Glossary

A decarbonization trajectory consistent with a 50% probability of limiting global temperature rise to 1.5C above pre-industrial levels. Requires roughly halving global emissions by 2030 and reaching net zero by 2050.

American Carbon Registry. One of the four major voluntary carbon market registries. Established in 1996 as the first private voluntary GHG registry in the US. Now managed by Winrock International. Focuses on emission reduction and removal projects primarily in the Americas.

Quantitative measures of the level of activity giving rise to GHG emissions, such as litres of fuel consumed, kWh of electricity purchased, or kilometres driven.

The requirement that emission reductions would not have occurred without the carbon credit project. A project is additional if it would not have happened under a business-as-usual scenario.

Agriculture, Forestry and Other Land Use - a sectoral category covering land-based greenhouse gas mitigation and carbon sequestration projects, including forestry, cropland, and livestock management.

Under IFC PS1, the zone over which a project's environmental and social impacts extend. Includes the project site, associated facilities, cumulative impact zones, and areas affected by unplanned but predictable developments. Defines the geographic scope for risk identification and stakeholder engagement.

The section of the Paris Agreement enabling international carbon market cooperation. Article 6.2 covers bilateral ITMO transfers, Article 6.4 establishes a centralized UN crediting mechanism, and Article 6.8 covers non-market approaches.

The share of a borrower's or investee's total emissions attributed to a specific financial institution, calculated as the institution's outstanding capital divided by the company's total financing.

A carbon credit representing emissions that were prevented from occurring, such as protecting a forest that would otherwise have been cleared (REDD+) or replacing a fossil fuel power plant with renewable energy. Contrasts with removal credits.

The reference case describing what would have happened in the absence of a carbon project. Used to calculate emission reductions by comparing project emissions against it.

A highly stable, carbon-rich solid produced by thermochemical conversion of waste biomass in an oxygen-limited environment. Applied to soil or incorporated into products for long-term carbon storage.

The variety of life on Earth at genetic, species, and ecosystem levels. Underpins ecosystem services vital to human society including pollination, water purification, and climate regulation.

A strategic document required under IFC PS6 for projects in critical or natural habitat. Describes the composite mitigation strategy for achieving net gains (critical habitat) or no net loss (natural habitat), including off-site conservation, partnerships, long-term funding, and measurable biodiversity targets. Distinct from the operational Biodiversity Management Plan (BMP).

A measurable unit representing a verified positive biodiversity outcome, such as species recovery or habitat restoration. Unlike carbon credits, biodiversity credits lack a universal metric, making standardisation and fungibility challenging. Emerging frameworks include the UK's Biodiversity Net Gain and voluntary schemes like the Biodiversity Credit Alliance.

A metric estimating the average proportion of a region's original species abundance that remains despite human pressures. Ranges from 0% (complete loss) to 100% (pristine). Based on over 2.38 million records from the PREDICTS database.

Measurable conservation outcomes designed to compensate for residual adverse impacts on biodiversity after avoidance, minimization, and restoration have been applied. Must follow the like-for-like or better principle. In critical habitat, must achieve net gains; in natural habitat, no net loss.

A practitioner term for a stakeholder archetype who provides nothing during the reporting process - no data, no feedback, no responses - and then blames the consultant when the work is delayed or incomplete. Key trait: absent during work, present during blame. The defense is keeping a meticulous paper trail of all requests and follow-ups.

A reserve of carbon credits set aside from AFOLU (forestry/land-use) projects to cover potential reversals of carbon storage, such as from fire, disease, or land-use change.

A visual model developed by the Ellen MacArthur Foundation showing two material cycles in a circular economy: the biological cycle (nutrients returned to the biosphere) and the technical cycle (products, components, and materials kept in use through reuse, repair, remanufacturing, and recycling).

One of three mandatory EU Taxonomy disclosure KPIs. The proportion of a company's capital expenditure that is Taxonomy-aligned - i.e., associated with economic activities meeting substantial contribution, DNSH, and minimum social safeguards criteria.

The finite cumulative amount of CO2 that can still be emitted while keeping global warming within a specific temperature threshold. Approximately 500 Gt CO2 remained from 2020 for a 50% chance of limiting warming to 1.5C.

A tradable certificate representing the reduction or removal of one metric tonne of carbon dioxide equivalent (tCO2e) from the atmosphere.

The physical extraction of CO2 from the atmosphere and durable storage in geological formations, soils, biomass, or products. Distinct from emission reductions, which prevent emissions from occurring.

