Common Share: A form of share which, unlike a preference share, entitles the holder to company voting rights.
Compounding: Reinvesting interest earned to generate a further increase in the value of an asset.
Dividend: A company’s distribution of its profits, to its shareholders.
Engagement: Efforts made by company stakeholders to positively influence a company’s decisions, through discussion and voting, on key ESG aspects that can impact them and society at large.
Environmental factors: One element of ESG investing that regards a company’s policies and resource allocation to the treatment of waste, pollution, energy use and nature conservation.
ESG (Environmental, Social, Governance) Investing: The financial impacts and opportunities of Environmental, Social and Governance factors are integrated into companies’ financial analyses in order to determine a holistic investment recommendation.
ETFs (Exchange-Traded Funds): A basket or wrapper of a product type - commodities, stocks, bonds - that tracks a respective product index.
Exclusionary investments (Negative Screening): A long time standard of many investment decisions, traditionally ‘sin’ companies (tobacco, alcohol, firearms and gambling) were forbidden in some strategies on religious and/or moral grounds. These could be considered the precursor of the different types of responsible investment that we know today and would extend to any industry or organisation conducting its business in a non-socially or sustainably viable way.
Governance factors: One element of ESG investing - a company’s ethical code of conduct: how strongly it promotes equality, handles executive remuneration, promotions and board member choices to mitigate conflicts of interest. Also upholding shareholder voting rights and adhering to transparent accounting and tax reporting, such that the environmental and social aspects are also naturally well executed.
Greenwashing: Falsely marketing a product or service as being environmentally friendly.
GRI (Global Reporting Initiative): An international and independent reporting standards body, established in 1997, that assists businesses and governments in disclosing and measuring their key ESG impacts.
Impact Investing: A form of Socially Responsible Investing. Investments are directed to companies with the intention of yielding significant, positive environmental and social returns, in addition to the financial return made.
Liquidity: The ease with which a security can be bought or sold. Liquid securities can be bought and sold fairly quickly and with minimal impact to the value of the security, whilst illiquid securities take longer to buy and sell and with greater consequence to their market value.
Positive Screening: Solely investing in companies that excel in their values-based considerations versus their peers.
Preference Share or Preferred Stock: A form of share, made up of both equity and bond features (a hybrid instrument). Holders of this have priority over common shareholders both for the payment of dividends from profits, and also for any claims to a company’s assets in the case of a company bankruptcy. As such, holders have no voting rights.
Principal: Original sum of money invested.
Risk-adjusted return: A measure of the value of risk in an investment versus the value of the investment’s return.
SASB (Sustainability Accounting Standards Board): Develops sustainability accounting standards, by industry, that assist businesses in transparently and consistently reporting on their sustainability activities to investors. Investors therefore benefit from the ability to easily compare companies within any given industry.
SDGs (Sustainable Development Goals): A UN General Assembly initiative defining 17 universal goals to be achieved by 2030, including the end to poverty, hunger, gender inequality and the promotion of sustainable cities, climate action, clean energy and peace.
Security: A tradeable financial instrument such as a stock or bond.
Shares or Stocks: Represent units of ownership in a company and can give the holder the right to share in the company’s profits, if any, through dividends. Two types of shares exist - Common shares and Preference shares.
Social factors: One element of ESG investing, regarding how responsibly a company behaves and positively impacts the communities in which it operates: upholding human and labour rights, safe working conditions, community preservation and volunteering, working with partners who do the same.
SRI (Socially Responsible Investing): A broad term encompassing, amongst others, thematic and impact Investing. The values emphasis of SRI outweighs economic profit, though financial gain is still desired.
TCFD (Task Force on Climate-related Financial Disclosures): Voluntary climate-related financial risk disclosures encouraging decision-useful information availability to all stakeholders, through data transparency, consistency, comparability, reliability and efficiency .
Thematic Investing: A form of Socially Responsible Investing which, involves investing in companies from different sectors, united by a common sustainable theme.
UN-PRI (United Nations-supported Principles for Responsible Investing): A UN-backed Global network of investment professional signatories, committed to reporting on their investment activities, as prescribed by the framework’s 6 core Principles.
Yield: The return made, quoted in percentage terms, from investing in a security.