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Earnings before interest, taxes, depreciation and amortization (EBITDA): An
indicator of a company™s financial performance calculated as revenues less
expenses, excluding tax, interest, depreciation and amortization.
Earnings per share (EPS): A commonly used financial indicator, calculated by
dividing a company™s net income by its number of outstanding shares.
Eco-efficiency: A measure of the resource intensity of a company™s operations,
including the inputs of materials and energy required to manufacture and
deliver a unit of output.
Ecosystem: A community of organisms and its physical environment.
Emissions: The release of substances (e.g. greenhouse gases) into the atmosphere.
Emissions cap: A mandated restraint in a scheduled timeframe that puts a ˜ceil-
ing™ on the total amount of anthropogenic greenhouse gas emissions that can
be released into the atmosphere. This can be measured as gross emissions or
as net emissions (emissions minus gases that are sequestered).
Emissions reduction unit (ERU): Emissions reductions generated by projects in
Annex B countries that can be used by another Annex B country to help meet
its commitments under the Kyoto Protocol. Reductions must be additional to
those that would otherwise occur.
Emissions trading: A market mechanism that allows emitters (countries,
companies or facilities) to buy emissions from or sell emissions to other emit-
ters. Emissions trading is expected to bring down the costs of meet-
ing emission targets by allowing those who can achieve reductions less expen-
sively to sell excess reductions (e.g. reductions in excess of those required
under some regulation) to those for whom achieving reductions is more costly.
Employment practices and workplace safety: Losses arising from acts incon-
sistent with employment, health or safety laws or agreements, from payment
of personal injury claims, or from diversity/discrimination.
Energy resources: The available supply and price of fossil and alternative
resources will play a huge role in estimating how much a greenhouse gas
constraint will cost. In the US context, natural gas supply (and thus price) is
particularly important, as it is expected to be a transition fuel to a lower car-
bon economy.
Engagement: Engagement is applied by some fund managers to encourage more
responsible business practices and/or enhance investment returns. It relies
on the influence of investors and the rights of ownership, and mainly takes
the form of dialogue between investors and companies on issues of concern.
Engagement may extend to voting practices.
Enhanced greenhouse effect: The increase in the natural greenhouse effect
resulting from increases in atmospheric concentrations of GHGs due to emis-
sions from human activities.
Enterprise risk management: A process used to manage risks that can have neg-
ative influence on the enterprise in question. By identifying and proactively
treating the resources (human and capital), the products and services, and
Glossary of terms
658



customers of the organization, as well as external effects on society, markets
or the environment.
Entry into force: The point at which international climate change agreements
become binding. The United Nations Framework Convention on Climate
Change (UNFCCC) has entered into force. In order for the Kyoto Protocol to
do so as well, 55 Parties to the Convention must ratify (approve, accept, or
accede to) the Protocol, including Annex I Parties accounting for 55% of that
group™s carbon dioxide emissions in 1990. As of June 2003, 110 countries
had ratified the Protocol, representing 43.9% of Annex I emissions.
Environment, health and safety (EHS): A professional discipline concerned
with protection of the environment, human health and safety through the
application of scientific, engineering and management methods.
Environmental performance: The performance of a business or facility accord-
ing to selected indicators of environmental impact.
Ethical exclusions: Reference to exclusions where a large number of negative
criteria and/or filters are applied to manage funds to remove stocks deemed
to be unethical (as opposed to just tobacco or weapons, for example).
European Community: As a regional economic integration organization, the
European Community can be and is a Party to the UNFCCC; however, it does
not have a separate vote from its members (Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, the Netherlands,
Portugal, Spain, Sweden and the United Kingdom).
Evapotranspiration: The process by which water re-enters the atmosphere
through evaporation from the ground and transpiration by plants.
External fraud: Losses due to acts of a type intended to defraud, misappropri-
ate property or circumvent the law, by a third party. These activities include
theft, robbery, hacking or phishing attacks.
Extra-financial performance: Also known as non-financial performance. The
performance of a business measured in terms of non-financial aspects such
as environmental and social responsibility.
Full disclosure: A policy under which listed companies must disclose all ma-
terial information that might affect investment decisions to all investors, at
the same time.
GDP: Gross domestic product, a measure of overall economic activity.
General Circulation Model (GCM): A computer model of the basic dynamics
and physics of the components of the global climate system (including the
atmosphere and oceans) and their interactions which can be used to simu-
late climate variability and change.
General Agreement on Tariffs and Trade (GATT): GATT is an agreement, not
an organization, originally created by the Bretton Woods Conference as part
of a larger plan for economic recovery after World War II. Its main purpose is
to reduce barriers to international trade through the reduction of tariff barri-
ers, restrictions and subsidies.
Generally Accepted Accounting Principles (GAAP): A technical accounting
term that encompasses the conventions, rules and procedures necessary to
define accepted accounting practice at a particular time.
Glossary of terms 659



