| Carbon Markets | Carbon markets are trading schemes in which participants buy and sell "carbon credits" that allow them to emit a certain amount of CO2 or other greenhouse gases (GHG). The primary goal of carbon markets is to reduce overall GHG emissions by creating a monetary incentive for participants to reduce their carbon emissions.
There are two types of carbon markets:
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| Carbon Neutral |
Carbon neutral refers to the situation when an organisation’s net carbon emissions are equal to zero. The process requires measuring total CO2 emissions, taking active steps to reduce emissions where the company can, and then purchasing carbon credits to offset CO2 emissions that cannot be eliminated from a company's operations. The carbon credits contribute to financing projects reducing CO2-emissions (i.e. by replacing fossil power generation with renewable energy projects). See also “Net Zero”. |
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| Climate Action 100+ | Founded in 2017, Climate Action 100+ is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take appropriate action on climate change in order to mitigate financial risk and to maximize the long-term value of assets. As of 2024, it brings together ca. 170 signatory companies. The initiative is set to continue until 2030. | ||||
| Climate-alignment | The climate alignment of a portfolio refers to the reduction of the greenhouse gas emissions of the portfolio (i.e. of the issuers it contains) in line with global climate goals. For this purpose, the definition of greenhouse gas emissions in the Greenhouse Gas (GHG) Protocol is used, including at least scopes 1 and 2 and ideally scope 3 emissions in sectors where scope 3 emissions make up a material share of total emissions. Climate alignment should involve formulating a long-term target along with interim targets. The methodology applied should be based on internationally recognized standards. | ||||
| Climate risk |
Climate risk refers to the potential impact of climate change to human societies coming from climate change and its related effects - extreme heat waves, droughts, wildfires and floods. It includes impact on lives, health and wellbeing, economic and social structures, cultural assets, infrastructure, financial investments, etc. There are two categories of climate risk: Physical risks that arise from the physical impacts of climate change (e.g. assets affected by storms or floods) and transition risks related to the adaptation of the political frameworks and economic system (e.g. costs resulting from climate policy measures). Climate risk is directly relevant to the financial services sector because it has the potential to impact asset values, investment returns, and the financial stability and resilience of investee companies or borrowers. |
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| Community Investment | Community investment means directing investment capital to communities that are underserved by traditional financial services institutions. Generally, it provides access to credit, equity, capital, housing, and basic banking products that these communities would otherwise lack. The term usually refers to investments in developed countries. | ||||
| Corporate Social Responsibility (CSR) | Corporate Social Responsibility (CSR) refers to the commitment of an organisation, beyond what is required by law, to ensure that the social, economic and environmental impacts of their actions create a net benefit to communities and society. This is founded on the belief that all corporations have a "duty of care" to all their stakeholders in every area of their business operations and that being a responsible citizen improves the long-term business success of a company. | ||||
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| Development Finance |
Development finance refers to the allocation of financial resources to developing nations with the objective of reducing poverty and developing the economy of recipient countries. This includes
Development finance is typically provided by multilateral development banks, regional development banks (also referred to as “Development Finance Institutions”) and governments. There is an increasing involvement of private sector funding, among others linked to the rise of Impact Investing. See also "Impact Investing" and "Blended Finance". |
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| Development Finance Institution (DFI) | DFIs occupy the space between public aid and private investment. They are financial institutions, which provide finance to the private sector for investments that promote development. They focus on developing countries and regions where access to private sector funding is limited. They are usually owned or backed by the governments of one or more developed countries. | ||||
| Double Materiality |
The concept of Double Materiality highlights the importance to evaluate and disclose publicly both the effects of the company’s activities on the environment and society (environmental and social materiality) as well as the financial impacts of sustainability rules and practices on a company operations and profitability (financial materiality):
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| Emissions Trading System | See “Carbon Markets” | ||||
| Environmental Factors (E of ESG) | Environmental factors within ESG criteria in the context of investing include but are not limited to the environmental footprint of a company or country (e.g. energy consumption, water consumption), environmental governance (e.g. environmental management system based on ISO 14 001) and environmental product stewardship (e.g. cars with low fuel consumption). | ||||
| Equator Principles | The Equator Principles is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in project finance and is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. | ||||
| ESG - Environment, Social and Governance | ESG stands for Environmental (e.g. energy consumption, water usage), Social (e.g. talent attraction, supply chain management) and Governance (e.g. remuneration policies, board governance). ESG factors form the basis for the different SI approaches. | ||||
| ESG Engagement | Engagement is an activity performed by shareholders with the goal of convincing management to take account of environmental, social and governance criteria. This dialogue includes communicating with senior management and/or boards of companies and filing or co-filing shareholder proposals. Successful engagement can lead to changes in a company's strategy and processes so as to improve ESG performance and reduce risks. This approach is typically part of Active Ownership (Stewardship) activities – see “Active Ownership”. | ||||
| ESG Integration | ESG Integration refers to the explicit inclusion of ESG risks and opportunities into financial decision-making.
