A
Article 6 (Paris Agreement) • Climate
The section of the Paris Agreement governing international cooperation on carbon markets and emissions trading between countries. It enables cross-border carbon credit transfers through bilateral agreements or a UN-overseen mechanism.
Asset Stranding • Climate
The premature write-off of fossil fuel assets or carbon-intensive infrastructure before the end of their expected economic life due to regulatory, market, or environmental shifts. Stranded assets represent a major financial risk for investors in the energy transition.
B
Baseline Emissions • Climate
The level of greenhouse gas emissions that would occur without a mitigation project or policy intervention, used as a reference point for calculating emission reductions. An accurate baseline is critical for credible carbon accounting.
Biodiversity • Environment
The variety of life on Earth, including species, genetic diversity, and ecosystems. Biodiversity loss is increasingly recognised as a systemic risk alongside climate change in ESG frameworks.
Biodiversity Net Gain [BNG] • Environment
A regulatory or voluntary framework requiring development projects to leave biodiversity in a measurably better state than before. It is becoming a legal requirement in several jurisdictions, including the UK.
Blue Bond • Finance
A debt instrument whose proceeds are earmarked for ocean-related sustainable projects such as marine conservation, sustainable fisheries, and wastewater management. Blue bonds are a growing niche within sustainable finance.
Board Diversity • Governance
The degree to which a company's board of directors includes people of different genders, ethnicities, ages, backgrounds, and expertise. Diverse boards are linked to better decision-making, risk management, and ESG performance.
Brownfield Site • Environment
Previously developed land, often contaminated, that is being considered for redevelopment. Remediating brownfield sites is preferred from an ESG perspective over developing on undisturbed greenfield land.
C
Carbon Border Adjustment Mechanism [CBAM] • Policy
An EU regulation that places a carbon price on imports of carbon-intensive goods from countries with weaker climate policies. CBAM is designed to prevent carbon leakage and level the competitive playing field for European industries.
Carbon Capture and Storage [CCS] • Climate
Technology that captures CO2 from industrial processes or power generation and stores it underground to prevent it from entering the atmosphere. CCS is considered a key tool for decarbonising hard-to-abate sectors.
Carbon Credit • Climate
A tradable certificate representing the verified reduction or removal of one tonne of CO2 equivalent from the atmosphere. Credits are used by companies to offset residual emissions after direct reductions have been made.
Carbon Dioxide Equivalent [CO2e] • Climate
A standard unit that expresses the warming potential of different greenhouse gases in terms equivalent to carbon dioxide. It allows comparison across gases such as methane, nitrous oxide, and HFCs on a common scale.
Carbon Footprint • Climate
The total greenhouse gas emissions, directly or indirectly, caused by an individual, organisation, product, or activity, expressed in CO2e. Carbon footprinting is the starting point for any corporate decarbonization strategy.
Carbon Neutral • Climate
A state in which the net carbon emissions associated with an entity are zero, achieved through a combination of emission reductions and offsets. The term is often distinguished from 'net zero,' which implies deeper, longer-term systemic change.
Carbon Offsetting • Climate
The practice of compensating for GHG emissions by funding equivalent reductions or removals elsewhere, such as forestry projects or renewable energy. Offsets are increasingly scrutinised for quality and additionality.
Carbon Price • Policy
The cost applied to carbon emissions to encourage reductions, either through a carbon tax or a cap-and-trade system. An effective carbon price is seen as one of the most efficient policy levers for driving decarbonization.
Carbon Sequestration • Environment
The process of capturing and storing atmospheric CO2, either through natural means such as forests and soils or through engineered solutions such as direct air capture. Sequestration is a core component of net-zero strategies.
Carbon Tax • Policy
A government-imposed fee on the carbon content of fossil fuels or the emissions they produce, intended to reduce their use and fund low-carbon alternatives. Unlike cap-and-trade, a carbon tax sets a price rather than an emissions ceiling.
Circular Economy [CE] • Environment
An economic model that eliminates waste by keeping materials, products, and resources in use for as long as possible through reuse, repair, remanufacturing, and recycling. The circular economy contrasts with the traditional linear 'take-make-dispose' model.
