Because sustainable finance is still in its infancy, common terminology, references and standards are lacking. This glossary – just one of the tools offered by the Centre to support financial actors in their work – provides a common denominator in terminology related to sustainable finance. Glossaries are especially critical in technical language. Correctly defined terms can help people communicate more efficiently and effectively, ensuring accuracy and consistency.
Historically, investors have based investment decisions on performance and financial returns. Over The last decade or so has seen a mind shift among financiers, whereby they are looking more towards environmental and social impact. The finance sector has become a crucial part of accelerating the energy transition, implementing urban transitions into sustainable living spaces, and shifting towards a circular economy
According to the Global Sustainable Investment Alliance (GSIA), US $23 trillion, or just over a quarter of all assets under management in 2016, took into account environmental, social and governance (ESG) factors (GSIA 2017)
With more data in place on ESG ratings and metrics, it has become easier for investors to judge an investment in term of its “sustainable profile”. But metrics for comparison, common terminology and best practices for assessment are still missing. As the Economist reported in April 2018, the European Union wants to change that, and has announced plans to set up an overarching framework for evaluating ESG ratings. This would help compare the different ratings themselves, rather than just providing another rating system altogether.