For sustainable investing, the term refers to the integration of ESG risks and opportunities into traditional financial analysis and investment decisions based on a systematic process and appropriate research sources. For sustainable lending it refers to the integration of ESG risks and opportunities in the loan approval, risk assessment and pricing processes. |
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| ESG Voting | ESG Voting refers to investors addressing concerns of environmental, social and governance (ESG) issues by actively exercising their voting rights, typically during Shareholder Assemblies, based on ESG principles or an ESG policy. This approach is typically part of Active Ownership (Stewardship) activities – see “Active Ownership”. | ||||
| Ethical Investment | Ethical investments are investments where the main motivation is aligning the investment strategy of an organisation or a person with their ethical values. In comparison to sustainable investments which are based on the conviction that an active management of environmental, social and governance risks and opportunities improves the long-term performance of a company, an ethical investment is mainly guided by ethical codes, religious beliefs or personal values and is often carried out using exclusionary screening. | ||||
| Eurosif | Eurosif is the European association whose mission is to promote sustainability through European financial markets. It works as a partnership of several Europe-based national Sustainable Investment Forums (SIFs). Eurosif engages in a range of promotional activities such as public events or discussion fora, both with the industry and policy-makers. www.eurosif.org | ||||
| Exclusions | Exclusions (also sometimes called “Negative Screening”) refer to excluding companies, countries or other issuers based on activities or business practices that violate given norms or values based on client’s preferences or due to anticipated risks. For sustainable investing, the term refers to rule out specific issuers from an investment portfolio. For sustainable lending, the term refers to financial institution’s excluding certain sectors of the economy or certain business activities from financing.
Exclusion criteria can refer to product categories (e.g. tobacco), activities (e.g. animal testing), or business practices (e.g. violation of human rights, corruption). They can be classified between:
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| Financial Centres for Sustainability | The Financial Centres for Sustainability (FC4S) Network is a partnership between financial centres and the United Nations Environment Programme, with the objective to exchange experience and take common action on shared priorities to accelerate the expansion of green and sustainable finance. The long-term vision of the FC4S Network is rapid global growth of green and sustainable finance across the world’s financial centres, supported by strengthened international connectivity, and a framework for common approaches. www.fc4s.org | ||||
| Financing Sustainability Solutions | The financing sustainability solutions approach within sustainable lending includes instruments that specifically target the funding of new sustainability innovations, business areas or business solutions with a positive sustainability footprint. These can refer to new business models or technologies, either within existing companies or as specialised SMEs or start-ups in the growth phase. In the latter case, this is generally difficult to address through traditional lending instruments, due to the increased risk or potentially long-term financing needs. | ||||
| Financing Transformation | The financing transformation approach within sustainable lending encompasses all instruments aimed at financing or supporting corporate transformations. The focus is on companies or corporate divisions that have the potential to improve their sustainability performance. This can be done through lending instruments such as sustainability-linked loans. | ||||
| Fiduciary Duty | In the institutional investment context, organisations entrusted with managing third-party money owe fiduciary duties to beneficiaries to exercise reasonable care, skill and caution in pursuing an overall investment strategy suitable to the purpose of the trust and to put the investors’ interests before their own. The explicit legal nature of fiduciary duty varies depending on the country of origin. While most institutional investment funds strive to create financial benefits for their beneficiaries, it is also possible for trust deeds explicitly to require trustees to consider ESG factors in investments. Given the growing evidence supporting the materiality of ESG issues, the consideration of ESG opportunities and risks in investment processes is increasingly considered by trustees as an integral part of their fiduciary duty. | ||||
