Découvrez ici les définitions des termes utilisés à travers le site de l'Observatoire de la Finance durable.
- Sector alignment analysis
Methods for measuring the alignment of financial portfolios with decarbonization scenarios for certain key business sectors, typically those sectors most sensitive to transition risks. These methods measure the gap between the carbon intensity recommended by sector to achieve the Paris Agreement objectives and that of the companies in the portfolio.
- Analysis of the adequacy of the energy or technology mix
Methodology consisting of transposing the 2°C carbon budget issues to a change in the energy mix (for energy companies) or technology (for car manufacturers). The current and projected mixes are compared to the International Energy Agency's objectives.
- Climate analysis
The climate analysis is divided into two parts:
- Climate risk analysis, which represents all the risks associated with climate change and the economic transitions required and undertaken to contain them. In the financial sector, these risks are generally divided into physical risks (risks associated with physical disruptions caused by climate change) or transition risks (caused by adjustment processes aimed at limiting greenhouse gas emissions), a conceptualization established by the TCFD. We can also consider the reputational risks incurred by companies depending on their positioning with regard to transitions.
- Analysis of the impact of the investment made by the actor on the climate. This analysis often takes the form of a calculation of the trajectory, carbon footprint, or temperature alignment of the portfolio.
- Other European labels:
Luxflag, Towards Sustainability, France Relance, FebelFin, UmWeltZeichen, FNG...
- Exit timetable:
Timetable specifying the dates for the definitive exit from coal, possibly according to geographical zones, i.e. to aim for zero exposure of investment portfolios and financing to thermal coal.
- Installed capacity:
Refers to coal-fired power generation plants.
- Portfolio Temperature Calculation:
A synthetic indicator to communicate a warming temperature if the global economy were to reflect the composition of a portfolio.
The CDP (formerly the Carbon Disclosures Project) is a nonprofit organization that operates a global reporting system to help investors, companies, cities, states and regions manage their environmental impacts. CDP also rates companies and cities on their environmental performance.
- Climate Action 100+:
Launched in December 2017 during the One Planet Summit and considered one of the twelve most relevant initiatives to address climate change issues, the Climate Action 100+ initiative's mission is to engage and influence the world's major greenhouse gas emitters. The initiative's investors, representing $31 trillion in total assets, are asking companies to improve their climate change governance, reduce their greenhouse gas emissions and strengthen their climate-related financial reporting.
- Nace Code:
The NACE code represents the European nomenclature for business activities. There are 615 four-digit codes that the EU determines; the fifth digit is assigned by the member states (NACE code - BEL for Belgium). This code plays an important role in social legislation, particularly in the classification of companies.
- Collective Climate Action:
The "Collective Commitment to Climate Action" of September 23, 2019, bringing together 33 international banks and 5 French banks at its launch, sets out concrete and binding measures that banks must take to strengthen their contributions and align their loan portfolio with the Paris Agreement. A progress report is published every year and is expected to present the progress of the CACC.
- Affected (or dedicated) credit:
Credit made available for the purchase of a specific good or service.
- Consumer credit:
Operation that consists in making a loan of money with interest, to finance a good or a service.
- Green consumer credit:
Any type of loan instrument made available exclusively to finance the individual purchase of goods and services supporting green initiatives (e.g., personal electric vehicle, etc.)
- Consumer credit:
Operation that consists in making a loan of money with interest, to finance a good or a service.
A rental contract for a fixed period of time, signed between a company (industrial or commercial) and a leasing company. This contract is accompanied by a promise to sell at the end of the contract.
- AMF Doctrine:
Launched in 2020, the AMF's doctrine defines standards to frame the commercial communication of funds claiming to be sustainable finance in France. It is based in particular on thresholds derived from the SRI label and concerns all so-called sustainable funds except those benefiting from a government label (SRI, Greenfin).
- Shareholder engagement:
Engagement refers to the fact that an investor interacts on ESG issues with the companies it finances, in debt or in equity, with the aim of influencing their environmental, social and governance (ESG) practices over the long term and/or improving their reporting in this area. These requirements are formulated within the framework of a structured approach that is monitored over the long term.
- Environmental thematic funds:
The approach of environmental thematic funds consists in selecting companies active in themes or sectors related to sustainable development and ecological transition (such as renewable energy sources, energy efficiency, waste management, environmental restoration).