The risk that production and associated emissions shift from jurisdictions with stringent climate policies to those with weaker or no carbon pricing. Can occur through relocation of production facilities or shifts in trade flows. The primary rationale for border carbon adjustments like CBAM.

Mechanisms that put a monetary cost on greenhouse gas emissions, including carbon taxes (fixed price per tonne) and emissions trading systems (cap-and-trade markets).

The process of capturing and storing atmospheric carbon dioxide, either through biological processes (trees, soil) or technological means (carbon capture and storage).

Carbon Border Adjustment Mechanism. An EU regulation (2023/956) requiring importers of carbon-intensive goods (cement, iron/steel, aluminium, fertilisers, electricity, hydrogen) to purchase certificates reflecting the EU ETS carbon price for embedded emissions. Designed to prevent carbon leakage as free ETS allowances are phased out (2026-2034).

A tradeable instrument purchased by authorised CBAM declarants, priced at the weekly average EU ETS auction price. Each certificate represents one tonne of CO2e of embedded emissions. Certificates must be surrendered annually to cover the embedded emissions of imported CBAM goods, minus any deduction for carbon prices paid in the country of origin.

Ten quality criteria established by the ICVCM for high-integrity carbon credits. Organised into three categories: governance, emissions impact, and sustainable development. Credits meeting all criteria receive the CCP label.

Clean Development Mechanism - a Kyoto Protocol mechanism allowing developed countries to fund emission reduction projects in developing countries and earn Certified Emission Reduction (CER) credits.

Carbon Disclosure Project - a global non-profit running the world's largest environmental disclosure system. Companies and cities report climate, water, and forest data through annual questionnaires scored from D- to A.

Certified Emission Reduction - a carbon credit issued under the Kyoto Protocol's Clean Development Mechanism, representing one tonne of CO2e reduced.

A project-specific procedure required under IFC PS8 that outlines actions to take when previously unknown cultural heritage is encountered during construction or operations. Includes stop-work protocols, record keeping, chain of custody for movable finds, notification of heritage authorities, and expert assessment.

Work that deprives children of their childhood, potential, and dignity, and is harmful to physical and mental development. ILO Convention 138 sets minimum age standards and Convention 182 identifies worst forms including slavery, trafficking, and hazardous work. The ILO estimates 160 million children are in child labour globally.

Corporate Human Rights Benchmark. Now part of the World Benchmarking Alliance, it assesses the human rights policies, processes, and practices of large companies across five measurement areas: governance, human rights due diligence, remedy, company performance, and transparency.

A production and consumption model that eliminates waste and keeps materials in use through designing out waste, keeping products in circulation, and regenerating natural systems.

The second of six EU Taxonomy environmental objectives. An economic activity substantially contributes to adaptation by reducing material physical climate risks through solutions that do not adversely affect others' adaptation efforts or lock in assets incompatible with long-term resilience.

The first of six EU Taxonomy environmental objectives. An economic activity substantially contributes to mitigation by avoiding or reducing GHG emissions, or enhancing removals, consistent with the Paris Agreement 1.5C target.

A forward-looking technique that tests how an organization or portfolio would perform under different plausible climate futures, typically including orderly transition, disorderly transition, and failed transition pathways.

Positive outcomes from a carbon project beyond greenhouse gas mitigation, such as biodiversity conservation, community livelihoods, improved water quality, or health benefits.

Carbon dioxide equivalent - a standard unit for measuring carbon footprints that expresses the impact of different greenhouse gases in terms of the amount of CO2 that would create the same warming.

Conference of the Parties - the annual climate negotiations under the UN Framework Convention on Climate Change. Key milestones include COP21 (Paris Agreement, 2015) and COP26 (Glasgow, Article 6 rules).

An accounting mechanism under Article 6 where a host country adds transferred emission reductions back to its own emissions total while the acquiring country subtracts them, preventing double counting.

Carbon Offsetting and Reduction Scheme for International Aviation - ICAO's global market-based mechanism requiring airlines to offset growth in international aviation emissions above 2019 levels.

A design philosophy developed by William McDonough and Michael Braungart that models industrial systems on biological ones, where all materials are either biological nutrients (safely returned to the biosphere) or technical nutrients (recycled indefinitely without quality loss). Contrast with cradle-to-grave.

The time period during which a carbon project can generate verified emission reductions or removals and issue carbon credits.

Areas of outstanding biodiversity value under IFC PS6, defined by five criteria: presence of CR/EN species, endemic/restricted-range species, globally significant migratory concentrations, highly threatened ecosystems, or key evolutionary processes. Projects in critical habitat must demonstrate net gains for the biodiversity values that triggered the designation.