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| GEAK | Gebäudeausweis der Kantone (GEAK) is a Swiss tool to measure and indicate the energy consumption of a building. It forms an easy tool to compare the energy efficiency of different buildings both for buyers and investors. www.geak.ch | ||||
| GFANZ | The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy, in line with the objective of the Paris Agreement to limit global temperature increases “well below 2°C from pre-industrial levels”. GFANZ works to develop the tools and methodologies to help turn financial institutions’ net-zero commitments into action, to achieve the transition of the whole economy. www.gfanzero.com | ||||
| GIIN | The Global Impact Investing Network (GIIN) is a not-for-profit organisation that is committed to increasing the scale and effectiveness of impact investing. www.thegiin.org | ||||
| GIIRS | The Global Impact Investing Ratings System (GIIRS) is a system for assessing the social and environmental impact of companies and funds. www.giirs.org | ||||
| Global Reporting Initiative | The Global Reporting Initiative (GRI) is the most widely used global framework for the standardized reporting of economic, social and environmental performance. The GRI guidelines are created through a multi-stakeholder, consensus-seeking process that involves an international network of business, civil society, labour and professional institutions. www.globalreporting.org | ||||
| GSIA | The Global Sustainable Investment Alliance (GSIA) is a global network of membership-based sustainable investment organisations. GSIA’s purpose is to extend the impact and visibility of sustainable investment organisations on a global level. GSIA was founded by Eurosif together with other regional and national SIFs. www.gsi-alliance.org | ||||
| Governance Factors (G of ESG) | Governance factors within ESG criteria in the context of investing refer to the system of policies and practices by which an organisation is directed and controlled (also referred to as Corporate Governance). They include but are not limited to transparency on Board compensation, independence of Boards and shareholder rights. | ||||
| Green Bonds | Green bonds are fixed-income securities that raise capital for a project with specific environmental benefits. The majority of green bonds issued to date have raised money for renewable energy projects, energy efficiency measures, mass transit and water technology. Most green bonds have been either plain vanilla treasury-style retail bonds (with a fixed rate of interest and redeemable in full on maturity), or asset-backed securities tied to specific green infrastructure projects. | ||||
| Green Loan | Green Loan is a financing instrument that restricts the use of the funds to a specific green project (so-called use-of-proceeds instruments). In the case of green loans, the project plan is reviewed at the beginning of the loan term, and an interest-rate reduction is granted throughout the entire term. | ||||
| Greenwashing | Greenwashing refers to the situation where there is a discrepancy between the claim a company makes about its sustainability practices and the reality of its activities, thereby misleading stakeholders (potential investors, business partners, regulators and the wider public) on the depth and extent of its sustainability engagements and practices. Greenwashing can include the use of misleading labels or claims (e.g. using the terms "green", "eco-friendly", etc.), selective disclosure or unprecise language (highlighting only certain information while hiding other, etc.
Combatting greenwashing in the financial services sector is a focus of various regulators and industry associations, for example via the adoption of targeted regulation. See also "Fiduciary Duty" and "Naming Rules" |
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| ILO Conventions | International Labour Organization’s (ILO) conventions encompass international labour standards which are integrated into legally binding international treaties, setting out basic principles and rights at work. Those legal instruments are ratified in all participating countries. The eight fundamental conventions cover the topics freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour; and the elimination of discrimination in respect of employment and occupation. They are frequently used as the basis for exclusion and engagement approaches. | ||||
| Impact Investing | Impact Investing intends to generate a measurable, beneficial social and environmental impact alongside a financial return. Impact investing can be made in both emerging and developed markets, and target a range of returns from below-market to above-market rates, depending upon the circumstances. SSF considers impact investments as those having three main characteristics: intentionality, management and measurability. | ||||
| IIGCC | The Institutional Investors Group on Climate Change (IIGCC) is a forum for collaboration on climate change for investors. 
