Understanding the alphabet soup that is ESG
2 minutes to read
ESG is awash with acronyms, but what do they all stand for?
ESG: Environment, Social, Governance
ESG investing is often used synonymously with Sustainable or Green investing. Green investing goals relating to the climate agenda and carbon reduction initiatives are often predominantly addressing the environmental or ‘E’ part of ESG. ‘S’ or social includes investing to consider wider stakeholders such as the local community or employees. ‘G’ or governance is about the decision-making process. As well as having the appropriate checks and balances to make this robust, it is about diversity of those making the decisions.
BREEAM
Building Research Establishment Environmental Assessment Method
Asset level assessment, rating and certification body of the sustainability at an asset or project level.
EPC
Energy Performance Certificate.
GRESB
Global Real Estate Sustainability Benchmark. A portfolio-based reporting tool for benchmarking real assets, working in partnership with BREEAM.
LEED
Leadership in Energy and Environmental Design. A green building certification system.
MEES
Minimum Energy Efficiency Standards. In England and Wales, under the new legislation, from 1 April 2018 any commercial property that has an EPC of lower than an ‘E’ cannot be rented out to new tenants or renew any existing tenancy contracts until at least an ‘E’ rating is obtained. From April 2023, MEES will apply to all existing commercial leases.
PRI
Supported by the United Nations, the Principles for Responsible Investment work to understand the investment considerations of ESG.
Based on the PRI, the European Union has created a Taxonomy Technical Report, which sets out proposed metrics and benchmarks of what could be considered ‘green’ investing, renovation or construction of for real estate.
Taxonomy
A standardised classification system. Crucial in the sphere of ESG to understand what is and isn’t green and how to benchmark this.
TCFD
Taskforce on Climate-related Financial Disclosures. A taskforce to develop standardised voluntary disclosures for use by companies to provide information to investors, lenders and other stakeholders. While the TCFD is currently voluntary, Mark Carney, future United Nations special envoy for climate action and finance, has advised that investors should “expect that, or something like that to become mandatory within a couple of years”.
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