Key Terms Flashcards
Accounting metrics
Quantitative and/or discussion and analysis metrics intended to measure performance on a sustainability disclosure topic.
Activity metrics
Metrics used to quantify the scale of a business. They are used in conjunction with accounting metrics to normalize data and facilitate comparison.
Actual impacts
A form of financial impact that is actively observable and measurable. They represent actual trends, events, or upcoming changes that are occuriring or will occur with a high degree of certainty.
Acute impacts
Impacts on a company’s financial condition or operating performance that may be rare or unlikely but can have significant consequences, such as extreme weather events or unanticipated accidents.
Alliance organizations
A formal association formed for the mutual benefit of member organizations in association with specific shared interests or goals. Member organizations benefit from a communication network, shared resources, and collaboration.
Alpha
The return on an investment in excess of a market index or benchmark.
Assurance readiness
Assessed through internal audits or other internal disclosure procedures, assurance readiness seeks to determine the appropriate level of external assurance and overall preparedness of a company to smooth the assurance process and control related assurance expenses.
Assurance
A service performed by external, independent professional(s) to declare the credibility of disclosed data, statements, and other information, typically accompanied by an assurance report and/or assurance statement.
Audit committee
A committee of the board of directors charged with overseeing fincnaical reporting and disclosure, including disclosure related to financially material sustainability information.
Audits
An official, independent examination of an organization’s financial and/or non-financial statements to ensure they fairly and accurately represent the transactions/activities of the company.
Benchmarks
A standard or point of reference used to evaluate the performance of a security, portfolio, fund, or investment manager. Stock and bond indexes are often used as benchmarks.
Boilerplate
Nonspecific wording that does not describe the realities of a company’s particular operating context.
Certifications
For public companies, disclosure regulations often require executive certification of internal controls where an executive, typically the CEO and/or CFO, must certify the accuracy and completeness of disclosed information.
Coalitions
A formal group of companies and organizations formed, sometimes temporarily, in pursuit of combined action toward a specific outcome. Coalition members often collaborate and collectively communicate goals and developments related to the particular topic of their coalition (e.g. the Sustainable Apparel Coalition, Sustainable Packaging Coalition, etc.)
Company (or security) valuation
The process of determining the economic value of an entire business. Company valuation may consider factors such as future earnings, management, capital structure, asset value, risks, and other factors.
Company-tailored narrative
Specific language in a disclosure that can be understood only in the context of the reporting company
Comparative analysis
Often part of fundamental analysis, comparative analysis aims to compare industry peers or security values to assess their intrinsic value, which may or may not be accurately reflected by market capitalization or stock prices.
Comply-or-explain
Provisions that require disclosure of particular information, but allow reporting entities to omit the information and provide an explanation for the omission.
Conceptual Framework
A document that defines the principles and characteristics of the standard-setting process, ensuring all standards are developed consistently, providing a framework to resolve questions that emerge throughout the standard-setting process, and allowing users of these standards to understand the process and have confidence in the quality of the standards.
Corporate Governance Codes
Rules, either mandatory or voluntary, that define standards and responsibilities for corporate boards to protect shareholder investments, including standards for ethical behaviour and responsible decision making.
Credit risk
The risk of a borrower defaulting on its ability to make required repayments (interest or principal) resulting in a loss to the lender.
Data aggregators
Organizations that compile raw data, often presenting it in a format to support analysis.
Disclosure platforms
A software-based interface that supports ESG report preparation and disclosure by establishing workflows and supporting data management.
Disclosure topics
The topics in SASB Standards that represent the industry-specific impacts of general sustainability issue categories. Metrics are used to measure company performance eon a disclosure topic.
Discussion and Analysis (D&A) metrics
Narrative data used to explain process, practices, risks, past events, or to otherwise provide important context to quantitative metrics.
Double materiality
Materiality has two components: financial materiality, or that which applies to the value of a company; and environmental and social materiality, or that which applies to a company’s impacts on broader society.
Dynamic
Information that is material can change over time. An ESG issue that is not critical to a company’s success may become critical as markets, resource availability, regulation, customer awareness, or other factors shift over time.
Enterprise Risk Management (ERM)
As defined by COSO, “the culture, capabilities and practices, integrated with strategy-setting and performance , that organizations rely on to manage risk in creating, preserving and realizing value.
Enterprise value
A measure of a company’s total market value, representative of the amount of money needed to purchased the company. Enterprise value (EV) is calculated by adding market capitalization to short-term and long-term dear, then subtracting all cash and cash equivalents.
Equity
Equity investors invest money into a company in exchange for a share of ownership, usually represented through stock ownership. Returns on equity vary according to the profitability of the business over the length of time the share is held.
ESG Integration
An investment strategy that uses sustainability information to evaluate and/or enhance the financial returns of a given investment opportunity
ESG ratings and analytics providers
Organizations that use proprietary methods for scoring and ranking companies based on ESG performance factors.
Examinations
As defined by AICPA, examinations are audit-level engagements designed to provide a high level of assurance on information other than historical financial statements.
Exclusionary screening
An investment strategy that intentionally avoids or “screens out” specific investments.
Externalities
An economic concept that refers to situations where the production or consumption of a good or service impacts (positively or negatively) a third party or its surrounding environment. Externalities are no reflected in the price of goods and services provided by the company. For example, water pollution caused by a manufacturing plant may reduce local fish populations and harm the livelihood of nearby fisherman, though the company does not “internalize” the cost of fish stock losses.
Fiduciary Duty
The legal and ethical responsibility of a professional to act in the best interest of another person, entity, or client.
Financed emissions
When a bank or other financial institution lends capital to companies or projects that produce significant greenhouse gas emissions, it indirectly exposes itself to climate-related risk and associated financial consequences.
Fixed-income
Fixed-income investors loan money to a company in return for a pre-determined number of interest payments (in addition to principal repayment) until the security’s maturity date. The interest rate depends not he creditworthiness of the borrower. Fixed interest payments provided a fixed stream of income to the investors. Bonds are the most common fixed-income instrument.
Frameworks
A set of concepts and principles that dictate how information is structured and prepared, and what board topics are covered.
Fundamental analysis
A type of analysis that aims to evaluate the intrinsic value of a security by examining relevant financial and economic factors. Fundamental analysis attempts to determine if a security is undervalued or overvalued relative to its market price.
Gap analysis
The comparison of actual levels of ESG data collection and the desired level of ESG data collection to determine what data a company must gather and what internal processes must be changed or implemented in order to meet disclosure goals/requirements.
General partner
An investor who jointly owns and manages a business. The General Partner may have unlimited liability, and typically brings specialized knowledge and skills to contribute to the business.
Generally Accepted Accounting Principles (GAAP)
The standards that set approved accounting methods and practices, including the rules that dictate the legality of publicly-filed financial statements. GAAP improves the comparability, consistency, and reliability of the communication of financial information.