Climate Risk • Climate
The potential for financial or operational harm arising from climate change, split into physical risks (e.g., flooding, heat) and transition risks (e.g., policy shifts, technology shifts). Disclosure of climate risk is increasingly required by regulators and investors.
Climate-related Financial Disclosures [TCFD] • Reporting
A global framework developed by the Task Force on Climate-related Financial Disclosures that guides companies in reporting on governance, strategy, risk management, and metrics related to climate. TCFD is now embedded in many national regulatory regimes.
Community Engagement • Social
The process of involving local stakeholders, residents, or affected groups in decisions about projects, operations, or policies that affect them. It is a core component of the Social pillar in ESG and a requirement under many licensing frameworks.
Corporate Social Responsibility [CSR] • Social
A self-regulatory business model in which companies integrate social, environmental, and ethical considerations into their operations and interactions with stakeholders. CSR is a precursor to modern ESG frameworks and remains widely used in practice.
D
Decarbonization • Climate
The process of reducing or eliminating carbon dioxide and other greenhouse gas emissions from an economy, sector, or organisation. Decarbonization strategies typically involve switching to renewables, improving efficiency, and electrifying processes.
Deforestation • Environment
The permanent clearing of forests for agriculture, development, or resource extraction, releasing stored carbon and destroying biodiversity. Deforestation is a major driver of climate change and is the subject of supply chain due diligence requirements.
Double Materiality • Reporting
An approach to sustainability reporting requiring companies to assess both the financial impact of ESG issues on the business and the company's impact on people and the environment. Double materiality underpins the EU's CSRD and ESRS reporting standards.
Downstream Emissions • Climate
Greenhouse gas emissions that occur after a company's products or services are sold, including their use and end-of-life disposal. Downstream emissions fall under Scope 3 and can be among the largest portions of a value chain's footprint.
Due Diligence [DD] • Governance
The process of investigating and assessing risks, including ESG and human rights risks, associated with a business relationship, investment, or project. Mandatory human rights and environmental due diligence laws are expanding rapidly in Europe.
E
Ecotoxicity • Environment
The potential of substances, typically chemicals or industrial pollutants, to harm living organisms in the environment. Ecotoxicity is assessed in environmental impact studies and life cycle assessments.
Electrification • Energy
The shift from fossil fuel-based systems to electric equivalents powered by clean energy, such as electric vehicles, heat pumps, and electric industrial furnaces. Electrification is one of the primary levers for decarbonising transport, heat, and industry.
Embodied Carbon • Climate
The greenhouse gas emissions associated with materials and construction processes throughout the full lifecycle of a building, excluding operational energy use. Embodied carbon is increasingly regulated in sustainable construction and green building certification.
Emissions Trading Scheme [ETS] • Policy
A market-based mechanism in which a cap is set on total allowable emissions, and participants can buy and sell allowances to comply. The EU ETS is the world's largest carbon market and is expanding to cover buildings, transport, and shipping.
Energy Intensity • Energy
The amount of energy consumed per unit of economic output or physical production, used as a measure of efficiency. Reducing energy intensity is a key performance indicator in corporate sustainability strategies.
Energy Management System [EnMS / ISO 50001] • Energy
A framework for organisations to systematically manage energy performance, reduce consumption, and improve efficiency, often aligned with the ISO 50001 standard. An EnMS provides a structured approach to monitoring, targeting, and reporting energy use.
Environmental Impact Assessment [EIA] • Environment
A process used to evaluate the likely environmental effects of a proposed project before it is approved or built. EIAs are legally required for major infrastructure, industrial, and construction projects in most jurisdictions.
Environmental Management System [EMS] • Environment
A structured framework, such as ISO 14001, enabling organisations to manage their environmental responsibilities and improve performance over time. An EMS covers planning, implementation, checking, and continual improvement cycles.
Environmental, Health and Safety [EHS] • Operations
A professional discipline and management framework addressing risks to the environment, worker health, and safety at work. EHS compliance and performance are closely linked to the E and S pillars of ESG and are often reported alongside them.