IIGCC provides investors with a collaborative platform to encourage public policies, investment practices, and corporate behaviour that address long-term risks and opportunities associated with climate change. www.iigcc.org | ||||
| IRIS+ | IRIS+ is a catalogue of generally accepted performance metrics that impact investors use to measure social, environmental, and financial success, evaluate deals, and improve the credibility of the impact investing industry. The catalogue is prepared by the Global Impact Investing Network (GIIN), a non-profit organisation dedicated to increasing the scale and effectiveness of impact investing. www.iris.thegiin.org | ||||
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| Just Transition | A just transition is about ensuring that the whole of society – all communities, all workers, all social groups – are equitably treated in the necessary transition of the global economy and business models to achieve the Paris Agreement’s objective of keeping the increase in the global average temperature "well below 2°C above pre-industrial levels". The International Labour Organization (ILO) defines it as follows: "Greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind." | ||||
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| Microcredit | See "Microfinance" | ||||
| Microfinance | Microfinance refers to a range of financial tools (loans, savings, money transfers, etc.) provided by specialised institutions and designed for people who do not have access to the traditional banking system. One of the most widespread microfinance instruments are "microcredits": small loans granted to lower income entrepreneurs in developing and emerging market countries. These loans contribute to the development of local economies and therewith contribute to creating jobs and reduce poverty. | ||||
| Microfinance Institutions | Microfinance institutions are organisations that offer microcredits and other microfinance products to companies and individuals in developing and emerging market countries. | ||||
| Microinsurance | The term microinsurance captures different insurance products (health, life, agricultural, property, etc.) specifically targeted to individuals in developing and emerging market countries who cannot get access to conventional insurance services. These insurances are issued by microinsurance institutions, and generally tailored for low-income individuals in countries. Such insurance policies may provide coverage of various risks such as illness, death, natural disasters, and property loss. | ||||
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| Naming rules | Naming rules are regulatory initiatives in various jurisdictions designed to ensure that investment funds do not use certain terms in their name (e.g. "sustainable", "esg", "responsible", "environment", "impact" without complying with a number of rules. The purpose of these rules is to avoid misleading investors on the actual features of the investment product.
Naming rules are currently enforced in various jurisdictions, including the European Union (ESMA’s "Guidelines on funds’ names using ESG or sustainability-related terms"), the UK (FCA’s "Sustainability Disclosure Requirements"), the US (SEC’s "Naming rules") and Switzerland (FINMA’s guidance "Preventing and combating greenwashing"). See also "Greenwashing" |
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| Natural Capital Finance Alliance | The Natural Capital Finance Alliance is an online platform that sets out how the economy depends and impacts on nature. Financial institutions can use data from ENCORE to identify nature-related risks they are exposed to through their lending, underwriting and investment in high-risk industries and sub-industries. As a sub-section of the tool, the ENCORE biodiversity module has been developed to help financial institutions explore how to align their activities in the agriculture and mining sectors with important global goals for nature. The ENCORE tool is maintained and continuously improved by Global Canopy, UNEP FI and UNEP-WCMC, who together form the ENCORE Partnership. www.encorenature.org/en | ||||
| Negative Screening | See "Exclusions". | ||||
| Net Zero | Net Zero refers to the target of bringing global greenhouse gas (GHG) emissions caused by human activity to Net Zero by reducing emissions as far as technically possible while compensating for the residual through removal from the atmosphere.
Net Zero commitments are a direct result of the Paris Agreement of 2015, which established that "global net emissions of carbon dioxide will need to fall to Net Zero by 2050" in order to have a chance to achieve its objective to limit global temperature increases "well below 2°C from pre-industrial levels". A number of organisations, including financial institutions, have started to establish "Net Zero Transition Plans" that detail how they intend to reduce emissions caused either directly (scope 1 emissions) or indirectly (scope 2 and 3 emissions) by their activities. |
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| Norms-based exclusions | See "Exclusions" | ||||
| Norms-based Screening | Norms-based screening relates to the screening of investments against minimum standards of business practice based on national or international standards and norms such as the ILO conventions, the OECD Guidelines for Multinational Enterprises, the UN Global Compact or the UN Guiding Principles on Business and Human Rights. In the case of violation of such principles an investor might chose to engage with companies to improve their practice or – often as a matter of last resort – exclude a company from the investment portfolio. | ||||
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| OECD Guidelines for Multinational Enterprises | These are a comprehensive set of government-backed recommendations on responsible business. The governments who aim to adhere to the Guidelines intend to encourage and maximise the positive impact multinational enterprises can make to sustainable development and enduring social progress. mneguidelines.oecd.org/ | ||||
