The ABCs of ESG

13th May, 2024

Sustainability for business is about measuring and managing the material environmental and social impacts of its activities, products and services.

ESG refers to the three factors, Environmental, Social and Governance considered when assessing the overall impact that a company has. ESG can be used as a framework that helps stakeholders understand how an organisation manages its risks and opportunities around sustainability issues.

ESG criteria can help to determine the future financial performance in terms of return and risk. Increasingly, access to capital is being tied to high ESG performance. Regulation is also driving shareholders to invest in high ESG performers - a trend that is challenging significant capital flows.

ESG related regulation and voluntary best practice frameworks, standards and initiatives continue to evolve, complete with their own jargon in the sustainability and finance domains. The vast number of ESG and sustainability related acronyms and terms are often referred to as an “alphabet soup”.

To support business cut through this complexity and navigate the “ABCs of ESG” Davy Horizons has defined the main acronyms and terms in their latest whitepaper which looks at over 55 of the most common terms and acronyms in ESG and sustainability, including the 6 most popular search terms in ESG outlined in the table below.

Acronym	Description
IPCC	Intergovernmental Panel on Climate Change The IPCC is the United Nations body for assessing the science related to climate change, climate change mitigation options and adaptation steps to deal with the impacts from climate change. It issues reports periodically, including a summary for policymakers.
IFRS	International Financial Reporting Standards The IFRS Foundation is an international organisation which develops accounting and sustainability standards through two boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB).
SFDR	Sustainable Finance Disclosure Regulations SFDR is a disclosure framework for asset managers and other financial market participants. It aims to ensure transparency on the degree of sustainability of financial products for end-investors in the EU.
TCFD	Taskforce on Climate-related Financial Disclosures The Financial Stability Board’s TCFD has developed guidelines that define the information that companies should disclose when assessing climate finance risks. This includes the material transitional and physical risks to the business from climate change.
EU Green Deal	EU Green Deal The European Green Deal is a set of policy initiatives by the European Commission with the overarching aim of making the EU climate neutral by 2050.
EU Taxonomy	EU Taxonomy The EU Taxonomy for sustainable activities is a classification system established to clarify which investments are environmentally sustainable, in the context of the European Green Deal. The aim of the taxonomy is to prevent greenwashing and to help investors make greener choices.