Environmental, Social and Governance [ESG] • Core
A framework used by investors, regulators, and companies to evaluate business performance across three non-financial dimensions: environmental impact, social responsibility, and corporate governance. ESG has become a central pillar of sustainable investing, risk management, and corporate reporting.
EU Taxonomy • Policy
A classification system established by the European Union defining which economic activities qualify as environmentally sustainable under six objectives. It provides a common language for green finance and underpins EU sustainable reporting requirements.
Extended Producer Responsibility [EPR] • Environment
A policy approach that makes manufacturers responsible for the end-of-life management of their products, including collection, recycling, and disposal. EPR schemes shift waste management costs from governments to producers and drive eco-design.
F
Fair Trade • Social
A trading partnership and certification system that seeks fairer prices, decent working conditions, and sustainability for producers in developing countries. Fair Trade labelling is used by companies as part of responsible supply chain management.
Free Prior and Informed Consent [FPIC] • Social
A specific right of indigenous peoples to give or withhold consent before projects affecting their lands or rights are approved. FPIC is enshrined in the UN Declaration on the Rights of Indigenous Peoples and is required by many ESG and financing frameworks.
G
Gender Pay Gap [GPG] • Social
The difference in average earnings between men and women across an organisation, expressed as a percentage of men's earnings. Gender pay gap reporting is mandatory in many countries and is a key social metric in ESG assessments.
Global Reporting Initiative [GRI] • Reporting
The world's most widely used sustainability reporting standard, providing a comprehensive framework covering economic, environmental, and social topics. GRI standards are used by thousands of organisations globally for voluntary and regulatory disclosure.
Governance [G] • Core
The systems and processes by which a company is directed, controlled, and held accountable, including board composition, executive remuneration, and shareholder rights. Strong governance is the foundation for credible ESG performance and investor confidence.
Green Bond • Finance
A debt instrument whose proceeds are exclusively used to finance or refinance projects with clear environmental benefits, such as renewable energy or green buildings. Green bonds are the largest segment of the sustainable debt market.
Green Building Certification • Environment
A third-party assessment framework such as LEED, BREEAM, or DGNB that rates buildings on sustainability criteria including energy, water, materials, and indoor environment. Certification supports sustainable real estate investment and tenant attraction.
Green Hydrogen [H2] • Energy
Hydrogen produced through electrolysis of water powered by renewable electricity, resulting in zero direct carbon emissions. Green hydrogen is a key decarbonization solution for hard-to-abate sectors such as steel, chemicals, and aviation.
Greenhouse Gas [GHG] • Climate
Gases in the atmosphere that trap heat and contribute to the greenhouse effect and global warming, including CO2, methane, nitrous oxide, and fluorinated gases. GHG inventory reporting is the foundation of corporate climate accountability.
Greenhouse Gas Protocol [GHG Protocol] • Reporting
The most widely used international accounting tool for understanding, quantifying, and managing GHG emissions, covering corporate, project, and product-level accounting. The GHG Protocol underpins most major sustainability reporting frameworks.
Greenwashing • Reporting
The practice of misleading stakeholders about the environmental benefits or sustainability credentials of a product, service, or company. Greenwashing is increasingly targeted by regulators, and several enforcement actions have been taken across the EU and US.
H
Hard-to-Abate Sectors • Climate
Industries where reducing greenhouse gas emissions is technically or economically very difficult, such as steel, cement, aviation, shipping, and chemicals. Decarbonising these sectors typically requires breakthrough technologies like green hydrogen, CCS, or electrification.
Human Rights Due Diligence [HRDD] • Social
A process by which companies identify, prevent, mitigate, and account for their actual and potential adverse human rights impacts throughout their value chains. Mandatory HRDD is required under the EU Corporate Sustainability Due Diligence Directive (CS3D).
I
Impact Investing • Finance
An investment strategy that seeks to generate measurable positive social or environmental outcomes alongside financial returns. Impact investing differs from ESG integration in that it actively targets specific real-world impact rather than managing risk.