Corporate Sustainability Due Diligence Directive. An EU directive adopted in 2024 requiring large companies to identify, prevent, mitigate, and account for adverse human rights and environmental impacts across their value chains. Includes civil liability provisions and administrative penalties up to 5% of global turnover.

Corporate Sustainability Reporting Directive - EU law requiring large companies to include sustainability data in management reports, assessed against European Sustainability Reporting Standards (ESRS).

Under IFC PS8, includes tangible forms (archaeological sites, historic structures, artifacts), unique natural features with cultural significance (sacred groves, lakes, waterfalls), and intangible culture (traditional knowledge, practices, ceremonies). Protected regardless of whether legally listed or previously identified.

An assessment under IFC PS1 that considers impacts combining with those from other existing and planned developments in the project's area of influence. Required when multiple projects affect the same resources or communities simultaneously.

The process of reducing carbon intensity by transitioning away from fossil fuels toward low-carbon energy sources and practices across the economy.

An electronic record containing standardised information about a product's composition, origin, repairability, recyclability, and environmental footprint. Required under the EU Ecodesign for Sustainable Products Regulation (ESPR) for regulated product categories.

Technology that physically extracts CO2 directly from the ambient atmosphere and stores it permanently in geological formations or products. Used for neutralizing residual emissions that cannot be abated.

Do No Significant Harm - a principle requiring that sustainable investments or activities do not cause major damage to other environmental or social objectives while pursuing their primary goal.

The risk that the same emission reduction is claimed by more than one party, undermining environmental integrity. Corresponding adjustments under Article 6 are designed to prevent this.

Assessment of both impact materiality (how a company affects people and environment) and financial materiality (how sustainability issues create financial risks or opportunities for the company).

A practitioner term for a stakeholder archetype who does not understand the work but keeps showing up as if they do. They insert themselves into the review process, provide generic or trivial feedback, demand endless review rounds, and consume enormous amounts of time. Key trait: high noise, low signal. Managed by setting clear review milestones and limiting revision rounds.

The process of identifying, preventing, mitigating, and accounting for actual and potential negative impacts on human rights, the environment, and governance across a company's operations and value chain.

Benefits that people, including businesses, obtain from ecosystems. Organized into four categories: provisioning (food, water, timber), regulating (climate regulation, water purification, pollination), cultural (sacred sites, recreation, ecotourism), and supporting (nutrient cycling, primary production). Under IFC PS6, classified as Type I (may adversely affect communities) and Type II (project depends on for operations).

European Financial Reporting Advisory Group - the technical body responsible for developing European Sustainability Reporting Standards (ESRS) under the CSRD.

The greenhouse gas emissions released during the production of a good, including direct emissions from the production process and, for certain CBAM goods, indirect emissions from electricity consumed. Calculated per tonne of product using installation-level data or default values.

A coefficient that quantifies emissions per unit of activity. For example, kg CO2 per litre of diesel burned, or tCO2e per MWh of grid electricity.

The measurable decrease in greenhouse gas emissions achieved by a project, calculated as the difference between baseline emissions and project emissions.

A cap-and-trade mechanism that sets an overall emissions cap and allows companies to buy and sell emission allowances. The EU ETS is the world's largest, covering power generation and heavy industry.

An economic activity that directly enables other activities to make a substantial contribution to an EU Taxonomy environmental objective. Must not lead to lock-in of carbon-intensive assets, must have a substantial positive environmental impact based on lifecycle considerations, and cannot qualify simply because it improves efficiency of a polluting activity.

Exploring Natural Capital Opportunities, Risks and Exposure. A tool developed by the Natural Capital Finance Alliance and UNEP-WCMC that maps how economic sectors depend on and impact nature. Covers 167 sub-sectors and 21 ecosystem services. Used in the TNFD LEAP approach.

Extended Producer Responsibility. A policy approach where producers are given significant responsibility for the end-of-life treatment and disposal of their products. Implemented through fees that fund collection, sorting, and recycling infrastructure. Eco-modulation adjusts fees based on product recyclability.

A risk management framework adopted by over 130 financial institutions in 38 countries for determining, assessing, and managing environmental and social risk in project finance. Applies IFC Performance Standards as the benchmark for projects above $10 million, making the PS the de facto global standard for project finance E&S management.

Environmental, Social, and Governance - a framework for evaluating corporate sustainability and ethical impact across three pillars.