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| Paris Agreement | Agreed at COP21 in Paris in 2015, the Paris Agreement's central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5°C. | ||||
| Positive Screening | See "Best in Class". | ||||
| PRI | The United Nations-supported Principles for Responsible Investment (PRI) Initiative is an international network of investors and asset managers working together to put the six Principles for Responsible Investment into practice. Its goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. Asset owners, investment managers and service providers can become signatories which obliges them to annually report on their progress regarding the six principles covering ESG integration, active ownership and promotion of sustainable investments. www.unpri.org | ||||
| PRI Collaboration Platform |
Platform offered by the Principles for Responsible Investments (PRI) for institutional investors and asset managers to collaborate on engagement activities with investee companies. An investor posts planned engagement activities and seeks other investors to co-sign letters or actively contribute to engagement activities. Accessible for PRI signatories only. collaborate.unpri.org/ See also "ESG Engagement" |
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| Principles for Sustainable Insurance (PSI) | Launched by UNEP FI (United Nations Environment Programme Finance Initiative) in 2012, the Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities. The purpose of the PSI Initiative is to better understand, prevent and reduce environmental, social and governance risks, and better manage opportunities to provide quality and reliable risk protection. www.unepfi.org/psi/ | ||||
| Proxy Voting | Proxy voting refers to a ballot being cast by one person on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters. Since most shareholders cannot, or do not want to, attend the annual and special meetings at which the voting occurs, corporations provide shareholders with the option to cast a proxy vote. Shareholders receive a proxy ballot in the mail along with an informational booklet called a proxy statement describing the issues to be voted on. Shareholders return a form by mail agreeing to have their vote cast by proxy. | ||||
| Public Private Partnership (PPP) | PPP are typically medium to long-term arrangements between the public and private sectors, whereby some of the service obligations of the public sector are provided by the private sector, with clear agreement on shared objectives for delivery of public infrastructure and/or public services. In the finance context, PPPs often form the basis for long-term investments by the private sector in infrastructure or other services of the public domain. | ||||
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| Responsible Investing |
The concept of "responsible investing" is not uniformly used in the market, with its usage and acceptance greatly varying from one market participant to another. It can however be defined as an overarching concept, embedding all investment strategies that take into consideration environmental, social or governance factors, typically with the purpose to invest responsibly. It therefore bears the connotation of ethical considerations and a sense of social responsibility motivating the investment decisions. See also "socially responsible investing" and "sustainable investment" |
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| Science-based targets | The term "Science-based targets" is currently mostly applied in the context of climate targets. Such targets provide a clearly defined pathway for companies to reduce greenhouse gas (GHG) emissions. According to the Science-based targets initiative, 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. the concept can also be applied to other sustainability targets. | ||||
| Scope 1,2,3 | Scope 1, Scope 2, and Scope 3 emissions are different categories of greenhouse gas (GHG) emissions. These categories were established by the Greenhouse Gas Protocol, launched in 1998.
See also "Net Zero" |
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| Shareholder Activism | Shareholder activism is an investment strategy that employs shareholder power to influence corporate strategy and behaviour. A company may be a target of shareholder activism for financial reasons (e.g. if it suffers mismanagement) or non-financial reasons (e.g. if it lacks a credible sustainability strategy). The approach is executed by submitting and voting on proxy resolutions that influence a company's policies and practices. Shareholder activism is typically carried out by specific types of investors such as hedge funds. | ||||
| Shareholder Proposal / Resolution | A legal right of shareholders to create a proposal for change in corporate policies and actions. Shareholder proposals are tools of corporate engagement and shareholders reserve the right to circulate proposals, and vote on them at the company’s Annual General Meeting (AGM). These tools are typically part of Active Ownership (Stewardship) activities – see "Active Ownership". For details on voting, see "Proxy voting". | ||||
| Social Factors (S of ESG) | Social factors within ESG criteria in the context of investing include, but are not limited to, worker rights, safety, diversity, education, labour relations, supply chain standards, community relations, and human rights. | ||||
| Social Loan | Social Loan (SL) is a financing instrument that restricts the use of the funds to a specific social project (so-called use-of-proceeds instruments). In the case of social loans the project plan is reviewed at the beginning of the loan term, and an interest-rate reduction is granted throughout the entire term. | ||||
| Socially Responsible Investing |
Socially responsible investing (SRI) is an early term for sustainable investing whose meaning evolved over time. In its current acceptance, it generally designates the first forms of sustainable investing, i.e. investments based on the ESG approaches "exclusions" (or "negative screening") and "best-in-class" (or "positive screening"). See also "Sustainable investment", "Responsible investing", "Exclusions", "Best-in-class". |
