The glossary contains the main and most frequently used terms in the PRI Reporting Framework and how the PRI defines them for reporting purposes. These definitions are key for preparing to report, as well as to understand the information reported by others. These defined terms are highlighted and linked to the Glossary in the offline version of the Reporting Framework.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ISSUES
|ESG factors||Environmental, social and governance issues that are identified or assessed in responsible investment processes.
• Environmental factors are issues relating to the quality and functioning of the natural environment and natural systems.
• Social factors are issues relating to the rights, well-being and interests of people and communities.
• Governance factors are issues relating to the governance of companies and other investee entities.
|Environmental factors||Issues relating to the quality and functioning of the natural environment and natural systems, identified or assessed in responsible investment processes.|
|Social factors||Issues relating to the rights, well-being and interests of people and communities, identified or assessed in responsible investment processes.|
|Governance factors||Issues relating to the governance of companies and other investee entities, identified or assessed in responsible investment processes.|
|Material ESG factors||Material ESG factors or issues have a substantial impact on the current and future financial, economic, reputational, and legal prospects of an issuer, security, investment, or asset class. At a corporate or issuer level, the disclosure of a material ESG issue or factor would be reasonably expected by investors, as its omission would result in an incomplete understanding of current or future financial prospects.|
|ESG materiality analysis||For an investor, this is the process of the identification, assessment, and incorporation of material environmental, social, governance, and emerging issues into the process of investment research, portfolio construction, or asset selection.|
|ESG incidents||Specific environmental, social or governance events that have a substantial negative impact on a security, issuer or investment and its key stakeholders including investors, employees, communities and the environment.|
|ESG risks||For an investor, an environmental, social, or governance risk is a factor or issue that may expose a security, issuer, investment, or asset class to unexpected changes in its current and future financial, economic, reputational, and legal prospects. At a corporate or issuer level, the disclosure of an ESG risk would be reasonably expected by investors, as its omission would result in an incomplete understanding of current or future financial prospects.|
|Long-term ESG trends||Environmental, social or governance issues or conditions that play out over time.|
|ESG index/ESG benchmark||Index or benchmark that includes ESG considerations in the selection or weighting of its securities.|
|ESG/RI certification or label||A certification or label awarded for a fixed period of time for a fund/product by an independent ESG/sustainability initiative or labelling scheme, upon auditing that the fund/product meets the initiatives’ or scheme’s predefined criteria.|
|ESG/sustainability marketed funds or products||Financial products that (i) have not received an RI certification or label but that (ii) are marketed or in other ways make claims that ESG or sustainability has been incorporated into product design and management and/or the investment process. These products could be segregated or pooled products for either the retail or institutional market.|
ESG INCORPORATION STRATEGIES
|ESG incorporation||ESG incorporationThe assessment, review and consideration of ESG factors in existing investment practices through a combination of three approaches: integration, screening, and thematic investing. ESG incorporation generally functions alongside—or in combination with—stewardship or active ownership.|
|ESG integration||The process of including ESG factors in investment analysis and decisions to better manage risks and improve returns. It is often used in combination with screening and thematic investing.|
|Screening||The application of filters to lists of potential securities, issuers, investments or sectors to rule investments in or out based on an investor’s preferences, such as ethics and values, and/or investment metrics, such as risk assessments. Screening covers screening conducted under a manager’s policy and client-directed screening.|
|Thematic investing||The identification and allocation of capital to themes or assets related to certain environmental or social outcomes, such as clean energy, energy efficiency, or sustainable agriculture.|
|Positive/best-in-class screening||Investing in sectors, companies or projects selected for their positive ESG performance relative to industry peers.|
negative exclusionary screens
|Excluding certain sectors, companies or projects for their poor ESG performance relative to industry peers or based on specific ESG criteria (e.g. avoiding particular products, services or business practices).|
|Norms-based screening||Screening investments against minimum standards of business practice based on international norms. Widely recognised frameworks for minimum standards of business practice include UN treaties, Security Council sanctions, UN Global Compact, Universal Declaration of Human Rights and OECD guidelines.|
|Stewardship||The use of influence by institutional investors to maximise overall long-term value, including the value of common economic, social and environmental assets, on which returns and client and beneficiary interests depend.|
|Stewardship tools||Stewardship is implemented through investors’ individual and collaborative use of tools, including—but not limited to—engagement with issuers (in all asset classes and for both current and potential investees); voting at shareholder meetings; filing of shareholder resolutions/proposals; direct roles on investee boards and board committees; negotiation with and monitoring of the stewardship actions of suppliers in the investment chain; engagement with policymakers; engagement with standard setters; contributions to public goods (such as research) and public discourse (such as media) that support stewardship goals; and, where necessary, litigation.|
|Engagement||Interactions between an investor (or an engagement service provider) and current or potential investees (e.g. companies), conducted with the purpose of improving practice on an ESG issue, changing a sustainability outcome, or improving public disclosure. Engagements can also be carried out with non-issuer stakeholders, such as policymakers or standard setters.