International Sustainability Standards Board [ISSB] • Reporting
A global standard-setter under the IFRS Foundation developing a comprehensive global baseline of sustainability-related financial disclosures. ISSB's IFRS S1 and S2 standards are being adopted or referenced by regulators in over 20 jurisdictions.
J
Just Transition • Social
The principle that the shift to a low-carbon economy must be fair and inclusive, protecting workers and communities dependent on fossil fuels or carbon-intensive industries. A just transition is increasingly embedded in climate policy frameworks at the national and EU levels.
K
Key Performance Indicator [KPI] • Reporting
A quantifiable measure used to evaluate success in meeting objectives, including ESG targets such as emissions reduction, waste diversion, and diversity ratios. ESG KPIs are used for internal management, investor reporting, and regulatory compliance.
Kyoto Protocol • Policy
An international treaty adopted in 1997 that committed developed nations to binding GHG reduction targets during two commitment periods. The Kyoto Protocol laid the groundwork for the Paris Agreement and established key carbon market mechanisms.
L
Landfill Diversion • Waste
The proportion of waste that is redirected away from landfill through recycling, composting, energy recovery, or reuse. Increasing landfill diversion rates is a primary objective in corporate waste management strategies.
Life Cycle Assessment [LCA] • Environment
A systematic analysis of the environmental impact of a product or process across its entire life span, from raw material extraction through production, use, and end of life. LCAs support circular economy design, product labelling, and Scope 3 emissions calculations.
Living Wage • Social
A wage level sufficient to meet a worker's basic needs including food, housing, healthcare, and education, calculated for the local cost of living rather than a minimum legal wage. Living wage commitments are a growing S pillar metric in ESG ratings and investor engagement.
Loss and Damage [L&D] • Climate
The economic and non-economic harms caused by climate change that cannot be adapted to or avoided, particularly in vulnerable developing countries. Loss and damage has emerged as a central issue in international climate negotiations, with a dedicated fund established at COP27.
M
Materiality Assessment • Reporting
A process used to identify and prioritise the ESG topics most relevant to a company and its stakeholders for reporting and strategy purposes. Under double materiality, companies assess both outward impact on society and the environment, and inward financial relevance.
Methane [CH4] • Climate
A potent greenhouse gas with roughly 80 times the warming power of CO2 over a 20-year period, emitted from oil and gas operations, livestock, and landfills. Methane reduction has become a major near-term climate priority given its short atmospheric lifetime.
Modern Slavery • Social
Exploitation including forced labour, human trafficking, debt bondage, and child labour that occurs within global supply chains. Modern slavery risk assessment and reporting is required under laws such as the UK Modern Slavery Act and is a critical social due diligence topic.
N
Nature-based Solutions [NbS] • Environment
Actions that protect, restore, or sustainably manage ecosystems to address societal challenges including climate, biodiversity, and water security. NbS include forest protection, peatland restoration, and coastal wetland conservation.
Net Zero • Climate
A state in which the greenhouse gases emitted by an organisation or economy are balanced by the removal or absorption of equivalent amounts from the atmosphere. Science-based net-zero targets require deep emission reductions, typically 90%+, before any residual offsets are applied.
O
Occupational Health and Safety [OHS] • Operations
The discipline and legal requirements concerning the safety, health, and welfare of people at work. OHS performance, including injury rates and fatality prevention, is a core component of the Social pillar in ESG and a focus of ISO 45001.
P
Paris Agreement • Policy
A legally binding international treaty adopted in 2015 committing countries to limit global warming to well below 2 degrees C, and ideally 1.5 degrees C, above pre-industrial levels. The Paris Agreement sets the global decarbonization framework that drives national climate policy and corporate net-zero commitments.
Physical Climate Risk • Climate
The financial or operational risks arising from the direct physical impacts of climate change, including extreme weather events, sea-level rise, heat stress, and water scarcity. Physical risks must be assessed under TCFD and are increasingly material to asset valuations.
Power Purchase Agreement [PPA] • Energy
A long-term contract between an energy buyer and a renewable energy producer setting the price and volume of electricity to be delivered. PPAs are a primary tool for corporations to secure affordable renewable energy and meet Scope 2 reduction targets.
