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.
A
Asset
For example cash, stocks, bonds, real estate or other holdings held by an organisation, individual or company.
Asset class
Category of investment, defined by its main characteristics of risk, liquidity and return. Major asset classes tend to be cash, fixed income (bonds), public equity (stocks), private equity and real assets.
AUM (abb.)
Assets under management - represents the market value of all of the assets that a financial entity owns and/or manages.
Avoided emissions
Avoided emissions come from the difference between legacy technologies and businesses and the new approaches that replace them. They are the a relative improvement in emissions compared to a business as usual (BAU) scenario.
C
Capital markets
The financial market on which companies, governments and other organisations raise large-scale funding by selling long-term investments such as shares and bonds to investors.
Circular economy
An alternative to a traditional linear-economy (make, use, dispose), in which resources are kept in use for as long as possible, extracting maximum value from them whilst in use, then recovering and regenerating products and materials at the end of each service life.
CO2e
Carbon dioxide equivalent (CO2e) is a measure of the effect of different greenhouse gases (GHGs) on the climate. Measuring CO2 only accounts for one of many GHGs so converting all emissions to their carbon dioxide equivalent includes the effects of the other main GHGs in the atmosphere.
COP (abb.)
Conference of the Parties. Mostly commonly used to refer to the annual conference for countries that signed the United Nations Framework Convention on Climate Change (UNFCCC) – a treaty that came into force in 1994. It can also refer to conferences relating to other international agreements such as the UN Convention on Biological Diversity.
CSR (abb.)
Corporate Social Responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour.
E
Engagement activity
Purposeful diaglogue with a company either bilaterally or collaboratively and involving a clear objective and an identifiable outcome and using escalation tactics where appropriate.
Engagement milestones
We track each of our engagements and report detailed information on the number of engagements, which companies they are with, what escalation tools are used, who participates in the engagement and ultimately what the outcomes are. We have identified four milestones that indicate the extent to which our engagement objectives have been achieved.
Enterprise impact
The impact which is delivered by the products and services that the investee company supplies.
ESG (abb.)
Environmental, Social, Governance. An analytical discipline covering environmental, social and governance factors that investors use to analyse investments, usually as a way of understanding and reducing potential investment risks.
EU taxonomy
A classification system used in the European Union, that allows financial and non-financial companies to share a common definition of economic activities that can be considered environmentally sustainable.
F
FCA (abb.)
Financial Conduct Authority. Regulatory body for financial services firms and financial markets in the UK.
Fundamental Quality Analysis
An approach used by WHEB when evaluating a company, where a range of environmental, social and governance (ESG) factors, together with strategic, business model and financial analysis are used to decide their fundamental quality.
G
G7 Impact Taskforce
A taskforce convened as part of the UK’s 2021 presidency of the G7 group of developed nations, and co-led by the Impact Investing Institute and the Global Steering Group for Impact, to promote and enable impact investing among the world’s leading investors.
GIIN (abb.)
The Global Impact Investing Network (GIIN) connects investors with a global peer network, empowering them to address social and environmental issues effectively through their investments.
GHGs (abb.)
Greenhouse gas emissions. Gases in the earth's atmosphere that trap heat.
I
Impact calculator
The impact calculator illustrates the underlying positive impact that companies in WHEB’s investment portfolio help create and that are associated with a given level of investment.
Impact engine
WHEB's analytical tool designed to assess the overall impact ‘intensity’ of the products and services offered by companies.
Impact intensity
WHEB’s impact engine is designed to assess the impact intensity of different investments based upon how the company’s products and services help solve a specific social or environmental problem as well as the different dimensions of positive impact that are created by products and services.
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’.
Impact map
A WHEB illustration that plots the positive impact associated at the aggregate portfolio-level for each individual stock with the impact intensity on the x-axis and the fundamental quality on the y-axis.
Impact score
The impact score is a score attributed to a company based on the impact engine analysis of the company's products and services.
Intentionality
The intention to generate a positive social or environmental impact alongside a financial return, sits at the core of what it is to be an impact investor.
Investment Advisory Committee
WHEB has an independent Investment Advisory Committee that scrutinises the investment team’s activities, including stewardship. They review the fund’s holdings and ensure that they meet with both the spirit and the letter of the strategy’s sustainability criteria. Members play an advisory role, are independent experts in the field of sustainable investing and meet every four months.
Investor contribution
The contribution an impact investor makes both through their engagement with the companies they invest in as well as with the wider financial system.
IRIS (abb.)
Impact Report and Investing Standards. A common reporting language for impact-related terms and metrics.
L
Liquidity
The degree to which assets are held in cash or in a form that can easily and immediately be converted into money.
M
Market capitalisation
Market Capitalization (Market Cap) is the most recent market value of a company’s outstanding shares. The investing community often uses market capitalization value to rank companies and compare their relative sizes in a particular industry or sector.
Materiality assessment
A materiality assessment is a test that is used to determine whether a given topic or issue could influence the decision-making of a company's stakeholders. 'Financial materiality' typically refers to issues that influence the economic value creation of a given company. 'Impact materiality' refers to the influence or impact that a given company has on environmental or social issues. Together the two are known as 'double materiality'.
N
NZC (abb.)
Net zero means no longer adding to the total amount of greenhouse gases in the atmosphere by cutting greenhouse gas emissions. Not all emissions can be eliminated completely, so those that remain need to actively removed.
P
Primary markets
A financial market where investors buy shares for the first time directly from the issuing company itself, and the proceeds of that issuance are largely returned to the company for further investment in its activities.
S
Scope emissions
Scope 1, 2, 3 refer to greenhouse gas emissions that are created by an organisation's own operations or from its wider ‘value chain’ (its suppliers and customers).
Scope 1 covers emissions from sources that an organisation owns or controls directly – for example from burning fuel in fleets of vehicles (if they’re not electrically-powered).
Scope 2 are emissions that a company causes indirectly and come from where the energy it purchases and uses is produced. For example, the emissions caused when generating the electricity that is used in buildings would fall into this category.
Scope 3 encompasses emissions that are not produced by the company itself and are not the result of activities from assets owned or controlled by them, but by those that it’s indirectly responsible for up and down its value chain. An example of this is when a company buys, uses and disposes of products from suppliers. Scope 3 emissions include all sources not within the scope 1 and 2 boundaries.
Screening
Screening is a process for determining which investments are or are not permitted in a portfolio. It is used for a variety of purposes, such as attaining an investment focus, complying with laws and regulations, satisfying investor preferences, and limiting risk.
SDG (abb.)
The United Nations Sustainable Development Goals (also known as the UN SDG's) are a collection of 17 interlinked objectives designed to serve as a shared blueprint for peace and prosperity for people and the planet. Many impact investments take the SDGs into account in their design.
SDR (abb.)
Sustainability Disclosure Requirements are a set of rules and guidance introduced by the UK's Financial Conduct Authority (FCA) to help consumers navigate the market for sustainable investment products.
Secondary market
A financial market where investors buy shares or assets from other investors on a stock market, rather than from the issuing company itself.
Shareholder engagement
The efforts made by shareholders to influence the companies they invest in.
T
Theory of change
Having a stated intention to deliver positive impact needs also to be supported by a problem statement and a ‘theory of change.’ The problem statement describes the problems that the investment(s) are intended to solve. The ‘theory of change’ describes the sequence of cause-and-effect actions that connect WHEB’s investments with investee activities that address the stated problem.
