Terminology relevant for this career area
IMPORTANT TERM
SIMPLE DEFINITION
Environmental, Social, and Governance (ESG) Criteria
A set of standards and guidelines used by investors to assess a company's sustainability and ethical performance, influencing investment decisions.
ESG Integration
ESG integration involves considering environmental, social, and governance factors when making investment decisions. It aims to enhance risk assessment and identify sustainable investment opportunities.
Socially Responsible Investment (SRI)
Socially responsible investment, also known as sustainable or ethical investment, is an investment approach that considers environmental, social, and governance (ESG) factors alongside financial returns. SRI seeks to generate positive social and environmental impacts while achieving financial goals by selecting investments that align with ethical and sustainability criteria.
Impact Investment
The allocation of capital to businesses or projects that are created to generate both financial returns and positive social or environmental impacts.
Sustainable Bonds
Sustainable bonds, including green, social, and sustainability bonds, are debt instruments where the proceeds are dedicated to financing environmentally or socially beneficial projects or activities.
Sustainability Risk Assessment
Sustainability risk assessment involves evaluating the potential environmental, social, and governance risks that could impact an investment's performance, allowing investors to make informed decisions.
ESG Ratings and Scores
ESG ratings and scores provide assessments of a company's or investment's sustainability performance. Various organizations and agencies assign these ratings based on ESG criteria.
Stewardship and Proxy Voting
Stewardship refers to an investor's active engagement with companies to promote ESG improvements. Proxy voting involves voting on shareholder resolutions related to ESG issues during corporate meetings.
Transition Finance
Transition finance focuses on providing capital to companies and projects that are actively transitioning toward more sustainable practices, helping them reduce their environmental and social impacts.
ESG Taxonomy
The European ESG Taxonomy is a regulatory framework that classifies economic activities based on their environmental sustainability. It helps investors and companies identify which activities are environmentally sustainable and align with European Union (EU) climate goals, facilitating ESG disclosure and investment decisions.