Companies are eligible if the share of their turnover derived from the sector of activity is above a certain threshold, or if they have a dominant position in the market in question. Environmental theme funds often have a sectoral approach by investing more or only in sectors related to sustainable development. They may also implement exclusions on the most greenhouse gas emitting sectors.
Organizations that collectively hold financial assets. They operate on a time-share basis, issuing to investors shares representing a portion of their portfolio. Investors are informed of the various terms of the fund beforehand, in particular the management policy and the objectives sought.
- Green funds:
"Green funds" are funds that have obtained an environmental label (Greenfin, LuxFlag Climate Finance, LuxFlag environnement) or funds that do not have a label but whose name explicitly targets an environmental theme or whose fund documentation indicates a strategy that takes into account environmental issues. Green funds include green bond funds, low-carbon funds and environmental theme funds.
- Global Coal Exit List:
A list created by the NGO Urgewald that transparently lists companies involved in the thermal coal value chain, using relative and absolute threshold criteria. The GCEL also lists companies that are developing new coal-related projects.
The companies on these lists meet one of the following criteria (updated in 2020):
Relative Threshold Criteria :
All companies whose coal share of revenue or electricity generation is 20% or greater are listed in the GCEL.
Absolute threshold criteria:
- annual thermal coal production is equal to or greater than 10 million tons
- installed coal generation capacity is equal to or greater than 5 GW.
- Power: Companies planning to develop at least 300 MW of new coal-fired power generation capacity.
- Mining: Companies involved in coal exploration activities, planning to develop new coal mines or planning a significant increase in annual thermal coal production of at least 1 Mt.
- Services: Companies involved in the development or expansion of coal transportation assets or other coal-related infrastructure, such as coal-to-gas facilities.
- Green bonds:
These are non-bank bonds where the issuer (company, government, community) commits to financing "green" projects over time with the amount of money raised. It also undertakes to publish an annual report on their extra-financial use and their impact on the environment. Only count Green Bonds that have received a second opinion and comply with the Green Bond Principles or the Climate Bond Standards.
- Hydrogen Council:
The Hydrogen Council is a global initiative led by CEOs of companies who share a common vision and long-term ambition for hydrogen to drive the transition to clean energy. The Investor Group is a category of Council members made up of banks and other financial institutions that are actively participating in the emerging hydrogen economy. This group works collaboratively to develop public policy and financial programs focused on large-scale hydrogen deployment.
- Environmentally certified real estate:
Green real estate in this indicator is defined as assets with environmental certifications (LEED, BREAM, HQE, E+C-, etc.) or BEPOS (BEPOS buildings).
- Green real estate:
We will not use this term this year but rather "real estate with environmental certification" and will wait until 2022 to apply the rules and definition of the European Taxonomy.
- Responsible Investment:
An investment that aims to reconcile economic performance with social and environmental impact by financing companies and public entities that contribute to sustainable development, regardless of their sector of activity.
- Sustainable Investments:
One or a combination of the following investment categories:
An investment in an economic activity that contributes to
- an environmental objective, measured for example through key indicators of resource efficiency in the use of energy, renewable energy, raw materials, water and land, waste generation and greenhouse gas emissions, or effects on biodiversity and the circular economy
- a social objective, in particular an investment that contributes to the fight against inequality or promotes social cohesion, social inclusion and labor relations, or an investment in human capital or economically or socially disadvantaged communities,
- Provided that such investments do not materially undermine any of these objectives and that the companies in which the investments are made follow good governance practices, particularly with respect to sound management structures, employee relations, compensation of qualified personnel and compliance with tax obligations
- Green Investments:
Refers to all investments that enable the transition to a low-carbon economy and mitigate the risks of climate change and environmental issues. The Taxonomy will define the list of activities considered as green.
- Finansol Label:
The Finansol label truly attests to the solidarity nature of a financial product.
- Greenfin label :
The Greenfin label aims to mobilize part of the savings for the benefit of the energy and ecological transition.
- SRI label:
The SRI label is a tool for choosing responsible and sustainable investments. Created and supported by the Ministry of Finance, the label aims to make Socially Responsible Investment (SRI) products more visible to savers in France and Europe
- Alignment methodologies :
Alignment metrics are measures that compare the climate performance of a portfolio of assets with temperature trajectory scenarios.