Global Reporting Initiative (GRI): GRI™s vision is that reporting on economic,
environmental and social performance by all organizations is as routine and
comparable as financial reporting. GRI accomplishes this vision by develop-
ing, continuously improving and building capacity around the use of the
GRI™s Sustainability Reporting Framework. All Reporting Framework com-
ponents are developed using a global, multi-stakeholder consensus seeking
approach.
Global warming: Gradual increase in average temperatures at the earth™s sur-
face, believed to result from the ˜greenhouse effect™ due to increased atmos-
pheric concentrations of carbon dioxide and other gases.
Global warming potential (GWP): A system of multipliers devised to enable
warming effects of different gases to be compared. The cumulative warming
effect, over a specified time period, of an emission of a mass unit of CO2 is
assigned the value of 1.
Greenhouse effect: The insulating effect of atmospheric greenhouse gases (e.g.
water vapour, carbon dioxide, methane, etc.) that keeps the earth™s tempera-
ture about 60°F warmer than it would be otherwise.
Greenhouse gas (GHG): Any gas that contributes to the ˜greenhouse effect™.
GRI Reporting Framework: The GRI Reporting Framework is intended to pro-
vide a generally accepted framework for reporting on an organization™s eco-
nomic, environmental and social performance. The Framework consists of
the Sustainability Reporting Guidelines, the Indicator Protocols, Technical
Protocols and the Sector Supplements.
Group of 77 and China, or G77/China: An international organization estab-
lished in 1964 by 77 developing countries; membership has now increased
to 133 countries. The group acts as a major negotiating bloc on some issues
including climate change.
HGWP (high global warming potential): Some industrially produced gases
such as sulphur hexafluoride (SF6), perfluorocarbons (PFCs) and hydrofluo-
rocarbons (HFCs) have extremely high GWPs.
Hot air: A situation in which emissions (of a country, sector, company or facil-
ity) are well below a target due to the target being above emissions that mate-
rialised under the normal course of events (i.e. without deliberate emission
reduction efforts). Hot air can result from overoptimistic projections of
growth.
Human capital: The set of skills which employees acquire on the job, through
training and experience, and which increase their value in the marketplace.
Human resources: This refers to the individuals within the firm, and to the por-
tion of the firm™s organization that deals with hiring, firing, training and
other personnel issues.
Human rights: UN Norms definition is: ˜human rights™ and ˜international human
rights™ include civil, cultural, economic, political and social rights, as set
forth in the International Bill of Human Rights and other human rights
treaties, as well as the right to development and rights recognised by interna-
tional humanitarian law, international refugee law, international labour law,
and other relevant instruments adopted within the United Nations system.
Glossary of terms
660



Human rights, internal: The extent to which the organization follows codes
and legislation with relevance to traditional human resources regulations as
well as discrimination, harassment and employee privacy.
Human Rights Act: A piece of legislation that sets out individual rights and
freedoms under law, this can be applicable to members of an organization™s
workforce. Many countries have similar rights enshrined into law.
Hydrofluorocarbons (HFCs): HFCs are synthetic industrial gases, primarily
used in refrigeration and semiconductor manufacturing as commercial
substitutes for chlorofluorocarbons (CFCs). There are no natural sources
of HFCs.
Incentive-based regulation: A regulation that uses the economic behaviour of
firms and households to attain desired environmental goals. Incentive-based
programmes involve taxes on emissions or tradable emission permits. The
primary strength of incentive-based regulation is the flexibility it provides
the polluter to find the least costly way to reduce emissions.
Income statement: A statement showing the revenues, expenses and income
(the difference between revenues and expenses) of a corporation over some
period of time.
Independent board member: Definitions for ˜independent™ can vary greatly but
usually implies that the member has no financial interest in the organization
or other potential benefits that could create a conflict of interest.
Institutional investor: An investor that is not an individual and may be a foun-
dation, endowment, pension fund or the like.
Intangible asset: A non-monetary asset, including people, ideas, networks and
processes, which is not traditionally accounted for on the balance sheet.
Integration: The explicit inclusion by asset managers of CG/SEE-risk into tradi-
tional financial analysis.
Intellectual capital: Knowledge that can be exploited for some money-making
or other useful purpose, including the skills and knowledge that a company
has developed about how to make its goods or services.
Intergenerational equity: The fairness of the distribution of the costs and ben-
efits of a policy when costs and benefits are borne by different generations.
In the case of a climate change policy the impacts of inaction in the present
will be felt in future generations.
Intergovernmental Panel on Climate Change (IPCC): The IPCC was established
in 1988 by the World Meteorological Organization and the UN Environment
Programme. The IPCC is responsible for providing the scientific and techni-
cal foundation for the United Nations Framework Convention on Climate
Change (UNFCCC), primarily through the publication of periodic assessment
reports (see ˜Second Assessment Report™ and ˜Third Assessment Report™).
Internal fraud: Loss due to acts of a type intended to defraud, misappro-
priate property or circumvent regulations, the law or company policy,
excluding diversity, discrimination events, which involve at least one inter-
nal party.
Investor relations (IR): A strategic corporate marketing activity, combining the
disciplines of communications and finance, which provides present and
Glossary of terms 661