Interactions that are not seeking change or an improvement in public disclosure are not considered engagement. This includes:
· Interactions with companies for data collection and/or for research purposes related to buy/ sell/ hold decisions;
· Standard questionnaires sent to companies for the purposes of information gathering and investment decision-making;
· Attendance at company presentations, AGMs or other company meetings without interactions or discussion, or where interactions are not seeking change or improved disclosure; and
· Bulk disclosure requests for ESG information, typically conducted via a third party.
|Engagement targets||The entities that are the focus of investor engagement effort.|
|Service provider engagements||Service provider engagements include engagements conducted via the following parties:
(1) commercial parties that provide stand-alone engagement services without managing their clients’ underlying assets under an explicit mandate and for an explicit fee that goes beyond a simple membership fee;
(2) investor organisations that conduct engagements on their members’ behalf under an explicit mandate and for an explicit fee that goes beyond a simple membership fee.
This may include engagements conducted entirely on an outsourced basis as well as those facilitated by the service provider but in which the investor’s staff undertake some of the engagement activity.
|Collaborative engagement/ collaborative initiative||An engagement that an investor conducts jointly with other investors. This might include:
(1) groups of investors working together without the involvement of a formal investor network or other membership organisation; or
(2) groups of investors working together with the support of a formal investor network or other membership organisation, including the PRI.
|Public policy||A course or principle of action adopted or proposed by government agencies and bodies. It encompasses the system of laws, regulatory measures, administrative mechanisms, courses of action and funding priorities concerning a given topic that a governmental entity or its representatives implement.|
|Systemic (sustainability) issues||Those issues that have effects across multiple companies, sectors, markets and/or economies. Impacts caused by one market participant can lead to consequences across the system, including the common economic, environmental and social assets on which returns, and beneficiary interests depend.
Universal owners and long-term investors in general are highly exposed to systemic sustainability issues and have limited ability to diversify away from them. However, they can (and should) influence such issues through responsible investment activities.
|(Proxy) voting||The exercise of voting rights on management and/or shareholder resolutions to formally express approval (or disapproval) on relevant matters. In practice, this includes taking responsibility for the way votes are cast on topics that management raises, as well as submitting resolutions as a shareholder for other shareholders to vote on (in jurisdictions where this is possible). Voting can be done in person, during an Annual General Meeting (AGM) or by proxy.|
|Securities lending (or share lending)||The temporary transfer of shares by a lender to a borrower, with agreement by the borrower to return equivalent shares to the lender at an agreed-upon time and pay lending fees. This process usually involves an intermediary organisation.|
Sustainability outcomes can be identified and assessed in terms of sustainability performance at the global level and the level of a particular asset, economic activity, company, sector, country, or region in the context of relevant thresholds.