Power-to-X [PtX] • Energy
A group of technologies that convert surplus renewable electricity into other energy carriers or chemicals such as green hydrogen, synthetic fuels, or heat. Power-to-X enables energy storage and decarbonization in sectors that cannot directly use electricity.
Principles for Responsible Investment [PRI] • Finance
A UN-supported international network of investors who commit to incorporating ESG factors into investment and ownership decisions. PRI signatories collectively manage over USD 120 trillion in assets under management.
Product Stewardship • Environment
A shared responsibility approach under which producers, retailers, users, and government take responsibility for the environmental impact of a product throughout its lifecycle. Product stewardship underlies extended producer responsibility legislation and circular economy strategies.
R
Renewable Energy [RE] • Energy
Energy from naturally replenished sources including solar, wind, hydro, geothermal, and biomass that produce little or no direct greenhouse gas emissions. Transitioning to renewable energy is the primary strategy for decarbonizing electricity grids and achieving Scope 2 net zero.
Renewable Energy Certificate [REC / REGO] • Energy
A tradable certificate representing the production of one megawatt-hour of electricity from a renewable source, used by companies to claim renewable energy use. RECs allow organizations to match their electricity consumption with renewable generation even when they cannot source it directly.
Resource Efficiency • Environment
Using natural resources, including materials, energy, water, and land, in a way that minimizes waste and environmental impact per unit of output. Resource efficiency is a core principle of sustainable production and a key metric in corporate ESG reporting.
Responsible Investment [RI] • Finance
An investment approach that incorporates ESG factors into portfolio selection and management to improve long-term risk-adjusted returns and generate positive societal outcomes. Responsible investment encompasses strategies from ESG integration to full sustainability-themed funds.
Responsible Sourcing • Social
The practice of ensuring that raw materials and products are obtained in a way that is ethical, sustainable, and compliant with human rights and environmental standards. Responsible sourcing is increasingly required by regulation, including the EU Conflict Minerals Regulation and upcoming forced labour legislation.
S
Science Based Targets [SBTi] • Climate
Emission reduction targets aligned with the level of decarbonisation required to keep global warming within Paris Agreement goals, validated by the Science Based Targets initiative. SBTi-validated targets are increasingly treated as the gold standard for corporate climate commitments.
Scope 1 Emissions [S1] • Climate
Direct greenhouse gas emissions from sources owned or controlled by a company, such as combustion in its own facilities and fleet vehicles. Scope 1 is typically the most straightforward category to measure and reduce.
Scope 2 Emissions [S2] • Climate
Indirect GHG emissions from the generation of purchased electricity, steam, heat, or cooling consumed by the reporting company. Scope 2 emissions can be reduced through energy efficiency, renewable PPAs, or on-site renewable generation.
Scope 3 Emissions [S3] • Climate
All other indirect greenhouse gas emissions occurring in a company's value chain, both upstream (supply chain) and downstream (product use and disposal). Scope 3 typically accounts for over 70% of a company's total footprint and is the most complex to measure and address.
Social [S] • Core
The 'S' pillar in ESG, covering a company's relationships with its employees, suppliers, customers, and the communities in which it operates. Key social topics include labour rights, health and safety, diversity, human rights, and community impact.
Social Return on Investment [SROI] • Finance
A framework for measuring and accounting for the broader social, environmental, and economic value generated by an investment or activity. SROI is used in impact investing and CSR program evaluation to quantify non-financial outcomes.
Stakeholder Engagement • Governance
The process of identifying, involving, and communicating with individuals and groups who affect or are affected by an organisation's activities. Effective stakeholder engagement is required by major sustainability standards and underpins social license to operate.
Stewardship • Finance
Active ownership practices by institutional investors to promote long-term value and ESG performance through engagement, voting, and escalation with companies. Stewardship codes in the UK, EU, and Japan define expectations for investor responsibility.
Supply Chain Due Diligence [SCDD] • Social
The process of assessing and managing human rights, environmental, and governance risks across a company's supply chain. Mandatory SCDD obligations are expanding under the EU CSDDD, German LkSG, and similar laws in France and Norway.