potential investors with an accurate portrayal of a company™s performance
and prospects.
Joint implementation (JI): One of the three market mechanisms established by
the Kyoto Protocol.
Kyoto mechanisms: The Kyoto Protocol creates three market-based mechanisms
that have the potential to help countries reduce the cost of meeting their emis-
sions reduction targets. These mechanisms are Joint Implementation (Article
6), the Clean Development Mechanisms (Article 12) and Emissions Trading
(Article 17).
Kyoto Protocol: An international agreement adopted in December 1997 in
Kyoto, Japan. The Protocol sets binding emission targets for developed coun-
tries that would reduce their emissions on average 5.2% below 1990 levels.
Land use, land-use change and forestry (LULUCF): Land uses and land-use
changes can act either as sinks or as emission sources. It is estimated that
approximately one-fifth of global emissions result from LULUCF activities.
Leading indicator: A predictive indicator of anticipated performance that can
be observed prior to the period of performance.
Liability: A financial obligation, or the cash outlay that must be made at a spe-
cific time to satisfy the contractual terms of such an obligation.
Licence to operate: The ability of a corporation or business to continue opera-
tions based on ongoing acceptance by external stakeholder groups.
Market benefits: Benefits of a climate policy that can be measured in terms of
avoided market impacts such as changes in resource productivity (e.g. lower
agricultural yields, scarcer water resources) and damages to human-built
environment (e.g. coastal flooding due to sea-level rise).
Market value: (1) The price at which a security is trading and could be pur-
chased or sold. (2) The value investors believe a firm is worth; calculated by
multiplying the number of shares outstanding by the current market price of
a firm™s shares.
Methane (CH4): CH4 is among the six greenhouse gases to be curbed under the
Kyoto Protocol. Atmospheric CH4 is produced by natural processes, but
there are also substantial emissions from human activities such as landfills,
livestock and livestock wastes, natural gas and petroleum systems, coalmines,
rice fields and wastewater treatment. CH4 has a relatively short atmospheric
lifetime of approximately 10 years, but its 100-year GWP is currently esti-
mated to be approximately 23 times that of CO2.
Montreal Protocol on Substances that Deplete the Ozone Layer: An interna-
tional agreement that entered into force in January 1989 to phase out the use
of ozone-depleting compounds such as methyl chloroform, carbon tetrachlo-
ride and CFCs.
National action plans: Plans submitted to the Conference of the Parties (COP)
by all Parties outlining the steps that they have adopted to limit their anthro-
pogenic GHG emissions.
Negative feedback: A process that results in a reduction in the response of a
system to an external influence. For example, increased plant productivity
in response to global warming would be a negative feedback on warming,
Glossary of terms
662



because the additional growth would act as a sink for CO2, reducing the
atmospheric CO2 concentration.
Net present value: The amount of cash today that is equivalent in value to a
payment, or to a stream of future cash flows minus the cost.
Nitrous oxide (N2O): N2O is among the six greenhouse gases to be curbed under
the Kyoto Protocol. N2O is produced by natural processes, but there are also
substantial emissions from human activities such as agriculture and fossil
fuel combustion.
Non-Annex I Parties: Countries that have ratified or acceded to the UNFCCC
that are listed in Annex I of the UNFCCC.
Non-Annex B Parties: Countries that are not listed in Annex B of the Kyoto
Protocol.
Non-financial performance: Also known as extra-financial performance. The
performance of a business measured in terms of non-financial aspects such
as environmental and social responsibility.
Non-market benefits: Benefits of a climate policy that can be measured in terms
of avoided non-market impacts such as human-health impacts (e.g. increased
incidence of tropical diseases) and damages to ecosystems (e.g. loss of
biodiversity).
Non-party: A state that has not ratified the UNFCCC. Non-parties may attend

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