Sources of further information: Investing with SDG outcomes: a five-part framework and Driving meaningful data: financial materiality, sustainability performance and sustainability outcomes.
|Shaping (sustainability) outcomes||All investor actions – investment decisions and the use of tools of influence – shape positive and negative outcomes in the world. Investors can play different roles in shaping sustainability outcomes, which include:
• Causing outcomes, through their own business activities (e.g. outcomes for their own employees);
• Contributing to outcomes, through a business relationship or investment activity (actions or omissions) that induces or facilitates an outcome from an investee company or project;
• Being directly linked to outcomes, through the activities, products or services of an investee company or project.
|Global (sustainability) goals||These include the SDG targets and indicators, thresholds set by the UNFCCC Paris Agreement, expectations set out in the Universal Declaration of Human Rights, and other environmental, social, governance, and development objectives established by political or socio-economic institutions.|
|Climate-related risks||Potential negative impacts of climate change on an organisation. Physical risks emanating from climate change can be event-driven (acute), such as increased severity of extreme weather events (e.g. cyclones, droughts, floods and fires). They can also relate to longer-term (chronic) shifts in precipitation and temperature and increased variability in weather patterns; or other long-term changes such as sea level rise. Climate-related risks can also be associated with the transition to a lower-carbon global economy, the most common of which relate to policy and legal actions, technology changes, market responses, and reputational considerations. This is in line with the TCFD’s definition.|
|Climate-related opportunities||Business or financial opportunities resulting from efforts to address climate change. Efforts to mitigate and adapt to climate change can produce opportunities for organisations, such as through resource efficiency and cost saving, the adoption and utilisation of low-emission energy sources, the development of new products and services and building resilience along the supply chain. Climate-related opportunities will vary depending on the region, market and industry in which an organisation operates. This is in line with the TCFD’s definition.|
|Physical (climate) risks||Physical risks emanating from climate change can be event-driven (acute) such as increased severity of extreme weather events (e.g., cyclones, droughts, floods, and fires). They can also relate to longer-term shifts (chronic) in precipitation and temperature and increased variability in weather patterns or other long-term changes such as sea level rise. This is in line with the TCFD’s definition.
These risks may often be more easily identifiable in alternative assets, such as infrastructure and property.
|Direct physical climate risk||Risk of damage or impairment to assets as a result of extreme weather events and sea-level rise.|
|Indirect physical climate risk||Risk of damage or impairment to assets as a result of second- or third-order impacts of climate change, such as disruption to trade as a result of an extreme weather event or impact on food prices as a result of prolonged drought.|
|Transition risks||Risks associated with the transition to a lower-carbon global economy, the most common of which relate to policy and legal actions, technology changes, market responses, and reputational considerations. This is in line with the TCFD’s definition.|
|Scenario analysis||A process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty. Scenarios are hypothetical constructs and not designed to deliver precise outcomes or forecasts. Instead, scenarios provide a way for organisations to consider how the future might look if certain trends continue or certain conditions are met.
For example, in the case of climate change, scenarios allow an organisation to explore and develop an understanding of how various combinations of climate-related risks, both transition and physical risks, may affect its businesses, strategies and financial performance over time. Scenario analysis can be qualitative, relying on descriptive, written narratives, or quantitative, relying on numerical data and models, or some combination of both.
