The total return of an asset, portfolio or fund over a given period of time or an investment approach that attempts to achieve a return which is not benchmarked against an index.
The active exercising of shareholder rights to improve the long-term value of a company.
A term used in the environmental area to describe the reduction in levels of greenhouse gas emissions (GHG) achieved as a direct result of investor strategies that differ from an established business-as-usual baseline scenario. There is no established guidance on how to account for this additionality.
‘Aiming for A’ coalition
A coalition set up in 2011 to undertake engagement with the largest global extractive and utilities companies. The coalition enables asset owners and managers to support these companies in their preparations for the low-carbon transition.
A measure of excess return generated by a manager compared to the benchmark index. An alpha of 1.00 indicates that a fund has outperformed its benchmark by 1%.
Ask / Bid price
The lowest price a seller is willing to sell a security for / against the highest price a buyer is willing to pay for a security.
Companies that have historically performed better than their peers in terms of ESG factors within a particular industry or sector. It is also considered a positive screening as it seeks to include companies from the investment universe based on criteria relating to their policies, actions, products or services.
A measure of a fund’s sensitivity to market movements (as represented by the fund benchmark). A bet of 1.10 suggest the fund could perform 10% better than the benchmark in up markets and 10% worse in down markets, assuming all other factors remain constant.
Big Society Capital
Big Society Capital is the world’s first social investment institution, established by the UK’s Cabinet Office and launched as an independent organisation with a £600m investment fund in April 2012. With the aim of having a transformative impact on the social investment market, Big Society Capital provides finance to organisations that tackle social issues.
Bloomberg New Energy Finance (BNEF)
Founded in 2004, Bloomberg New Energy Finance is a dedicated source of data, insight and news on the transformation of the energy sector. It is a leading provider of information to energy companies, investors and governments.
The amount of carbon dioxide released into the atmosphere as a result of the activities of a particular organisation, most often expressed as tonnes of CO2 emission per USD million of revenues.
An investment approach that seeks to optimise the carbon footprint of a portfolio by taking into account the carbon emissions of the securities in the investment universe.
Means Cash Flow Return On Investment.
Also referred to as clean technology, cleantech is an umbrella term encompassing the investment asset class, technology, and business sectors that include environmental, sustainable and green products that contribute to reduce CO2 emissions.
Climate Bond Initiative
An investor-focused, not-for-profit organisation that works to mobilise bond markets for climate change solutions. The aim is to reduce the cost of capital for climate-related investments by developing a large and liquid market, while providing trusted standards and certification.
The long-term global shift in weather patterns, also linked to global warming.
Coalition for Environmentally Responsible Economies (CERES)
Ceres is a non-profit sustainability advocacy organisation founded in 1989 and based in Boston, Massachusetts. With the mission of “mobilizing investor and business leadership to build a thriving, sustainable global economy", Ceres brings together different stakeholders to accelerate the adoption of sustainable investing practices.
Conference of the Parties (COP): COP21, COP22, COP23
A UN conference on climate change that is held annually. The 21st conference (COP 21) was held in Paris in December 2015. The conference negotiated the Paris Agreement, a landmark global treaty on the reduction of climate change. The treaty lays out a framework to limit global warming to less than 2°C compared to pre-industrial levels. COP22 was held in Marrakech, Morocco in November 2016. COP 23 was held in Bonn, Germany in November 2017.
The system of rules, practices and processes by which a company is directed and controlled.
Corporate Social Responsibility (CSR)
Corporate responsibility involves the search for an effective ‘fit’ between businesses and the societies in which they operate. ‘Corporate responsibility’ refers to the actions taken by businesses to nurture and enhance this symbiotic relationship.
Delta measures the change in value of a derivative from a change in the price of the underlying asset. It is sometimes referred to as the “hedge ratio”.
Double bottom line
The concept of a double bottom line extends from the conventional single bottom line – the final measurement of financial performance of an investment – by adding a second bottom line to measure a company’s performance in terms of positive societal impact.
Effective duration estimates the sensitivity of a bond’s price to changes in benchmark interest rates. Effective duration is required for the measurement of interest rate risk for complex types of bonds.
Energy Transition Law (French) – Article 173
In August 2015 France passed the Energy Transition Law, the first of its kind in Europe, came into full effect in June 2017. France has decided to provide a clear signal to institutional investors with this law by encouraging them to become truly engaged on the subject of RI and start considering how to better integrate ESG factors in their investments. The law reinforces the role of institutional investors in financing the transition towards a low-carbon economy and requires more awareness of long-term issues in investment decisions.