The systematic inclusion of ESG factors into financial analysis and investment decisions, going beyond exclusionary screening to embed sustainability into valuation models.

Environmental and Social Impact Assessment - a systematic process under IFC PS1 for identifying, predicting, and evaluating the environmental and social impacts of a proposed project. Covers seven key elements: scoping, baseline data, impact prediction, cumulative impacts, alternatives analysis, mitigation design, and monitoring framework.

Environmental and Social Management System - a structured management system required by IFC PS1 for all investment clients. Comprises seven elements: policy, identification of risks and impacts, management programs, organizational capacity, emergency preparedness, stakeholder engagement, and monitoring and review.

Ecodesign for Sustainable Products Regulation. EU Regulation 2024/1781 replacing the original Ecodesign Directive. Sets performance and information requirements for products sold in the EU, including durability, repairability, recyclability, and mandatory Digital Product Passports.

European Sustainability Reporting Standards - 12 mandatory disclosure standards (covering cross-cutting, environment, social, and governance topics) developed by EFRAG for use under the CSRD.

EU regulation requiring companies placing commodities (palm oil, soy, cocoa, beef, timber, rubber, coffee) on the EU market to demonstrate products are deforestation-free and legally produced. Requires geolocation data and due diligence statements.

A classification system defining which economic activities are environmentally sustainable based on six environmental objectives: climate mitigation, climate adaptation, water and marine resources, circular economy, pollution prevention, and biodiversity. Activities must make a substantial contribution to at least one objective, do no significant harm to the others, and meet minimum social safeguards.

The legal obligation to act in the best long-term financial interests of beneficiaries. The 2004 Freshfields Report established that ESG integration is consistent with fiduciary duty.

GHG emissions that financial institutions indirectly cause through their lending and investment activities, classified as Scope 3 Category 15. Typically exceed a bank's operational emissions by 700x or more.

Forest, Land and Agriculture - SBTi's specialized guidance requiring companies with significant land-use emissions to set separate targets for biological and agricultural emissions distinct from industrial emissions.

All work or service exacted from any person under the threat of penalty and for which that person has not offered themselves voluntarily. The ILO identifies 11 indicators including abuse of vulnerability, deception, restriction of movement, isolation, physical violence, intimidation, retention of identity documents, withholding of wages, and debt bondage.

Free, Prior, and Informed Consent - the highest tier of community engagement under IFC PS7. Required in three circumstances: impacts on lands subject to traditional ownership or customary use, relocation of Indigenous Peoples, and significant impacts on critical cultural heritage. Established through good faith negotiation; does not require unanimity but must document both the mutually accepted process and evidence of agreement.

Intentional or unintentional releases of greenhouse gases from equipment leaks, industrial processes, coal mines, or refrigeration and air-conditioning systems.

Greenhouse Gas - any gas that absorbs and re-emits infrared radiation, trapping heat in the atmosphere. The main GHGs are CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3.

The most widely used international accounting standard for measuring and managing greenhouse gas emissions. Comprises the Corporate Standard (Scope 1 and 2) and the Corporate Value Chain Standard (Scope 3).

A carbon credit certification standard established by WWF and other NGOs in 2003. Requires projects to demonstrate contributions to at least three UN Sustainable Development Goals beyond climate action. Known for strong stakeholder consultation requirements.

A fixed-income instrument with proceeds earmarked specifically to fund climate and environmental projects such as renewable energy, energy efficiency, and clean transport.

The practice of making misleading or unsubstantiated claims about the environmental or social benefits of a product, service, or investment strategy to attract capital or customers.

Global Reporting Initiative - an international standards organization that provides the world's most widely used framework for sustainability reporting.

A process through which concerns and complaints related to a company's human rights impacts can be raised, investigated, and resolved. UNGP Principle 31 sets eight effectiveness criteria: legitimate, accessible, predictable, equitable, transparent, rights-compatible, a source of continuous learning, and based on engagement and dialogue.

Global Warming Potential - a measure of how much heat a greenhouse gas traps in the atmosphere relative to CO2 over a specified time period (typically 100 years). Methane has a GWP of 28.

Human Rights Due Diligence. An ongoing process through which companies identify, prevent, mitigate, and account for how they address their adverse human rights impacts. Defined in the UNGPs (Principles 17-21) and OECD Due Diligence Guidance as a six-step process.

Integrated Biodiversity Assessment Tool. Provides access to the IUCN Red List of Threatened Species, World Database on Protected Areas, and Key Biodiversity Areas. Used to screen project locations for biodiversity sensitivity in the TNFD LEAP Locate phase.