|Carbon intensity||Volume of carbon emissions per million dollars of revenue (carbon efficiency of a portfolio), expressed in tons CO2e (carbon dioxide equivalent) / $M revenue. This is in line with the TCFD’s definition.|
|Weighted average carbon intensity||A portfolio’s exposure to carbon-intensive companies expressed in tonnes CO2e (carbon dioxide equivalent) / $M revenue. This is in line with the TCFD’s definition.|
|Total carbon emissions||The absolute greenhouse gas emissions associated with a portfolio, expressed in tons CO2e (carbon dioxide equivalent). This is in line with the TCFD’s definition.|
|(Portfolio) carbon footprint||Total carbon emissions for a portfolio normalised by the market value of the portfolio expressed in tonnes CO2e (carbon dioxide equivalent) / $M invested. This is in line with the TCFD’s definition.|
|Stranded assets||Assets which have premature or unanticipated write-downs, dilutions or conversion into liabilities.|
|Confidence-building measures||Different practices ranging from basic internal control mechanisms to internal audit and third-party assurance. Such measures aim to increase the confidence of both the organisation itself and external stakeholders in the rigour and robustness of the process to collect the information presented in external ESG reports (e.g. PRI transparency reports).|
|Internal audit||An independent, objective assurance and consulting activity performed by the organisation’s internal-audit function, designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control and governance processes.|
|Third-party assurance||Engagement conducted by someone who is independent of the organisation, applying predefined criteria to evaluate certain data and/or processes against an appropriate standard. This engagement should result in a written conclusion, stating the level of confidence that the intended audience can have in the data or process.|
|ESG audit||The testing and verification of ESG claims for an organisation’s fund, product or policy, by someone independent of that organisation.|
|Responsible investment policy||A document that captures an organisation’s strategy to incorporate environmental, social and governance (ESG) factors in investment decisions and active ownership. An organisation’s responsible investment policy can take many shapes. It may involve embedding responsible investment considerations into the organisation’s main investment policy. It could also consist of a standalone responsible investment policy. Alternatively, it could be captured in high-level public statements or codes of business practice to which the organisation adheres.|
|Investment decision-making process||Research, analysis and other steps that lead to a decision to make, maintain, or modify an investment (e.g. to buy, sell or hold a security) or commit capital to an unlisted fund or other asset.|
|Due diligence||A systematic process to collect and interpret information about a prospective investment; includes both technical and financial due diligence.|
|Risk management||The processes the organisation uses to identify, assess and manage risks.|
|External service provider||Commercial parties that provide standalone services, without managing their clients’ underlying assets. This includes investor organisations that conduct services on their members’ behalf and have an explicit mandate from their members to represent them.|
|Strategic asset allocation||Strategic asset allocation is a portfolio strategy whereby the investor sets target allocations for various asset classes and rebalances the portfolio periodically. The target allocations are based on factors such as the investor’s risk tolerance, time horizon and investment objectives.|
|Investment committee||A decision-making body that oversees and advises management on an organisation’s investment assets. This committee usually has the primary responsibility for investment strategies, objectives, processes, and investment decisions. The committee often works with investment consultants or advisors and its responsibilities differ depending on local regulations.|
|Thematic bonds||Debt securities issued by both public and private entities on the condition that the funds obtained are used to finance specific projects with positive social and/or environmental performance.
Labelled thematic bonds are issued according to industry standards, such as those set by the Climate Bonds Initiative, the International Capital Markets Association or the EU Taxonomy. Non-labelled thematic bonds do not follow these standards.
|Green bond||Bond instrument whose proceeds will be applied exclusively to finance or refinance (in part or in full) new and/or existing projects which contribute to environmental objectives; within four core components (use of proceeds, process for project evaluation and selection, management of proceeds, and reporting). Environmental objectives include, for instance, climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation and pollution prevention and control. This is in line with ICMA’s definition.|
|Social bond||Bonds instrument whose proceeds will be applied exclusively to finance or re-finance (in part or in full) new and/or existing projects which directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially but not exclusively for a target population(s); within four core components (use of proceeds, process for project evaluation and selection, management of proceeds, and reporting). This is in line with ICMA’s definition.|
