ESG & Impact

Additionality in the renewables refers to the concept of an increase in renewable energy generation that would not have occurred without the project's implementation. Investing in construction assets rather than operating assets participate to the concept of additionality. Additionality is a key consideration in evaluating the impact and effectiveness of renewable energy investments, ensuring that they result in genuine and meaningful contributions to reducing carbon emissions and advancing the transition to sustainable energy sources.

Under the Sustainable Finance Disclosure Regulation (SFDR, see definition) in the European Union, Article 9 funds are a specific category of funds that have sustainable investment as their objective. These funds are designed to promote environmental or social characteristics and they must meet certain criteria outlined in the SFDR to qualify as Article 9 funds. Article 9 funds are those that have a clear and measurable sustainable investment objective and they must invest in companies that contribute to specific environmental or social goals. Investors in Article 9 funds can expect higher level of transparency and disclosure regarding the extent to which they meet their objectives.

A community benefit fund is a financial resource established by a project/organisation or any other entity to provide financial support, resources to local communities or specific groups impacted by a project or development. The fund aims to contribute positively to the well-being and development of the community by addressing social, economic or environmental needs.

Decarbonisation is the process of reducing or eliminating the emission of carbon dioxide and other greenhouse gases into the atmosphere. It involves transitioning from activities and technologies that rely on fossil fuels to cleaner and more sustainable alternatives, with the aim of mitigating the impacts of climate change and achieving a low-carbon or carbon-neutral future.

ESG stands for Environmental, Social and Governance. It refers to a set of criteria used to evaluate the risks relating to the ethical and sustainability practices of a company or investment. ESG factors consider a company's impact on the environment, its treatment of employees and communities and its governance structure. Evaluating ESG helps investors identify potential risks and make decisions that align with their values and consider the broader societal and environmental impact of their investments.

An ESG scoring matrix is a tool used to assess and measure environmental, social and governance performance and practices of companies or investments. It involves assigning scores or ratings to various ESG factors based on specific criteria, allowing for a quantitative evaluation of their sustainability and responsible business practices. The matrix typically includes a set of ESG indicators (KPIs see definition) that are relevant to the sector being assessed. Each indicator is assigned a weight/importance based on its significance in reflecting ESG performance. Scores are then assigned to each indicator based on the performance against the established criteria. The scores are often aggregated to calculate an overall ESG score for the entity.

EU Taxonomy Alignment refers to the extent to which an investment or company aligns with the criteria and standards set out in the European Union's Taxonomy regulation. The EU Taxonomy regulation established a classification system for environmentally sustainable economic activities, with the goal of promoting investments that contribute to climate change mitigation and environmental objectives.

The Green Economy Mark from the London Stock Exchange recognises London-listed companies and funds that derive more than 50% of their revenues from products and services that are contributing the environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy.

Impact refers to the meaningful and measurable effect that a project or initiative has on a particular outcome, situation or community. It is used to assess the effectiveness and significance of efforts aimed at creating a positive difference.

An Impact Fund is a fund that seeks to generate positive and measurable social or environmental alongside financial returns. Unlike traditional investment funds that primarily focus on financial gains, impact funds aim to address specific social or environmental challenges while delivering competitive financial performance. Impact funds also help investors to align their investment portfolios with their values and make meaningful contribution to the society and the planet.

KPI stands for Key Performance Indicator. It's a measurable metric used to evaluate and quantify the performance or progress of company or a project. KPIs help monitor performance against set goals and benchmarks. Examples of Impact KPIs used by ORIT include equivalent tonnes of carbon avoided, number of beneficiaries from impact initiatives, equivalent homes powered by clean energy etc.

Net zero refers to achieving a balance between the amount of greenhouse gases emitted into the atmosphere and the amount removed from it. It involves reducing emissions of carbon dioxide and other greenhouse gases to a level where any remaining emissions are offset by actions that remove an equivalent amount of these gases from the atmosphere. The goal of net zero is to mitigate the impacts of climate change my minimising the overall contribution of human activities to global warming.

The Paris Agreement is a global treaty adopted in 2015 by nearly all countries of the world to address climate change. Its main goal is to limit global warming to well below 2 degrees celsius above pre-industrial levels. Countries that join the agreement commit to reducing their greenhouse gas emissions, enhancing their climate resilience. The agreement aims to collectively combat climate change and work together to create a sustainable and low-carbon future.

SFDR stands for Sustainable Finance Disclosure Regulation. It's a European Union regulation that requires financial institutions and investment firms to provide clear and standardised information about the ESG (see definition) aspects of their financial products. SFDR aims to enhance transparency and help investors make informed decisions by ensuring consistent ESG disclosure across the financial industry.

Sustainability is the practice of using resources in a way that meets present needs without compromising the ability of future generations to meet their own needs. It involves balancing economic, social and environmental considerations to ensure long-term well-being for both people and the planet.

TCFD stands for the Task Force on Climate-related Financial Disclosures. It is an initiative established by the Financial Stability Board to promote transparency and consistent reporting of climate-related financial risks and opportunities by companies and financial institutions. The TCFD provides recommendations and guidelines for organisations to disclose information about how climate change could impact their businesses, strategies and financial performance. The goal is to help investors, lenders, insurers and other stakeholders make more informed decisions by understanding the climate-related risks and opportunities associated with their investments.

UN PRI stands for the United Nations Principles for Responsible Investment. It is an international initiative that encourages and promotes the integration of environmental, social and governance factors into investment decision-making and ownership practices. UN PRI provides a framework for investors to incorporate sustainability considerations into their investment strategies and operations. Investors who sign up to UN PRI commit to a set of six principles that guide their approach to responsible investment: 1) Incorporating ESG considerations into investment analysis and decision-making, 2) Being active owners and incorporating ESG issues into ownership policies and practices, 3) Seeking appropriate disclosure on ESG issues from the entities in which they invest, 4) Promoting the acceptance and implementation of the principles within the investment industry, 5) Working together to enhance effectiveness in implementing the principles, 6) Reporting on their activities and progress in implementing the principles.

The UN SDGs or United Nations Sustainbale Development Goals are a set of 17 global goals established by the United Nations in 2015. The goals are designed to address some of the world's most pressing social, economic and environmental challenges, with the aim of achieving a more sustainable future for all by the year 2030. The 17 SDGs cover a wide range of issues including poverty, hunger, health, education, gender equality, clean water, clean energy, economic growth, industry innovation, climate action and more. Each goal is accompanied by specific targets and indicators to track progress. They provide a universal framework for governments, businesses, organisations and individuals to work together and take concrete actions to advance social progress, protect the planet and ensure prosperity for all. They promote a hollistic approach to sustainable development.