Informed Consultation and Participation - the baseline engagement requirement under IFC PS7 for projects affecting Indigenous Peoples. Goes beyond standard consultation to require engaging representative bodies, providing accessible information, allowing adequate time for internal decision-making, and documenting how community views shaped the project.

Integrity Council for the Voluntary Carbon Market. An independent governance body that sets and enforces global threshold standards for high-quality carbon credits through the Core Carbon Principles (CCPs) and Assessment Framework.

Eight environmental and social standards that IFC requires its investment clients to meet. PS1 (Assessment and Management Systems) is always applicable; PS2-8 cover labor, resource efficiency, community health, resettlement, biodiversity, indigenous peoples, and cultural heritage. Applied globally through the Equator Principles by 130+ financial institutions.

The ISSB's climate-related disclosure standard requiring companies to report on governance, strategy, risk management, and metrics and targets related to climate risks and opportunities.

International Labour Organization. A UN specialized agency setting international labour standards through conventions and recommendations. Its eight fundamental conventions cover freedom of association, forced labour, child labour, and discrimination. The ILO's MNE Declaration provides guidance specifically for business.

Investments made with the specific intent to generate measurable positive social or environmental impact alongside a financial return.

A time-bound action plan required under IFC PS7 detailing measures to avoid, minimize, and compensate for adverse impacts on Indigenous Peoples. Must include nine elements: baseline information, impact analysis, consultation results, mitigation measures, natural resource management, opportunity enhancement, grievance mechanism, budget/timetable, and monitoring.

A form of inter-firm cooperation where the waste, by-products, or excess resources of one company become inputs for another. The Kalundborg Eco-Industrial Park in Denmark is the world's most cited example, operating since the 1970s.

Under IFC PS5, displacement that occurs when affected persons cannot refuse - either through government expropriation or negotiated settlements under threat of expropriation. Covers both physical displacement (loss of homes) and economic displacement (loss of income or resource access). All displaced persons receive protection regardless of formal tenure status.

Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. The biodiversity equivalent of the IPCC. Its 2019 Global Assessment found that approximately one million species face extinction and identified five direct drivers of biodiversity loss.

Intergovernmental Panel on Climate Change - the leading international body for assessing climate change science. Its assessment reports synthesize thousands of studies to inform policy.

International standard for GHG accounting and verification, consisting of three parts: organizational-level quantification (Part 1), project-level quantification (Part 2), and verification guidance (Part 3).

International Sustainability Standards Board - established in 2021 to develop a global baseline of sustainability disclosure standards (IFRS S1 and S2) for capital markets.

Internationally Transferred Mitigation Outcome - the unit of exchange under Article 6.2, representing emission reductions transferred between countries with corresponding adjustments applied.

Ensuring the economic burdens and benefits of decarbonization are distributed equitably across society, with support for workers and communities most affected by the shift to a low-carbon economy.

A benchmark initiative evaluating how companies in food, ICT, and apparel sectors address forced labour risks in their supply chains. Assesses governance, traceability, risk assessment, purchasing practices, recruitment, worker voice, and remedy.

Adopted at CBD COP15 in December 2022, this framework sets 23 targets for 2030, including the landmark 30x30 target (protecting 30% of land and sea) and Target 15 requiring large companies to assess and disclose nature-related risks and dependencies.

The first binding international climate agreement (1997) establishing carbon markets through the Clean Development Mechanism, Joint Implementation, and emissions trading among developed countries.

An increase in greenhouse gas emissions outside the project boundary that occurs as a result of the project activity. Must be accounted for when calculating net emission reductions.

The TNFD's integrated assessment process for identifying and managing nature-related issues. Four phases: Locate (interface with nature), Evaluate (dependencies and impacts), Assess (risks and opportunities), and Prepare (respond and report). Designed to feed into the four TNFD disclosure pillars.

A systematic methodology (ISO 14040/14044) for evaluating the environmental impacts of a product, process, or service throughout its entire life cycle, from raw material extraction through production, use, and end-of-life treatment.

Under IFC PS5, the requirement to help economically displaced persons rebuild their income-earning capacity. Cash compensation alone is rarely sufficient. Measures vary by livelihood type: land-based (replacement land, improved inputs, transitional food support), wage-based (job placement, skills training), enterprise-based (relocation assistance, access to customers).

A wage sufficient to afford a decent standard of living for a worker and their family, including food, housing, healthcare, education, clothing, transport, and a margin for unexpected events. Distinguished from the legal minimum wage, which is often set below subsistence level. The Anker methodology is the most widely used benchmarking approach.