- Energy (generation) mix:
Refers to the mix of primary energy sources used for electricity generation. In the context of a coal exclusion policy, we look at the share of coal in a company's energy mix to ensure that the defined thresholds are not exceeded.
- Net zero asset managers initiative:
A program launched in December 2019 as part of the United Nations Environment Programme Finance Initiative (UNEP-FI). By joining the alliance, signatory asset managers commit to aligning their investments and portfolios with net zero emissions goals by 2050.
- Net Zero Asset Owner Alliance:
A program launched in September 2019 as part of the United Nations Environment Programme Finance Initiative (UNEP-FI). By joining the alliance, signatory investors commit to aligning their investments and portfolios with net zero emissions goals by 2050.
- Carbon neutrality:
Carbon neutrality implies a balance between carbon emissions and the absorption of carbon from the atmosphere by carbon sinks.
- Green share of portfolio:
Proportion of assets that are considered green investments (definition above)
- Sustainable investment (bank):
Investments that incorporate ESG performance criteria in addition to economic return and risk criteria.
- Coal exclusion policy:
Policy through which a player commits to stop its activities with companies that are exposed to coal above absolute and/or relative thresholds. Exclusion policies are often used by actors to transition away from coal. Actors can set relative and/or absolute thresholds and lower them over time until they are completely excluded.
- Poseidon Principles:
The Poseidon Principles establish a framework for assessing and disclosing the climate alignment of ship financing portfolios. They set a benchmark for what it means to be a responsible bank in the maritime sector and provide practical guidance on how to achieve it.
Along the same lines as the PRIs, the UN launched the Principles for Responsible Banking (PRB) in 2019, which translates its responsible investment principles to the banking sector.
- Green home loans for households/green mortgages:
Green loans for households aim to incentivize borrowers to improve the energy efficiency of their homes and/or acquire energy efficient properties (Class A, B or C of the Diagnostic de Performance Energétique (DPE))
- Green loans to businesses and public bodies (excluding unrestricted loans):
Refers to all investments that enable the transition to a low-carbon economy and the mitigation of risks induced by climate change and environmental problems.
- Loans to social and solidarity economy actors :
Any type of loan instrument made available exclusively to finance or refinance an activity that consciously addresses a social problem/need
- PRI :
The Principles for Responsible Investment (PRI) initiative works with an international network of signatories to implement six principles for responsible investment
responsible investment. It aims to identify the links between investments and environmental, social and governance issues, and to help signatories integrate these issues into their investment and ownership decisions. They have received more than 1,400 signatures from over 50 countries.
- Equator Principles:
A financial sector benchmark for identifying, assessing and managing environmental and social risks in projects. The 10 principles define a number of social and environmental assessment criteria that a bank must respect when selecting the projects it finances.
Signing the Equator Principles entails changes in the credit granting process: the borrower must complete an environmental and social assessment form, the degree of which varies according to the potential impact of the project.
The PSI (Principles for Sustainable Insurance) brings together insurers from around the world committed to developing responsible insurance worldwide. The initiative is supported by the United Nations.
- Climate risks:
Climate risks are all risks associated with climate change that could have a significant actual or potential negative impact on the value of the investment. These risks are generally divided into
- physical risks (risks associated with physical disruptions caused by climate change)
- transition risks (resulting from the implementation of a low-carbon economic model). [Transition risks include political and legal risks (e.g., the introduction of a carbon price). Transition risks include political and legal risks (e.g., introduction of a carbon price, increase in claims and litigation as losses and damages from climate change increase), technology risks related to technological disruptions (new renewable energy technologies, energy storage, carbon capture, etc.), market risks (changes in supply and demand as climate risks are increasingly taken into account), reputational risks (changing perceptions of customers and civil society regarding an organization's contribution to the transition to a low-carbon economy)].
- litigation or liability risks integrated by TCFD into transition risks.
- Transition risks:
Identified by the TCFD, transition risks include all potential losses associated with the impact of transitions on issuers (companies or states) in the portfolio.
- Physical risks:
Identified by the TCFD, physical risks include all potential losses associated with the impact of climate change on the issuers (companies or states) in the portfolio.
