Guide to Jargon

There is a lot of jargon in the investment world, and ethical investing adds another layer of terminology. Below is a brief guide to some of the terms you may come across.

1.5°C

A key goal from the Paris Agreement (December 2015) is to limit global temperature rises to well below 2°C above pre-industrial levels, with countries agreeing to pursue efforts to limit warming to 1.5°C. As at December 2020, global warming was estimated at around 1.18°C, and current trajectories suggest the 1.5°C threshold could be reached by around 2040.

B Corp

B Corp certification is an international designation recognising businesses that balance purpose and profit, and use business as a force for good. Certification is rigorous, ongoing, and independently assessed. Certified businesses must meet high standards of social and environmental performance, accountability, and transparency, and continue to improve their practices over time.

B Corp is administered by a not-for-profit organisation. As at mid 2025 , there were over 9,500 certified B Corps globally, with only around one in three applicants achieving certification. Some of the ethical fund managers we work with are B Corps.

COP

Conference of the Parties. COP meetings are annual global climate conferences convened under the United Nations Framework Convention on Climate Change. COP26, held in Glasgow in 2021, was the 26th such meeting. “Parties” includes governments, non-government organisations, and other stakeholders. COP26 was attended by around 25,000 delegates from nearly 200 countries.

IPCC

The Intergovernmental Panel on Climate Change is a United Nations body established to assess scientific knowledge relating to human-induced climate change. Its Sixth Assessment Report (2021) stated that it is unequivocal that human influence has warmed the atmosphere, ocean and land, and warned that avoiding warming of 1.5°C or 2°C will require immediate and deep reductions in greenhouse gas emissions.

Materiality

Materiality refers to how significant a particular activity or exposure is to a company or investment. For example, some fund managers will only exclude a company if more than a specified percentage (often 10% or 20%) of revenue or profit is derived from an activity of concern.

Similarly, when assessing fund managers, we consider both the nature and the scale of exposure. If a fund’s exposure to a company with an issue is small, the resulting allocation within a client portfolio may be minimal. For example, the Alphinity Sustainable Share Fund has held a modest exposure to Rio Tinto, while avoiding other excluded activities, and we assess this within the context of the fund’s overall approach and governance.

Modern slavery legislation

Modern slavery reporting legislation now applies in jurisdictions including Europe, the UK, Australia and Canada, requiring large companies and fund managers to report on risks within their supply chains. While early reporting was often high-level, increased regulatory scrutiny and media investigation are driving more detailed and substantive disclosure over time.

NDCs

Nationally Determined Contributions are national climate action plans setting out emissions reduction targets and strategies, typically with milestones to 2030.

Net zero

Net zero refers to reducing greenhouse gas emissions as far as possible, and then offsetting remaining emissions that cannot be eliminated (for example in heavy industry or aviation) through measures such as carbon sinks, including forests.

Scope 1, 2 and 3 emissions

• Scope 1: Direct emissions from owned or controlled sources

• Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating and cooling

• Scope 3: All other indirect emissions occurring across a company’s value chain

SDGs

The United Nations Sustainable Development Goals form part of the 2030 Agenda for Sustainable Development. The framework includes 17 goals and 169 targets adopted by all UN member states in 2015. While designed primarily for governments, many ethical fund managers map their investments to the SDGs as part of their approach to sustainability and impact.

More information is available at https://sdgs.un.org/goals.

Stranded assets

Stranded assets are assets that have lost economic value or become liabilities due to regulatory, environmental, or market changes. This term is often used in relation to fossil fuel assets. The risk is that such assets may require unanticipated write-downs, become uneconomic to operate, or incur costs to close or remediate.

TCFD

The Task Force on Climate-related Financial Disclosures developed a framework to help organisations assess and disclose climate-related financial risks and opportunities. It recognises the role of the financial system in influencing climate outcomes through capital allocation and investment decisions.

UNFCCC

The United Nations Framework Convention on Climate Change is an international treaty adopted in 1992, committing signatory nations to stabilise greenhouse gas concentrations to avoid dangerous climate change.

UN PRI

The United Nations Principles for Responsible Investment is an international initiative encouraging investors to incorporate environmental, social and governance factors into investment decision-making. We view UN PRI membership as a baseline expectation for fund managers committed to ethical investing.

While early participation was sometimes criticised as superficial, monitoring and accountability requirements have strengthened in recent years. Members are now required to engage actively with investee companies and report on outcomes. 

Some fund managers that do not apply ethical principles across all strategies, but offer specific ethical funds, have chosen not to join UN PRI.