Lieferkettensorgfaltspflichtengesetz (German Supply Chain Due Diligence Act). Enacted in 2023, it requires companies with 1,000+ employees in Germany to establish human rights and environmental due diligence across their supply chains. Enforced by the Federal Office for Economic Affairs and Export Control (BAFA).

A Scope 2 accounting approach that uses the average emission factor of the local electricity grid to calculate emissions from purchased electricity, reflecting the physical reality of the grid.

A Scope 2 accounting approach that reflects specific electricity purchasing decisions such as renewable energy certificates (RECs) or power purchase agreements, allowing companies to claim lower emissions.

A metric developed by the Ellen MacArthur Foundation and Granta Design measuring how restorative a product's material flows are. Ranges from 0 (fully linear) to 1 (fully circular). Considers recycled content, recyclability, product utility, and lifespan.

A systematic assessment of flows and stocks of materials within a defined system (product, company, region, or economy). Uses mass balance principles to track resource inputs, outputs, and accumulation. Sankey diagrams are a common visualisation tool.

The principle determining which sustainability topics are significant enough to warrant disclosure. A topic is material if it could influence decisions of stakeholders or represents significant impacts.

A biodiversity metric measuring the mean abundance of original species in an area relative to their abundance in an undisturbed reference state. Ranges from 0 (complete loss) to 1 (pristine). Developed by PBL Netherlands and used in the GLOBIO model.

A mandatory requirement under the EU Taxonomy that companies must meet alongside environmental criteria. Based on the OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights, ILO Core Conventions, and the International Bill of Human Rights. Covers human rights due diligence, anti-corruption, fair competition, and taxation.

The fundamental logic running through all IFC Performance Standards: (1) avoid the impact entirely, (2) minimize where avoidance is not possible, (3) restore or compensate for residual impacts, (4) offset only as a last resort. Jumping straight to compensation without first trying to avoid and minimize is non-compliant.

An umbrella term covering forced labour, debt bondage, human trafficking, and forced marriage. The ILO estimates approximately 50 million people are in situations of modern slavery globally. Addressed by legislation including the UK Modern Slavery Act and Australian Modern Slavery Act.

Systematic measurement and recording of project data to track emission reductions, verify performance, and ensure compliance with methodology requirements.

Monitoring, Reporting, and Verification - the process of systematically tracking project performance, documenting results, and having them independently verified.

The stock of natural assets - geology, soil, water, air, and living organisms - that provides ecosystem services underpinning economic activity and human wellbeing.

A goal and framing concept calling for a measurable net gain in biodiversity and ecosystem integrity by 2030, relative to a 2020 baseline, with full recovery by 2050. Aligned with the Kunming-Montreal GBF ambition.

Nationally Determined Contribution - a country's self-defined climate pledge under the Paris Agreement, outlining its emission reduction targets and adaptation plans. Each successive NDC must be more ambitious.

An investment strategy that deliberately excludes companies or sectors conflicting with investor values or sustainability criteria, such as tobacco, weapons, or fossil fuels.

Biodiversity outcome targets under IFC PS6. No net loss is the minimum standard for natural habitat - project impacts must be fully offset so biodiversity is no worse off. Net gain is the higher standard required for critical habitat - the project must leave biodiversity measurably better off than if it had never happened. Both require long-term monitoring and typically involve biodiversity offsets.

Achieving a balance between greenhouse gas emissions produced and greenhouse gas emissions removed from the atmosphere, resulting in no net increase.

A GHG Protocol consolidation approach where an organization accounts for 100% of emissions from operations over which it has full authority to introduce and implement operating policies.

One of three mandatory EU Taxonomy disclosure KPIs. The proportion of a company's operating expenditure (research and development, building renovation, short-term leases, maintenance) that is Taxonomy-aligned.

The set of entities, operations, and facilities included in an organization's GHG inventory. Determined using either the equity share or control (financial or operational) approach.

Principal Adverse Impacts - the negative effects that investment decisions have on sustainability factors such as climate, environment, workers, and human rights. Required disclosure under SFDR.

The 2015 international accord where 196 countries committed to limiting global warming to well below 2C above pre-industrial levels, with efforts to limit to 1.5C. Establishes NDCs and Article 6 carbon markets.

Partnership for Carbon Accounting Financials - the global standard for measuring and reporting financed emissions across financial institutions, covering lending, investment, and insurance portfolios.