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| Stewardship | See "Active Ownership" | ||||
| Stranded Assets | Stranded assets are assets whose investment value must be written off, because of changes in the economic framework conditions such as regulatory changes making them unexploitable, obsolescent due to technological developments, market expectation changes, etc. The concept is often used for fossil fuels, when the value of fossil fuel reserves falls due to rising operational costs associated with carbon prices. Fossil fuel assets could become ‘stranded’ as production becomes unprofitable. The possibility of increased regulation and public pressure, both domestic and international, poses additional risks. The share price of fossil fuel companies could diminish considerably if political pressure to reduce carbon emissions strengthens. |
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| Sustainability | Sustainability was defined in 1987 by the World Commission on Environment and Development (commonly named “Brundtland Commission” by the name of its Chair) in their report Our Common Future. The report defined sustainability (or sustainable development) as a development that "meets the needs of the present generation without compromising the ability of future generations to meet their needs.” | ||||
| Sustainability Index / Benchmark | A Sustainability Index is a market capitalisation-weighted index designed to represent the performance of companies that are selected from a parent index based on Environmental, Social and Governance (ESG) criteria. These criteria exclude constituents based on involvement in specific business activities, as well as ESG ratings and exposure to ESG controversies. Sustainability Indices aim to achieve sector weights that reflect the sector weights of their corresponding parent index. | ||||
| Sustainability-linked Loan | A Sustainability-linked loan (SLL) defines a concrete sustainability target for a company and provides a discount on the interest rate if the target is achieved, while failure to achieve the target can be linked to an interest-rate increase. It allows funds to be used freely within an organisation (so-called general-purpose instruments). In the case of SLLs, a recurring review of the degree of target achievement is foreseen throughout the term. | ||||
| Sustainability Ratings | Sustainability (or ESG) Ratings are provided by specialised rating agencies and reflect a company's/country's/fund's performance with regards to environmental, social and governance (ESG) factors. Sustainability ratings enable investors to gain a quick overview of the sustainability performance of a company/country/fund and are the basis for a best-in-class investment approach. | ||||
| Sustainability-related Investment | Sustainability-related investment refers to any investment approach integrating environmental, social and governance (ESG) factors into the selection and management of investments. This includes certain sustainable investment approaches that were previously considered as "sustainable investments" but no longer qualify as such under recent regulatory developments.
In Switzerland, for example, investments based on certain approaches such as Exclusions or ESG Integration do not qualify as sustainable investment as per the AMAS Self-regulation "Self-regulation on transparency and disclosure for sustainability-related collective assets", Appendix 3. See also "Sustainable investment", "Exclusions", "ESG Integration" |
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| Sustainability Research Provider / Sustainability Rating Provider | These are organisations providing research and/or ratings on the sustainability performance of companies, issuers, countries or sectors. Most investors and asset managers use such third-party information when preparing sustainable investment products. | ||||
| Sustainable Development Goals (SDGs) | The SDGs are 17 goals aiming to catalyse sustainable development set by the United Nations in 2015. They include goals such as no poverty, gender equality, decent work, sustainable consumption, climate action and reduced inequalities. The goals were developed to replace the Millennium Development Goals (MDGs) which ended in 2015. Unlike the MDGs, the SDG framework does not distinguish between "developed" and "developing" nations. sdgs.un.org/ | ||||
| Sustainable Finance | Sustainable finance refers to any form of financial service with the objective of supporting the transition to a sustainable economy and society by integrating environmental, social and governance (ESG) factors into business and investment decisions. Such finance aims for the lasting benefit to clients, society at large and the planet. | ||||
| Sustainable Finance Geneva (SFG) | Sustainable Finance Geneva is an association of investment professionals with an interest in sustainable finance. SFG's objectives are to raise key financial players' awareness about sustainable investing through communication, training and networking and to promote the Geneva financial centre with its capacities in sustainable finance. SFG is a network partner of SSF. www.sfgeneva.org | ||||
| Sustainable Financial Centre | A sustainable financial centre is a financial marketplace that contributes to sustainable development and value creation in economic, environmental and social terms. In other words, one that increases prosperity and economic competitiveness both today and in the long term, while aiming for the lasting benefit of clients, society at large and the planet. | ||||
| Sustainable Investment | The concept of sustainable investment (SI) has evolved over time, following the maturation of market practices and regulatory frameworks. While it previously referred to any investment integrating ESG factors into the investment processes through one or more sustainable investment approaches, its use is increasingly limited to investments fulfilling specific predefined process-related or outcome-related criteria.