The practice of shareholders entering into dialogue with management of companies to change or influence the way in which that company is run.
Environmental, Social and Governance issues that constitute the three pillars of Responsible Investments. E, S, and G are the three central factors in measuring the sustainability qualities of an investment.
These investments benefit from active stewardship, exclusion polices on controversial weapons, non-RSPO palm oil, derivatives on food commodities. The can also receive ESG scoring and footprint analysis.
The incorporation of ESG factors and analysis into investment decisions.
ESG Key Performance Indicator (KPI)
A measurable value that demonstrates how effectively a company is achieving its ESG and impact objectives.
An investment process that uses ethical principles and values as a filter for selecting investments.
ESG Key Performance Indicator (KPI)
A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving its ESG and impact objectives.
ESG mainstreaming and integration
The incorporation of ESG factors and analysis into investment decisions.
AXA IM’s vision is that delivering RI expertise should not be limited to an offering of RI ‘labelled’ funds only. Since early days, we believed that RI can be materially relevant to all investments and that the attention paid to ESG issues should be shared and integrated across all asset classes and specialist investment teams. This vision to mainstream RI across portfolios has guided the deliberate and purposeful development of our RI expertise for nearly two decades.
EU Non-financial Reporting Directive
Large , public-interest entities (listed companies, banks, insurers) with more than 500 employees should disclose in their management reports relevant and useful information on the policies, main risks and outcomes relating to at least
- Environmental matters
- Social and employee aspects
- Respect for human rights
- Anti-corruption and bribery issues
- Diversity in the board of directors
European SRI (Socially Responsible Investments) Transparency Code
The European SRI Transparency Code focuses on SRI funds distributed publicly in Europe and has been designed to cover a range of asset classes. The code comes with a Guidance Manual for fund managers on how to best use and respond to the Transparency Code. This reporting framework is issued by the European Forum for Social Responsible Investment in Eurosif.
European Sustainable Investment Forum (Eurosif)
Eurosif is the leading pan-European SRI membership organisation whose mission is to promote sustainability through European financial markets. Working as a partnership of Europe-based national Sustainable Investment Forums, Eurosif’s main activities are public policy, research and creating platforms for nurturing sustainable investing practices.
The return of the fund in excess of the benchmark / index return (annualized)
Exchange Traded Funds or ETF
ETF is a fund vehicle that is traded like a stock on the stock exchange. It is used to track and mimic the performance of a specific market index.
Describes the level of risk to a particular asset, asset type, sector, market or government. Also, the directional market exposure of a (absolute return) fund.
Elements of a company's behaviour that may not be immediately apparent solely from an analysis of its financial data. Often ESG themes are associated with extra-financial factors.
Fiduciary duties (or equivalent obligations) exist to ensure that those who manage other people’s money act in the interests of beneficiaries, rather than serving their own interests. The most important of these duties are:
- Loyalty: Fiduciaries should act in good faith in the interests of their beneficiaries, should impartially balance the conflicting interests of the different beneficiaries, should avoid conflicts of interest and should not act for the benefit of themselves or a third party.
- Prudence: Fiduciaries should act with due care, skill and diligence, investing as an ‘ordinary prudent person’ would do.
Financial Stability Board (FSB)
An international body that monitors and makes recommendations about the global financial system. It was established after the 2009 G20 London summit as a successor to the Financial Stability Forum.
Floating Rate Note (FRN)
A bond with a variable interest rate that is variable as it is tied to a benchmark such as LIBOR (London Interbank Offered Rate).
Forest Footprint Disclosure Project (FFDP)
A UK government supported project created to support investors in identifying how an organisation's activities contribute to deforestation. By collecting data on how businesses are impacting forests worldwide, the project enables a company’s 'forest footprint' to be linked to its value.
The Gates Foundation is the largest private foundation in the world, launched in 2000 by Bill and Melinda Gates. It works with partner organisations worldwide to tackle critical problems in four programme areas: global development, global health, education and global policy.
The Generation Foundation was set up in the UK with a mission to bring about progressive change both for the individual and for society as a whole. In particular, the Generation Foundation supports projects that assist in the education and personal growth of children and under-represented groups.
Global Health Investment Fund (GHIF)
The GHIF is a US$108 million social impact investment fund designed to provide financing to advance the development of drugs and other interventions against diseases that disproportionately burden low- and middle-income countries. The fund was set up by the Global Health Investment Corporation, a non-profit organisation with a mission to catalyse global health financing.