Project Design Document. The detailed technical document that describes a carbon credit project's methodology, baseline scenario, monitoring plan, and expected emission reductions. Submitted to the registry during the validation stage.

The requirement that carbon stored or emission reductions achieved by a project are long-lasting and not reversed. Particularly relevant for forestry and land-use projects.

Direct financial risk from climate change impacts, split into acute (extreme weather events like floods and storms) and chronic (long-term shifts like sea-level rise and temperature increase).

Principles for Responsible Investment - a UN-supported initiative (launched 2006) establishing six principles for incorporating ESG factors into investment analysis, decision-making, and ownership practices.

Thermochemical decomposition of biomass entirely without oxygen, producing biochar, bio-oil, and syngas. The primary production process for stable biochar used in carbon removal projects.

Renewable Energy Certificate - a tradable instrument certifying that one MWh of electricity was generated from a renewable source. Used in market-based Scope 2 accounting.

Reducing Emissions from Deforestation and Forest Degradation - a UN framework that creates financial incentives for developing countries to reduce emissions from forest loss and enhance forest carbon stocks.

A carbon credit representing CO2 that has been actively removed from the atmosphere, such as through direct air capture, afforestation, biochar, or enhanced weathering. Generally considered higher quality than avoidance credits under the Oxford Principles hierarchy.

A comprehensive plan required under IFC PS5 when a project causes physical displacement. Covers 19 sections including census of affected persons, asset inventory, valuation methodology, entitlements, relocation site preparation, transitional support, grievance mechanism, budget, and completion audit criteria. Must be disclosed to affected communities before displacement begins.

The permanent cancellation of a carbon credit in a registry to claim the associated emission reduction or removal. Once retired, a credit cannot be transferred, sold, or used again. Retirement is the final step in the credit lifecycle.

The human rights at risk of the most severe negative impacts through a company's activities and business relationships. Severity is assessed by scale, scope, and irremediability of the impact. Companies are expected to prioritise these issues in their HRDD process.

Sustainability Accounting Standards Board - develops sector-specific materiality maps identifying which sustainability issues are financially material for 77 industries. Now part of the ISSB.

Science Based Targets initiative - an independent body (partnership of CDP, UN Global Compact, WRI, and WWF) that validates corporate emission reduction targets as consistent with limiting warming to 1.5C.

Science Based Targets Network. Extends the science-based target approach from climate (SBTi) to nature, covering biodiversity, freshwater, land, and ocean. Uses the AR3T framework: Avoid, Reduce, Restore and Regenerate, and Transform.

Corporate GHG reduction targets mathematically aligned with the decarbonization pathways required to limit global warming to 1.5C. Validated by the SBTi using methods like Absolute Contraction and Sectoral Decarbonization.

Direct GHG emissions from sources owned or controlled by an organization, such as fuel combustion in boilers, vehicles, or manufacturing processes.

Indirect GHG emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting organization.

All other indirect GHG emissions in a company's value chain, including both upstream (supply chain) and downstream (product use and disposal) emissions. Organized into 15 categories by the GHG Protocol.

Sustainable Development Goals - 17 interconnected goals adopted by all UN member states in 2015 as a blueprint for peace and prosperity for people and the planet.

Sustainable Finance Disclosure Regulation - EU regulation requiring financial market participants to disclose how they integrate sustainability risks and impacts. Classifies funds as Article 6 (grey), Article 8 (light green), or Article 9 (dark green).

An internal price that companies apply to projected future carbon costs when evaluating investment decisions, reflecting anticipated regulatory and market pricing of emissions.

A fixed-income instrument with proceeds designated for projects addressing social challenges such as affordable housing, healthcare, education, and food security.

Carbon stored in soil from decomposed plant and animal matter. The primary carbon pool tracked in agricultural carbon projects, measured in tonnes of carbon per hectare.

The process of actively consulting with individuals and groups affected by or interested in a company's activities, including employees, communities, investors, and civil society.

The burning of fuels in fixed equipment such as boilers, furnaces, and generators to produce heat, steam, or electricity. A major source of Scope 1 emissions.

Investments that lose economic value before the end of their expected useful life due to changes in regulation, technology, or market behavior - such as coal plants made unviable by carbon pricing.

The first of three tests an economic activity must pass for EU Taxonomy alignment. An activity must make a substantial contribution to at least one of the six environmental objectives through specific technical screening criteria - quantitative thresholds that vary by sector and activity.

A bond whose financial characteristics (typically coupon rate) are tied to the issuer's achievement of predefined ESG performance targets, with penalties for missing them.