- Science based targets:
Launched in 2015 by the Carbon Disclosure Project (CDP), the UN Global Compact, the World Resources Institute (WRI) and the World Wildlife Fund (WWF), this initiative proposes concrete solutions for organizations to commit to reducing their emissions according to science-based targets (SBTs), thus following warming trajectories limited to 1.5 °C or 2 °C
- Absolute coal thresholds:
Absolute thresholds are exclusionary criteria that allow actors to make the transition away from coal. In a coal exclusion policy, a player stops its activity with companies whose coal-related activities represent more than X€ of turnover or which have an electricity production capacity from thermal coal of more than XGW. (X being the absolute threshold)
- Relative coal thresholds:
Relative thresholds are exclusion criteria that allow players to transition away from coal. In a coal exclusion policy, a player stops all activity in companies whose coal-related activities represent more than X% of their revenue or that coal represents more than X% of their electrical production capacity. (X being the relative threshold)
SFDR: Sustainable Finance Disclosure is a European regulation that came into force on March 10, 2021. It provides a framework for defining sustainable financial products distributed in Europe. It defines common reporting standards for management companies and financial advisors.
- SIF (FIR, ...):
The Social Investment Forum (SIF) is an organization promoting American SRI. Through a publication every two years, it reports on the evolution of the American SRI market. Eurosif and FIR (Forum pour l'Investissement Responsable created in 2001) are the European and French equivalents of this association.
- Social bonds:
Social bonds are bonds where the net proceeds of the issue are used exclusively to finance or refinance, in part or in full, new and/or ongoing social projects and which comply with the four principles of the ICMA Social Bond Principles. Record only bonds that have received a second opinion.
- Coal-exposed companies:
Companies that are involved in the coal value chain through their operations. The value chain includes the upstream supply of electricity or heat from coal (i.e. exploration and production, all operations leading to the removal of coal from the ground, including drilling rigs); intermediate activities (i.e. processing and transportation); and downstream (i.e. refining, storage, transportation and marketing of products).
A company is exposed to coal if one of its subsidiaries is.
Energy conservation financing companies, created by the legislator to finance energy conservation or environmental protection projects.
- Final exit from coal:
For a financial player, final exit from coal means the complete cessation of financial activities with companies exposed to coal.
In order to achieve this, the financial actor sets an exit date and establishes an action plan detailing the process by which it will achieve its transition to final exit. The action plan often involves an exclusion policy and the establishment of relative and/or absolute thresholds that will be progressively lowered to 0. Financial actors can refer to the recommendations of Climate Analytics, which suggests definitive exit dates to be set according to geographical zones in order to be in line with the Paris agreements.
- Sustainability-Linked Bonds:
Sustainability-Linked Bonds are debt securities whose financial and/or structural characteristics may vary depending on whether predefined sustainability/ESG performance targets are met by the issuer. Thus, issuers expressly commit (including in the bond documentation) to future improvements in their sustainability performance according to a predefined timeline. Only count bonds that have received a second opinion.
- Sustainable bonds:
Sustainable bonds are bonds where the net proceeds of the issue are used exclusively for financing or refinancing both environmental and social projects. Sustainable bonds follow the four key principles of ICMA's Green Bond Principles and Social Bond Principles, which are relevant to environmental and social projects respectively. Only bonds that have received a second opinion are included.
- European Taxonomy:
Classification of economic activities considered sustainable in the environmental field, applicable to all member countries. Launched at the initiative of the European Commission, the taxonomy defines criteria by sector of activity to harmonize the definition of investments considered sustainable.
To be considered green, an activity must: i) meet one of the six objectives of the taxonomy, ii) not cause any collateral damage to one of the other five objectives (DNSH) and iii) comply with the minimum guarantees of social law.
- TCFD (Task force on climate disclosure):
The TCFD (Task force on climate disclosure) is a working group set up at the end of 2015 during COP21 by the G20 Financial Stability Board. Its aim is to promote financial transparency related to climate risks. The recommendations resulting from this task force invite financial actuators to report on their approach to identifying, managing and taking into account climate factors.
Trucost is an independent research firm specializing in environmental research founded in 2004. In particular, it proposes to calculate the coal exposure of portfolios.
- Zero Net Banking Alliance:
A program launched in April 2021 as part of the United Nations Environment Programme Finance Initiative (UNEP-FI). By joining the alliance, signatory banks commit to aligning their investments and portfolios with zero net emissions targets by 2050.