Investing sustainably can be a confusing and daunting task. There is a lot of information to navigate through to ensure that your investments are Avoiding harm, Doing going and Making money. One of the key factors is understanding the Jargon that is used when discussing this topic.
Read our jargon buster to better understand the language of sustainable investing.
- Ethical Investing – Can be used as a general term for incorporating personal values into investment, but is usually synonymous with avoiding companies on the basis of their activities (e.g. tobacco, armaments).
- ESG – Short for Environmental and Social Governance, which means considering environmental, social and business governance factors as part of the financial management process. Many, if not most funds, now incorporate some form of ESG into their decision making, but it tends to focus on governance – i.e. executive pay, board composition and so on.
- Impact Investing – a term which is becoming widely used (and misused), but in its true form, means intentionally investing for positive social and environmental impact, with a commitment to measuring that impact.
- SRI – Socially responsible investment. A term that’s fallen out of favour, but is an umbrella term for a range of approaches incorporating environmental and/or social considerations in the investment strategy.
- Sustainable Investing – investing in companies that don’t compromise the future health of the planet in providing their products or services. Often includes companies that are providing positive solutions to environmental challenges.
- Green bonds – bonds in which the proceeds are specifically used to finance environmental projects such as carbon reduction or waste recycling.
- UN Global Compact – A set of 10 principles on human rights, labour, the environment and anti-corruption. These are defined by the United Nations, with signatories including investment management firms that commit to abiding by the principles in their business.
- Triple bottom line – the idea of a social, environmental and financial return on an investment.
- PRI – United Nations Principles for Responsible Investment -The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice. Signatories commit to completing a questionnaire that details how they incorporate ESG into their investment management.
- Social investment – investment in companies and organisations that make a positive impact on society, typically in the healthcare, education and housing sectors.
- Impact report – a document that shows the social and environmental impacts of a fund.
- Best of class or sector – an approach that seeks to identify companies that demonstrate leadership in their sector in terms of social and environmental practices.
- Solutions based – companies whose core products or services provide solutions to social or environmental challenges.
- SDGs – The United Nations Sustainable Development Goals. These are 17 global goals for the year 2030 to address poverty, tackle climate change, improve health and education, and to reduce inequality. They are increasingly being used to map the positive impacts of funds.
Our Positive Pennine Portfolios help the investor to achieve their objective without the need to become an expert in jargon!
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