The status of an economic activity that passes all three EU Taxonomy tests: makes a substantial contribution to at least one environmental objective, does no significant harm to the other five, and meets minimum social safeguards. Only aligned activities count toward a company's Taxonomy KPIs (Turnover, CapEx, OpEx).

The status of an economic activity that is described in the EU Taxonomy's delegated acts, regardless of whether it meets the performance thresholds. Eligibility is the first filter - an activity must be listed before it can be assessed for alignment. Many activities are eligible but not aligned.

Task Force on Climate-related Financial Disclosures - a framework (established 2017 by the FSB) providing standardized recommendations for climate-related disclosure organized into governance, strategy, risk management, and metrics and targets.

Sector-specific quantitative thresholds defined in the EU Taxonomy delegated acts that determine whether an activity makes a substantial contribution to an environmental objective. Examples include gCO2e/kWh limits for electricity generation and energy efficiency standards for buildings.

Taskforce on Nature-related Financial Disclosures - a framework for organizations to report and act on evolving nature-related risks and opportunities, modeled on the TCFD structure.

An economic activity for which there is no technologically and economically feasible low-carbon alternative, but which supports the transition to a climate-neutral economy. Must have GHG emission levels corresponding to best performance in the sector, must not hamper development of low-carbon alternatives, and must not lead to lock-in of carbon-intensive assets.

Financial risk arising from the shift to a low-carbon economy, including policy changes (carbon taxes), technology disruption (renewables), market shifts (changing consumer preferences), and reputational impacts.

Taskforce on Scaling Voluntary Carbon Markets. Launched by Mark Carney and the IIF in 2020, it produced influential reports projecting VCM growth to $5-50 billion by 2030 and recommended market infrastructure improvements. Led to the creation of the ICVCM.

One of three mandatory EU Taxonomy disclosure KPIs. The proportion of a company's net revenue derived from Taxonomy-aligned economic activities. The primary metric for assessing what share of a company's business is environmentally sustainable.

Uyghur Forced Labor Prevention Act. A US law enacted in 2021 that creates a rebuttable presumption that goods produced in Xinjiang, China, or by entities on the UFLPA Entity List, are made with forced labour and are prohibited from import into the United States.

United Nations Declaration on the Rights of Indigenous Peoples. Adopted in 2007, it affirms the individual and collective rights of indigenous peoples, including the right to Free, Prior and Informed Consent (FPIC) for decisions affecting their lands, territories, resources, and cultural heritage.

United Nations Guiding Principles on Business and Human Rights. Adopted in 2011, they establish three pillars: the state duty to protect human rights, the corporate responsibility to respect human rights, and access to remedy for victims. Also known as the Ruggie Principles.

The full range of activities and entities involved in creating and delivering a product or service, including upstream suppliers and downstream customers. Central to Scope 3 emissions accounting.

Voluntary Carbon Markets Integrity Initiative. A multi-stakeholder platform that sets guidance for how companies can credibly use carbon credits through its Claims Code of Practice, which defines Silver, Gold, and Platinum claim tiers based on decarbonisation progress.

Verified Carbon Standard - Verra's flagship carbon crediting program and the world's most widely used voluntary carbon standard, certifying projects across renewable energy, forestry, agriculture, and more.

Verified Carbon Unit - a carbon credit issued by Verra's Verified Carbon Standard (VCS) program, representing one tonne of verified GHG emission reductions or removals.

The year in which the emission reduction or removal represented by a carbon credit occurred. Older vintages may reflect less stringent methodology versions. Many buyers prefer recent vintages (within 5 years) to ensure credits reflect current standards.

A decentralized market where companies and individuals voluntarily purchase carbon credits to offset their emissions, operating independently of compliance carbon markets and national accounting.

Validation/Verification Body - an independent third-party auditor accredited to assess and confirm that a carbon project meets the requirements of a given standard.

Weighted Average Carbon Intensity - a portfolio-level metric that normalizes GHG emissions by revenue across holdings, allowing comparison of carbon exposure between different portfolios.

A five-step priority order for waste management established by the EU Waste Framework Directive (2008/98/EC): prevention, preparation for reuse, recycling, other recovery (e.g., energy recovery), and disposal. Prevention is the most preferred option.

World Benchmarking Alliance. An organisation that publishes free public benchmarks ranking companies on their contributions to the SDGs. Includes the Corporate Human Rights Benchmark (CHRB), Social Benchmark, and Nature Benchmark, covering over 2,000 companies globally.