|Sustainability bond||Bonds whose proceeds will be applied exclusively to finance or re-finance (in part or in full) new and/or existing projects which contribute to a combination of environmental objectives and positive social outcomes; within four core components (use of proceeds, process for project evaluation and selection, management of proceeds, and reporting). This is in line with ICMA’s definition.|
|Commodities||A physical good attributable to a natural resource that is tradable and supplied without substantial differentiation by the general public, traded in physical (spot) markers and in futures and forward markets. These include direct investments in physical assets, long exposure to commodities through commodity futures contracts and commodity exchange-traded funds (ETFs).|
ASSET CLASS BREAKDOWN
|Listed equity||Equity that is traded on a stock exchange. It includes all listed equity in all jurisdictions.|
|Passive listed equity||Listed equity investments that mirror the performance of an index and follow a predetermined buy-and-hold strategy that does not involve active forecasting. Examples include investments in broad capital-market indices, ESG-weighted indices, themed indices, passively managed ETFs or indices with ESG-based exclusions.|
|Active - Quantitative equity||Listed equity investment strategies or funds where the manager builds computer-based models to determine whether an investment is attractive. In a pure ‘quant model’, the model makes the final decision to buy or sell.|
|Active - Fundamental equity||Listed equity investment strategies where the investment decision is based on human judgement. This includes both bottom-up (e.g. stock-picking) and top-down (e.g. sector-based) strategies.|
|Investment trusts (REITs and similar publicly quoted vehicles)||For the purposes of PRI’s reporting framework, Investment trusts and Real estate investment trusts (REITs) are categorised as listed equities. Where the signatory acts as the sole manager of a specific Investment trust or REIT, this should be reported as “Investment trusts (REITs and similar publicly quoted vehicles)” in the PRI reporting framework.|
|Fixed income||Any form of debt financing by investors (whether through loans, the purchase of bonds or any other debt instrument such as commercial paper or convertible bonds and notes) to borrowers that can be sovereign, sub-sovereign, supranational or corporate entities (in the latter case, also their subsidiaries or special-purpose vehicles).|
|Fixed income passive||Fixed income investments that mirror the performance of an index and follow a predetermined buy-and-hold strategy that does not involve active forecasting. Examples include investments in broad capital-market indices, ESG-weighted indices, themed indices, passively managed ETFs or indices with ESG-based exclusions.|
|SSA||SSA (i.e. supranational, sovereign, government agencies and subnational) refers to:
(i) debt securities issued by supranational organisations (e.g. bonds issued by multilateral development banks or international unions);
(ii) debt securities issued by sovereigns (e.g. government bonds in any denomination);
(iii) debt securities issued by government agencies (e.g. government sponsored agency bonds, quasi-government agencies); and
(iv) debt securities issued by municipalities, sub nationals, local governments (e.g. muni bonds).
|Corporate||Debt securities issued by public or private financial and non-financial companies, including banks and insurers. This includes senior or subordinated publicly listed debt, project finance and infrastructure; it excludes assets in a lending portfolio, such as deposits and loans, where an organisation runs a banking division.|
|Securitised||Debt securities backed by asset pools and issued by special-purpose vehicles. Includes asset-backed securities, mortgage-backed securities, collateralised debt or loan obligations and covered bonds.|
|Private debt||Debt investments not financed by banks and not issued or traded in an open market. The word ‘private’ refers to the investment instrument itself and not necessarily the borrower (i.e. public companies can borrow via private debt just as private companies can). Private debt falls into a broader category termed ‘alternative debt’ or ‘alternative credit’ and is used interchangeably with ‘direct lending’, ‘private lending’ and ‘private credit’.|
|Private equity||Equity stakes in privately held companies.|
|Venture capital||Investments provided in equity form to start-up or emerging companies. This category includes seed and early-stage capital.|
|Growth capital||Investments with a minority or majority stake in relatively mature companies at a critical stage in their development (e.g. to expand or restructure operations).|
|(Leveraged) buy-out||Equity investments as part of transactions in which companies are acquired from the current shareholders with the use of financial leverage. Leveraged buyouts involve a financial sponsor agreeing to an acquisition without itself committing all the capital required for the acquisition. Therefore, the financial sponsor will also raise debt to fund the acquisition. The companies involved in these transactions are typically mature.|
|Distressed, turnaround or special situations||Investments in equity form in financially stressed companies, through rescue financing.|
|Secondaries||The acquisition of direct positions in operating companies from existing private equity investors, typically through portfolios.|
|Real estate||An asset class that includes direct or indirect exposure to real property. This includes investments in non-listed real estate funds and investments in real estate companies that invest in real property.|
