As sustainability professionals, we have a bit of a habit of using acronyms. I mean, who wants to say Global Real Estate Sustainability Benchmark in a conversation when GRESB is so much easier to say. But that habit can confuse unfamiliar audiences. To lift the veil a bit, I wanted to take a stab at providing a quick reference on the alphabet soup of acronyms that we use in ESG - I mean Environmental, Social & Governance.
With that example, let’s start there…
ESG: Environmental, Social & Governance. ESG tends to refer to the standards regarding a companies operations concerning the Environment, its Social relationships and how it manages those relationships such as employees, suppliers, customers, and the communities in which it operates, and the Governance of the organization, which includes the company leadership, executive pay, audits, internal controls, risk management, and shareholder rights.
AIFMD: Alternative Investment Fund Managers Directive. A European Union (EU) directive requiring member states to enact national laws which regulate the investment fund sector and seeks to protect investors as well as reduce the systematic risk that alternative investment funds can pose to the EU and its economy.
CDP: One of the most recognized and oldest reporting organizations which focus on the measurement of greenhouse gasses, water, and deforestation. Formerly was known as the Carbon Disclosure Project. CDP, like most frameworks, emphasizes disclosure, transparency, and accountability.
CDSB: Climate Disclosure Standards Board. The CDSB is a reporting framework aggregator which includes recommendations from CDP, TCFD, SASB, WRI, and several other frameworks. The membership of the CDSB is made up of an international consortium of businesses and environmental NGOs committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital.
CSR: Corporate Social Responsibility. A self-regulated business model which aids organizations in being socially accountable, both internally and externally. Sometimes referred to as Corporate Citizenship, it refers to how a business operates in ways that enhance society and the environment. Often, organizations will produce an internal and/or external CSR Report that communicates the company’s CSR efforts, including environmental, ethical, philanthropic, and economic impacts. This report often reflects the GRI Standards in format, and in 2019 90% of the S&P 500 published CSR Reports.
DJSI: Dow Jones Sustainability Index. A global index comprised of global sustainability leaders as identified by S&P Global through the Corporate Sustainability Assessment (CSA). It represents the top 10% of the largest 2,500 companies in the S&P Global BMI based on long-term economic, environmental, and social criteria.
EU Non-Financial Reporting Disclosure. A European Union (EU) directive requiring member states to enact national laws requiring companies with more than 500 employees to include environmental and social disclosures in their annual reports. Currently, companies are provided flexibility in choosing the framework to follow, so long as it includes key topics such as environmental protection, treatment of employees, human rights, and anti-corruption practices.
GRESB: Global Real Estate Sustainability Sustainability Benchmark. With a focus on real estate assets, GRESB is the leading disclosure framework used by asset managers and investors to access the ESG performance of real estate and infrastructure. The framework provides assessments that reflect what investors and the industry consider to be material issues in the sustainability performance of real asset investments and is aligned with international reporting frameworks, such as GRI, PRI, SASB, DJSI, TCFD recommendations, the Paris Climate Agreement, UN SDGs, region and country-specific disclosure guidelines and regulations.
GRI: Global Reporting Initiative. Sometimes referred to as GRI standards, this framework provides a set of standard practices for reporting and disclosing sustainability impacts, emphasizing transparency. GRI standards cover topics ranging from anti-corruption to water, biodiversity to occupational health and safety, tax to emissions. The GRI standard format is often an important element in organizational CSR Reporting.
IIRC: International Integrated Reporting Council. A framework used in over 70 countries to advance communication about an organization’s efficient and productive capital allocation, acting as a force for financial stability and sustainable development. The IIRC focuses on the creation of value and the disclosure of value through an integrated reporting standard. IIRC’s focus is broader then sustainability, however, includes the incorporation of ESG performance amongst other organization in corporate reporting and disclosure.
ISO: International Organisation for Standardisation. While not specifically focused on ESG, the ISO creates international standards among many areas, including ESG, including ISO 14000 (environmental management), ISO 50001 (energy management), and ISO 26000 (social responsibility). ISO standards are standards of practice, not reporting frameworks.
SASB: Sustainability Accounting Standards Board. Sometimes referred to as the SASB Standards, this financially focused framework is designed to establish sustainability accounting standards that help organizations communicate sustainability data to investors. Available for 77 industries, the Standards identify the subset of environmental, social, and governance (ESG) issues most relevant to financial performance in each industry.