Sustainable Development Goals [SDGs] • Policy
A set of 17 global goals adopted by the UN in 2015 as a universal call to action to end poverty, protect the planet, and ensure prosperity for all by 2030. The SDGs provide a common reference framework for aligning corporate ESG strategies with global priorities.
Sustainable Finance Disclosure Regulation [SFDR] • Policy
An EU regulation requiring financial market participants to disclose how they integrate sustainability risks and impacts into their investment decisions. SFDR introduced the Article 6, 8, and 9 classification system for funds based on their sustainability ambition.
T
Task Force on Nature-related Financial Disclosures [TNFD] • Reporting
A global framework for companies and financial institutions to assess, disclose, and manage risks and opportunities related to nature and biodiversity. The TNFD framework, finalised in 2023, mirrors TCFD's structure and is gaining rapid regulatory and investor adoption.
Thermal Comfort • Environment
The condition in which occupants of a building are satisfied with the thermal environment, covering temperature, humidity, and air movement. Thermal comfort is a key parameter in green building design, energy efficiency, and workplace wellbeing.
Transition Finance • Finance
Financing provided to companies in hard-to-abate sectors to support credible decarbonization pathways, even if they are not currently 'green.' Transition finance bridges the gap between sustainability finance for already-clean assets and support for real-economy change.
Transition Risk • Climate
The financial risk arising from the shift to a low-carbon economy, including changes in policy, technology, market preferences, and reputation. Transition risks are material for carbon-intensive industries and must be assessed under TCFD and ISSB frameworks.
U
Upstream Emissions • Climate
Greenhouse gas emissions that occur in the supply chain before goods or services reach the company's own operations, such as raw material extraction, manufacturing, and logistics. Upstream emissions are part of Scope 3 and often the most significant portion of a company's value chain footprint.
V
Value Chain • Operations
The full sequence of activities involved in creating and delivering a product or service, from raw material extraction through production, distribution, use, and end of life. ESG management increasingly requires addressing impacts across the entire value chain, not just direct operations.
Verified Carbon Standard [VCS] • Climate
A widely used voluntary carbon market standard managed by Verra that certifies GHG emission reduction and removal projects. VCS-certified credits, known as Verified Carbon Units (VCUs), are traded on voluntary carbon markets globally.
Volatile Organic Compounds [VOCs] • Environment
Carbon-based chemicals that easily evaporate at room temperature, emitted from paints, solvents, fuels, and industrial processes. VOC emissions contribute to air pollution and are regulated under environmental permitting in most jurisdictions.
W
Waste Hierarchy • Waste
A prioritisation framework ranking waste management options from most to least preferred: prevention, reuse, recycling, recovery, and disposal. The waste hierarchy is embedded in EU waste legislation and guides corporate waste reduction strategies.
Waste Management [WM] • Waste
The collection, transportation, processing, and disposal of waste materials in a manner that minimises environmental impact. Integrated waste management strategies include reduction, reuse, recycling, and energy recovery.
Waste-to-Energy [WtE] • Waste
The process of generating electricity or heat from the combustion or gasification of waste materials that cannot be recycled. While preferred over landfill, WtE sits below recycling in the waste hierarchy and should be a last resort before disposal.
Water Stewardship • Environment
The responsible management of freshwater use, recognising water as a shared resource and addressing risks such as water scarcity, quality, and access for communities. Water stewardship frameworks such as AWS and CDP Water guide corporate reporting and target-setting.
Z
Zero Carbon Building [ZCB] • Energy
A building that produces no net carbon emissions from its operation, achieved through a combination of energy efficiency, on-site renewables, and, where necessary, renewable energy procurement or offsets. Zero carbon buildings are a key target in sustainable construction and urban decarbonization strategies.
Zero Waste • Waste
A goal or certification standard targeting the elimination of landfill and incineration through redesign, reuse, and near-complete recycling of all materials. Zero waste certification, typically defined as 90%+ diversion from landfill, is pursued by manufacturers, events, and campuses.