Global Impact Investing Network (GIIN)
The Global Impact Investing Network was founded in 2009 by a group of investors brought together by the Rockefeller Foundation. It is a non-profit organisation dedicated to increasing the scale and effectiveness of impact investing. In particular, it works to develop the role of impact investing by building a strong network of investors and leaders.
A bond that is issued to raise capital for the development of environmentally friendly projects or assets.
A term used to describe the heating of the atmosphere owing to the presence of carbon dioxide and other gases. Without the presence of these gases, heat from the sun would return to space in the form of infrared radiation.
Greenhouse Gas (GHG)
Any of various gaseous compounds (such as carbon dioxide) that absorb infrared radiation, trap heat in the atmosphere, and contribute to the ‘Greenhouse Effect’.
A process of making investment decisions based on environmentally conscious criteria, including the low carbon economy and climate change.
When a company, government or other group make a unsubstantiated or misleading claim about the environmental benefits of a fund or financial instrument.
Grid parity occurs when an alternative energy source can generate power at a levelised cost of electricity (LCOE) that is less than or equal to the price of purchasing power from the electricity grid.
The percentage value of the long positions plus the percentage value of the short positions. See NET EXPOSURE.
High Level Expert Group (HLEG) on sustainable finance
Set up by the European Commission to develop an overarching and comprehensive EU strategy on sustainable finance as part of the Capital Markets Union.
High Water Mark
The highest level that a fund’s net asset value (NAV) has reached at the end of any 12 month accounting period.
High yield bond
A bond with a high coupon payment and typically a low or no credit rating.
The minimum level of return required before a fund can charge a performance fee.
Focuses on financing businesses and projects that are designed to have intentional, positive and measurable impacts on society while simultaneously delivering financial market returns. As the societal impact is fully embedded into the business model, there need not be an inherent trade-off between impact returns and financial returns.
Information ration (IR)
Measures if a manager is outperforming or underperforming the benchmark and accounts for the risk taken to achieve the returns. A manager who outperforms a benchmark by 2% p.a. will have a higher IR than a manager with the same outperformance who has taken more risk.
Institutional Investor Group on Climate Change (IIGCC)
A forum the provides investors with a collaborative platform to encourage public policies, investment practices, and corporate behaviour that address long-term risks and opportunities associated with climate change.
International Energy Agency (IEA)
The International Energy Agency is a Paris-based autonomous inter-governmental organisation that was established in the wake of the 1973 oil crisis. Today, the IEA acts as a policy adviser to nations in the fields of energy security, economic development, and environmental protection.
Japan Stewardship Code
Introduced in 2014, the Japan Stewardship Code lays out a framework that promotes stronger corporate governance by calling on shareholders to actively exercise their voting rights and engage with the companies in which they invest.
The use of financial instruments (example debt) to increase the potential return of an investment.
Long / short position
A long position is buying a security with the expectation that it will deliver a positive return if its value goes up and a negative return if its value falls. Conversely, a short position involves selling a borrowed security with the expectation of buying it back at a lower price to make a profit. However, if the security goes up in value, a short position will make a loss.
An economy based on low-carbon power sources with minimal carbon emissions into the environment. It makes reference to a world where the temperature increase is contained below 2°C or 1.5°C.
Modified duration estimates the effect that a 1% change in interest rates will have on the price of a bond or bond fund.
An investment approach that excludes some companies or sectors from the investment universe based on criteria relating to their policies, actions, products or services.
Divestment refers to the sale of stocks, bonds or investment that conflict or are not aligned with specific ESG objectives, values or convictions.
The percentage value of the long positions less the percentage value of the short positions.
Non rated bonds
Bonds that are not rated.
Commonly used in relation to a derivative, denoted the theoretical value of its underlying asset.
The ongoing charges figures is based on the fund’s expenses during the previous 12 months, on a rolling basis. It excludes transaction costs an performance fees incurred by the fund.
Fees deduced from the fund’s asset incurred as part of the fund’s operations.
A feed paid to an asset manager for generating positive returns above a hurdle rate.
Principles for Responsible Investment (PRI)
The UN-supported Principles for Responsible Investment (PRI) initiative was launched in 2006. The world’s leading proponent of responsible investment, the PRI is an independent organisation bringing together and supporting an international network of investors to put the six Principles for Responsible Investment into practice.
The six Principles are to:
incorporate ESG issues into investment analysis and decision-making processes
be active owners and incorporate ESG issues into ownership policies and practices
seek appropriate disclosure on ESG issues from invested entities
promote acceptance and implementation of the Principles within the investment industry
enhance effectiveness in implementing the Principles
report on activities and progress towards implementing the Principles.