SBTi: Science Based Targets Initiative. A World Resources Institute (WRI) initiative focused on addressing climate change by promoting the establishment of meaningful climate impact targets validated by science. When committing to SBTi, organizations clearly define a pathway to reduce greenhouse gasses that align with the goals of the Paris Climate Agreement, which limits global warming to well below 2°C above pre-industrial levels and encourages pursuing efforts to limit warming to 1.5°C.
SDGs: United Nations Sustainability Development Goals. The SDGs were developed by the United Nations Department of Economic and Social Affairs (UNDESA) and include 17 overarching goals that form a global strategy for governments and businesses alike to unite around a common strategy to help end poverty, fight inequality, and address climate change by the year 2030. A deeper dive can be found in this blog post (link).
SFDR: Sustainable Financial Disclosure Regulation. A European Union (EU) directive requiring member states to enact national laws aimed to eliminate the practice of greenwashing financial products and financial advice through standardizing ESG terminology, reporting, and disclosures. To do this, SFDR requires all funds under EU jurisdiction, both sustainable and non-sustainable, to disclose their ESG considerations to potential investors. Firms will have to improve business operations to comply with these mandatory terms and remain relevant in an increasingly ESG-focused market.
TCFD: Task Force on Climate-related Financial Disclosures. A task force under the Financial Stability Board, the TCFD seeks to improve and increase reporting of climate-related financial information, specifically around the impacts of climate change. This includes the risks and opportunities presented by rising temperatures, climate-related policy, and emerging technologies in our changing world. TCFD is incorporated into several other reporting frameworks, including GRESB, SASB, and CDSB.
UK Modern Slavery Act. A United Kingdom law designed to combat modern slavery and human trafficking. This law requires businesses in the UK with annual revenues of 36m pounds or more to publish an annual statement outlining the steps taken to ensure that no human trafficking or slavery is in their supply chains.
UK Stewardship Code. A United Kingdom law requiring investors to consider ESG factors when undertaking stewardship and making investment decisions. Compliance is currently voluntary; however, if investors choose not to comply, they must explain why they have chosen not to.
UN Global Compact: A framework for businesses established by the United Nations (UN) with 10 principles related to human rights, labor, the environment, and anti-corruption. Participating organizations are required to produce communication progress reports (COP) annually, which illustrate progress towards achieving the 10 goals of the compact.
UNGPs: UN Guiding Principles. The UNGP Reporting Framework is a short series of questions to which any company should have answers, both to know whether it is doing business with respect for human rights and to show others the progress it is making. These standards aim to prevent human rights violations linked to business activity and assign responsibility to organizations to identify, prevent, and remediate any negative impacts their business activities may have on human rights.
UNPRI: United Nations Principles for Responsible Investment. Often shortened to PRI, this framework identifies six key environmental, social, and governance principles and requires reporting on their investments using the PRI reporting framework. Signing the internationally recognized Principles for Responsible Investment allows your organization to publicly demonstrate its commitment to including environmental, social, and governance (ESG) factors in investment decision making and ownership.
Walker Guidelines for Disclosure and Transparency in Private Equity. Designed to encourage greater disclosure and transparency by private equity firms, the Guidelines are reviewed and monitored regularly by the Private Equity Reporting Group (PERG). The Walker Guidelines aim to increase transparency and encourage PE firms to improve governance and keep pace with the wider market.
WEF Stakeholder Capitalism Metrics: World Economic Forum Stakeholder Capitalism Metrics. Launched in August 2019 at the request of the World Economic Forum’s International Business Council in collaboration with Deloitte, EY, KPMG, and PwC. It seeks to improve how companies measure and demonstrate their performance against ESG indicators and track their positive contributions towards achieving the Sustainable Development Goals (SDGs) consistently. This framework incorporates several other frameworks, including CDP, CDSB, GRI, IIRC, and SASB.
While attempting to capture all of the acronyms and names of important sustainability laws, standards, and laws, one thing became obvious; I am sure that I have missed some. This is only a starter towards your own glossary of ESG terminology. There is an increasing number of frameworks, standards, and laws being enacted around ESG reporting. What nearly every one of them shares, however, is an emphasis on disclosure and transparency. Hopefully, this starter set helps as you dive into your own bowl of ESG Alphabet Soup.
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Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry reduce energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions with real impacts and track performance to ensure the trendline stays laser-focused on the goal. To get there, we must build relationships within our organizations and outside of our organizations building the critical mass needed to truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
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