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An ESG Glossary of Terms

Aug 13, 2023 | 9m


Understanding The E, S, and G in ESG

Environment (E): The E in ESG commonly deals with a company’s relationship with the natural environment. It looks at how companies manage the environmental risks and impact of their actions, as well as how they manage their natural resources both in their direct operations and across their supply chains. 

Common terms associated with Environment include:

  • Carbon Intensity: The amount of carbon dioxide (CO2) emissions produced per unit of economic output, often measured in terms of GDP.
  • Carbon Neutrality: Achieving a balance between the amount of greenhouse gasses emitted and removed from the atmosphere such that your business does not generate a net increase in atmospheric CO2 levels.
  • Climate Resilience: The ability of an organization to anticipate, prepare for, adapt to and mitigate the risks associated with hazardous events or trends related to climate change. 
  • Corporate Social Responsibility (CSR): A business approach in which companies work consciously towards operating in ways that contribute positively to society and the environment while also generating profits.
  • Emissions Intensity: The amount of emissions (e.g., CO2) produced per unit of activity, revenue, or other relevant metric.

Social (S): The S in ESG: The “social” of ESG broadly encompasses the ways companies interact and the impact they have on their employees, communities and stakeholders within their operating environment.

Common terms associated with Social include:

  • Labor Standards: Guidelines and regulations that protect workers' rights, including issues related to wages, working hours, child labor, and workplace safety.
  • Stakeholder Engagement: The process of involving individuals, groups, or organizations affected by or with an interest in a company's activities in decision-making and dialogue.
  • Social Impact Assessment: A systematic process to identify, predict, and evaluate the social consequences of a proposed project, program, or policy.
  • Supply Chain Auditing: The process of assessing the practices and conditions of suppliers to ensure they comply with social and ethical standards.
  • Impact Investing: Investing in companies, organizations, and funds with the intention of generating both financial returns and positive social and environmental impacts.

Governance (G):The G in ESG refers largely to how the company is held accountable for its actions and decisions, which is related to the impact of its corporate policies on its various stakeholders. It includes how rights and responsibilities are assigned across the organization, how corporate performance is measured, and the rules and procedures in place. 

Common terms associated with Government include:

  • Proxy Voting: A process where shareholders delegate their voting rights to a representative to vote on their behalf during company meetings.
  • Materiality Assessment: A systematic evaluation of issues that are most relevant and significant to a company's operations and stakeholders, often used in sustainability reporting.
  • ESG Integration: The practice of incorporating environmental, social, and governance factors into investment analysis and decision-making processes.
  • Shareholder Resolution: A proposal submitted by shareholders for a vote at a company's annual general meeting, addressing issues related to ESG concerns.
  • Whistleblower Policy: A policy that encourages employees and other stakeholders to report unethical or illegal behavior within an organization, while protecting them from retaliation.
  • Board Effectiveness: The assessment of how well a company's board of directors fulfills its responsibilities and ensures the company's long-term success.

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