AXA IM was an early signatory to the PRI in 2007.
A proxy vote is a ballot cast by one person on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters. Since most shareholders cannot attend the annual and special meetings at which the voting occurs, corporations provide shareholders with the option to cast a proxy vote.
Energy from a source that is not depleted when used, such as wind or solar power.
At AXA IM, we believe that responsible investment can deliver sustainable, long term value for clients and create a positive impact on society. We do this by incorporating environmental, social and governance (ESG) considerations into our investment solutions across all asset classes, with a view to achieve sustainable performance and positive measurable outcomes in line with our clients’ objectives.
A unit of ownership in a company or financial asset.
A measure of the performance of an investment adjusting for the amount of risk taken (compared to a risk free investment). The higher the Sharpe ratio the better the return compared to the risk taken.
Société d’Investissement à Capital Variable. A type of open-ended fund widely used in Europe.
The difference between the bid and the ask price of a single security. It can also refer to the difference in price between securities.
An internationally agreed threshold to limit the rise in global temperatures to below 2°C from pre-industrial levels.
Assets that are rendered worthless or devalued due to issues such as climate, regulatory or market change.
Task Force on Climate-related Financial Disclosure (TCFD)
Set up to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.
A thematic investment approach refers to the selection of company securities based on specific sustainability themes such as human capital, renewable energy, water use, waste management or other ESG issues.
The capital gain or loss plus any income generated by an investment over a given period.
Tracking error (%)
Measures how much a fund’s returns deviate from those of the benchmark. The lower the number the closer the fund’s historic performance has followed its benchmark.
UN 2030 Agenda for Sustainable Development
An agenda made up of 17 Sustainable Development Goals adopted by world leaders in 2015. The Goals encourage countries to establish national frameworks to end all forms of poverty, fight inequalities and tackle climate change. Each goal has specific targets to be achieved over the next 15 years.
United Nations Conference on Trade and Development (UNCTAD)
Governed by its 194 member states, UNCTAD is the United Nations body responsible for dealing with development issues, particularly international trade. In effect, UNCTAD offers direct technical assistance to developing countries, with the aim of helping them to build the capacities they need to become integrated into the global economy.
United Nations Development Programme (UNDP)
UNDP is the United Nations’ global development programme. It works across 170 countries and territories, helping to achieve the eradication of poverty, and the reduction of inequalities and exclusion.
United Nations Environment Programme (UNEP)
UNEP was set up in 1972 as an agency of the United Nations to assist developing countries in implementing environmentally sound policies and practices. Today, UNEP is the leading global environmental authority, setting the global environmental agenda within the United Nations system.
UN Environmental Programme Finance Initiative (UNEP FI)
An initiative led by the UN that seeks to encourage the implementation of sustainability principles in financial institutions through the incorporation of ESG factors in risk analyses.
UN Global Compact
An initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies and report on their implementation. The UN Global Compact supports companies to:
- Do business responsibly by aligning their strategies and operations with Ten Principles on human rights, labour, environment and anti-corruption; and
- Take strategic actions to advance broader societal goals, such as the UN Sustainable Development Goals, with an emphasis on collaboration and innovation.
UN Guiding Principles (UNGP) on Business and Human Rights
A global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity. The UNGPs encompass three pillars outlining how states and businesses should implement the framework:
- The state duty to protect human rights
- The corporate responsibility to respect human rights
- Access to remedy for victims of business-related abuses
UK Stewardship Code
A code first published by the Financial Reporting Council in 2010 to enhance the quality of engagement between asset managers and companies in the UK. Its principal aim is to make asset managers more active and engaged in corporate governance matters in the interests of their beneficiaries.
UK Sustainable and Investment Finance Association (UKSIF)
UKSIF is the membership association for sustainable and responsible financial services in the UK. In effect, UKSIF works to support and advance the UK finance sector as a world leader in sustainable development through financial services.
Value at risk (VaR)
Value at risk, a mathematical way of measuring the level of risk of loss of an investment over a period of time.
Weighted Average Delta
Refers to the overall delta of a collection of derivatives based on the delta of each individual derivative and their respective “weight” or size in the collections as a whole.
World Economic Forum (WEF)
The World Economic Forum is a Swiss non-profit foundation, established in 1972 and based in Geneva. While the Forum does not specialise in any particular field, it engages the foremost political and business leaders to shape global, regional and industry agendas.