It can be challenging to keep up with the evolving terminology and acronyms in the sustainability investment world. We want impact investing to be accessible to everyone so we have put together a short glossary, to help you navigate through the jargon.
Enterprise impact
The impact which is delivered by the products and services that the investee company supplies.1
Engagement or Shareholder Engagement
The efforts made by shareholders to influence the companies they invest in. These efforts often have the objective of fact-finding or encouraging positive behavioural change by company management.
ESG
An analytical discipline covering environmental, social and governance factors that investors use to screen investments, usually as a way of understanding and reducing potential investments risks.
GIIN
The Global Impact Investing Network
IFC
The International Finance Corporation
Impact engine
An analytical tool that rates the overall impact ‘intensity’ of the products and services offered by companies. This tool captures the different dimensions of positive impact that are created by products and services to provide an overall intensity rating for the company. It is bespoke to, and has been developed by WHEB Asset Management. 2
Impact intensity
The ‘intensity’ of impact is a measure of the level of change in outcomes and the contribution that the investment makes to these outcomes. WHEB’s impact engine is designed to assess the impact intensity of different investments
Impact investing
An investment approach which involves making investments with the explicit intention to generate positive, measurable social and environmental impact alongside a financial return. This is typically also accompanied by a ‘theory of change’.
Intentionality
An investor’s intention to have a positive social or environmental impact through their investments.
Investor impact
The impact that is attributable to the investor as opposed the the ‘enterprise impact’ that comes from the activites of the investee.. It typically refers to changes in enterprise impact that are due to the investor (i.e., resulting from stewardship activity) and the investment itself (which might support the investee company through reductions in the cost of capital, supporting emplyee incentivisation etc.). 1
Primary Markets
A financial market where investors buy securities for the first time directly from the issuing company itself.
Secondary Markets
A financial market where investors buy securities or assets from other investors, rather than from the issuing company itself.
Shareholder Primacy
A theory with roots in US corporate law that prioritises the needs of shareholders over other stakeholders such as customers, employees, suppliers and communities.
Stewardship or Investor Stewardship
This refers to investors using their influence over investee companies or potential investee companies, policy makers, service providers and other stakeholders, to maximise long-term value. Often this is done collaboratively.3
1 https://www.whebgroup.com/investing-for-impact/about-impact-investing/our-perspective
2 https://www.whebgroup.com/investing-for-impact/how-we-invest
3 https://www.unpri.org/an-introduction-to-responsible-investment/an-introduction-to-responsible-investment-stewardship/7228.article#:~:text=Stewardship