In Switzerland, the Asset Management Association (AMAS) "Self-regulation on transparency and disclosure for sustainability-related collective assets" defines what qualifies as a sustainable investment (the definition is also followed by the Swiss Banking Association and hence applies also to the banking industry). It its latest version, the AMAS regulation defines as sustainable an investment strategy that pursues for at least 70% of its assets:
The EU Sustainable Finance Disclosure Regulation (SFDR) sets out transparency requirements around sustainable investments. It includes company-related and product-related disclosure obligations:
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| Sustainable Investment Forum | A sustainable investment forum (SIF) is an association promoting sustainable investments and finance in a national or multinational financial market. There are many SIFs in Europe, most of which are partners and founders of Eurosif. Eurosif together with other regional and national SIFs has founded the Global Sustainable Investment Alliance (GSIA) to align activities and gain a market overview on sustainable investments globally. | ||||
| Sustainable Lending | Sustainable Lending covers all lending activities with clear procedures to assess environmental, social and governance risks and opportunities of projects or companies. There are different approaches to sustainable lending, some aiming at the avoidance of risks on the side of the lender, others aiming at the promotion of ESG-related improvements on the side of the borrower, e.g. by providing preferential interest rates for projects fulfilling pre-defined sustainability criteria (i.e. sustainable mortgages for energy-efficient buildings). | ||||
| SVVK - ASIR | The Swiss Association for Responsible Investments (SVVK - ASIR) is an association of large pension funds aiming to provide services to its members that enable them to invest responsibly. This entails the inclusion of ESG criteria in their investment decisions, where the association supports its members through norms-based and product-based portfolio screening and engagement. The normative standards applied are the Swiss constitution and Swiss law, ILO conventions and the Global Compact. The association was founded in December 2015 and has 11 members as of 2024. svvk-asir.ch/ | ||||
| Swiss Federal Act on War Material (WMA) | The WMA is a piece of Swiss legislation in force since 1998. This Act focuses on the fulfilment of Switzerland's international obligations and the respect of its foreign policy principles by means of controlling the manufacture and transfer of war material and related technology. At the same time, it aims at maintaining Swiss industrial capacity adapted to the requirements of its national defence. The WMA was amended in 2013 to include the prohibition of the production as well as the direct financing of controversial weapons, encompassing cluster munition, anti-personal mines, as well as biological, chemical and nuclear weapons. Switzerland is one of the 13 countries regulating the financing of controversial weapons. | ||||
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| Transition Plan | A transition plan is an aspect of an organisation’s overall business strategy that lays out a set of targets and actions supporting its transition toward a low-carbon economy, including actions such as reducing its GHG emissions. Many organisations are making GHG emissions reduction commitments or are domiciled in jurisdictions that have done so.
A transition plan should be a part of, and aligned with, an organisation’s broader activities for addressing climate-related risks and opportunities, which in turn should be a part of, and aligned with, the organization’s overall business strategy. See also "Net Zero" |
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| Triple Bottom Line |
The concept of “Triple Bottom Line”, introduced in 1994, was one of the early initiatives extending the assessment of business performance beyond the mere economic dimension. It expands traditional reporting by taking into account ecological and social performance in addition to financial performance:
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| United Nations Environment Program; Finance Initiative (UNEP FI) | UNEP FI is a global partnership between UNEP and the financial sector founded in 1992. UNEP FI’s mission is to bring about systemic change in finance to support a sustainable world, and is highlighted in its motto, "Changing finance, financing change". Member organisations, representing banking, insurance and investment, recognize sustainability as part of a collective responsibility and support approaches to anticipate and prevent potential negative impacts of the financial industry on the environment and society. UNEP FI develops selective collaborations with other partner organisations, in order to increase awareness and raise support for critical activities. www.unepfi.org | ||||
| United Nations Global Compact (UNGC) | The UNGC initiative aims to encourage businesses worldwide to align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. Companies signing the UNGC commit to regularly reporting on progress on the ten principles. www.unglobalcompact.org | ||||
| United Nations Guiding Principles on Business and Human Rights | The Guiding Principles for Business and Human Rights are meant to support the implementation of the United Nations "Protect, Respect and Remedy" Framework. This set of guidelines seeks to provide a global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity. They were proposed by the UN Special Representative for Business and Human Rights, John Ruggie, and endorsed by the UN Human Rights Council in June 2011. As they cover all areas of business, they are also applicable to the financial sector. | ||||
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| Values-based Exclusions | See "Exclusions" | ||||
