Glossary

CDP

CDP stands for the Carbon Disclosure Project, which is a non-profit organization that provides a global system for companies, cities, states, and regions to measure, disclose, manage, and share environmental information. CDP collects and analyzes data related to climate change, water, and deforestation risks and opportunities, and makes this information publicly available to investors, companies, and other stakeholders.

CDP is an important framework for companies to report their environmental impact and performance but it also provides a rating system that evaluates companies and provides benchmarking information for investors and other stakeholders in regard to sustainability. The CDP rating is widely recognized as a measure of a company's commitment to sustainability and responsible environmental management.

CSRD

CSRD stands for Corporate Sustainability Reporting Directive. It is a proposed European Union (EU) legislation that aims to update and strengthen the Non-Financial Reporting Directive (NFRD). The NFRD, which was introduced in 2014, requires large EU companies to disclose certain non-financial information related to environmental, social, and governance (ESG) issues in their annual reports.

ESG

ESG is an acronym that stands for Environmental, Social, and Governance. ESG refers to a set of criteria that investors and other stakeholders use to evaluate a company's performance and sustainability.

The "E" in ESG stands for Environmental, which encompasses issues related to a company's impact on the natural world, such as its carbon emissions, use of natural resources, and waste management practices.

The "S" in ESG stands for Social, which includes considerations related to how a company treats its employees, customers, and other stakeholders. This can include issues such as labor practices, human rights, community engagement, and diversity and inclusion.

The "G" in ESG stands for Governance, which relates to the systems and structures that a company has in place to manage its operations and ensure accountability to stakeholders. This includes issues such as board composition, executive compensation, and transparency and disclosure practices.

GHG

GHG stands for greenhouse gas. Greenhouse gases are gases that trap heat in the Earth's atmosphere and contribute to the greenhouse effect, which is the warming of the Earth's surface. The most common greenhouse gases are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gases.

GHG emissions are a significant contributor to climate change, which is one of the most pressing environmental issues facing the world today. Sources of GHG emissions include burning fossil fuels for energy, transportation, agriculture, and industrial processes.

As such, many companies now report their GHG emissions as part of their ESG reporting, and there are a variety of GHG reporting frameworks and standards available to companies to guide them in this process. Some of the most commonly used GHG reporting frameworks include the Greenhouse Gas Protocol, the Task Force on Climate-related Financial Disclosures (TCFD), and the Carbon Disclosure Project (CDP).

Materiality

Materiality is a concept in ESG that refers to the significance or importance of a particular environmental, social, or governance issue to a company's business or stakeholders. In other words, material issues are those that have a direct or indirect impact on a company's financial performance, reputation, or long-term sustainability.

Materiality Assessment

Materiality assessments are commonly used by companies to identify and prioritize ESG issues that are most relevant to their operations and stakeholders. These assessments may involve analyzing factors such as the severity of the issue, its likelihood of occurrence, and the potential financial or reputational impact on the company.

For example, a company operating in the oil and gas industry may consider climate change to be a material ESG issue, as regulations and consumer preferences shift towards renewable energy sources, potentially impacting the company's financial performance and long-term sustainability. Alternatively, a company operating in the technology sector may consider data privacy to be a material ESG issue, given the increasing focus on data protection and the potential risks associated with data breaches.

NFRD

NFRD stands for the Non-Financial Reporting Directive, a European Union (EU) directive that requires certain companies to disclose non-financial information in their annual reports. The directive was introduced to improve transparency and accountability in areas such as environmental, social, and governance (ESG) issues, human rights, and anti-corruption.

The NFRD applies to large public-interest entities (PIEs) with more than 500 employees, including listed companies, credit institutions, and insurance companies. These companies must disclose information on their policies, risks, and outcomes related to environmental matters, social and employee issues, human rights, anti-corruption and bribery matters, and diversity on boards.

PRI

PRI stands for Principles for Responsible Investment, an international network of investors who are committed to incorporating environmental, social, and governance (ESG) factors into their investment decision-making processes. The PRI was launched in 2006 with support from the United Nations and is based on six principles that provide a framework for incorporating ESG considerations into investment practices.

By signing on to the PRI, investors commit to implementing the principles and to reporting on their progress towards integrating ESG factors into their investment practices. The PRI initiative has grown significantly since its launch, with more than 4,000 signatories representing over $100 trillion in assets under management as of 2021.

SDG

SDG stands for Sustainable Development Goals. The SDGs are a set of 17 goals and 169 targets adopted by the United Nations in 2015 as part of the 2030 Agenda for Sustainable Development.

The SDGs aim to address some of the world's most pressing economic, social, and environmental challenges, including poverty, hunger, climate change, inequality, and sustainable development. Each goal has specific targets and indicators that governments, businesses, and civil society organizations can use to track progress towards achieving the SDGs.