|Infrastructure||An asset class that includes direct or indirect exposure to physical or real assets. This includes real assets such as electricity distribution systems, road and rail transportation, telecommunication systems, pipelines, and a wide variety of similar assets. This is in line with GRESB’s definition.|
|Hedge funds||Alternative investments that employ a range of investment strategies to deliver returns and manage risk. Typically offered through pooled private investment vehicles that offer limited liquidity compared to mutual funds and other investment vehicles. Hedge funds are generally only accessible to professional investors and face fewer regulatory constraints than some traditional investments.|
|Hedge fund strategy||Hedge funds can follow a wide range of investment strategies, trading different asset classes, types and financial instruments, including derivatives, for various durations. Hedge funds can seek to profit from price increases (by taking long positions) and from price declines (by taking short positions).|
|Multi-strategy||Hedge fund strategies that utilise multiple investment strategies to construct client portfolios. Often, a central decision-making team or function will determine the portfolio’s exposure to the various strategies, sectors or geographies at any given time, aiming to reduce risk and volatility while taking advantage of market opportunities.|
|Long / short equity (strategy)||Hedge fund strategies that utilise long and short equity and/or equity derivative positions. Considerations for portfolio construction can include exposure (by sector or geography), leverage, holding periods, concentrations and valuation. Strategies can take various approaches, including focusing on growth or value stocks.|
|Long / short credit (strategy)||Hedge fund strategies that utilise long and short credit and/or credit derivative positions. Considerations for portfolio construction can include exposure (by sector or geography), credit rating, maturity, leverage, holding periods, concentrations and valuation.|
|Distressed, special situations and event-driven fundamental (strategy)||Hedge fund strategies that utilise holdings in assets, securities or other financial instruments whose returns may be influenced by specific events, such as corporate restructuring, financial distress, M&A, debt or equity issuance. Strategies may trade across the capital structure.|
|Structured credit||Hedge fund strategies that focus on structured credit utilise various securities and financial instruments that have exposure to an underlying stream of cash flows, such as commercial and residential mortgage loans, credit card loans or other types of debt obligations, which have been packaged together. Structured credit instruments are also referred to as Securitisations or Asset-Backed Securities (ABS).|
|Global macro||Hedge fund strategies that utilise investments in assets, securities or other financial instruments to construct portfolios based on analysis of macroeconomics. Examples might include currency fluctuations, interest rate changes and economic growth.|
|Commodity trading advisor||An organisation or individual that provides advice on the buying and selling of futures contracts, options on futures or certain foreign-exchange contracts, often relating to commodities.|
|Forestry||All forms of forestry-related investments, including direct investments, forestry funds and managed investment schemes.|
|Farmland||All forms of farmland and agriculture-related investments, including direct investments, farmland funds and managed investment schemes.|
|Off-balance sheet||Accounting term for assets or liabilities that do not appear on a corporation’s balance sheet. This includes assets such as money markets, derivatives, cash and/or cash equivalents or overlays.|
|Money market||Fixed income securities, generally with maturities of one year or less. Examples include Banker’s Acceptance, Treasury Bills, Repurchase Agreements, Certificate of Deposits and Commercial Paper.|
|Derivatives||Securities whose price depends upon or is derived from the fluctuations of one or more underlying assets (e.g. stocks, bonds, commodities, currencies, interest rates or market indices). The derivative itself is a contract between two or more parties, based upon the underlying asset(s).
Derivatives are classified in two broad categories, namely, customised contracts (traded over-the-counter, such as forwards) or standardised contracts (traded on an exchange, such as warrants and futures).
|Cash, cash equivalents or overlays||An accounting term that refers to items on the balance sheet that report the value of a company’s assets that are cash or immediately convertible into cash. These include items such as bank accounts and short-term government bonds.|
|Internally managed assets||Assets for which investment decisions (buy-sell-hold-weight) are made within the organisation itself, including consolidated and wholly owned subsidiaries. Investment managers who primarily perform investment research internally and provide lists of eligible (or ineligible) securities to sub-advisor(s) should list their assets as ‘internally managed’.|
|Externally managed assets||Assets for which investment decisions (buy-sell-hold-weight) are made on an organisation’s behalf by a third party (such as an external investment manager). Funds of funds or managers of managers should report their assets as ‘externally managed’ if a third party makes the investment decisions for the underlying assets.|
EXTERNALLY MANAGED ASSETS
|External (investment) manager||An organisation that manages or controls investment funds, either on its own account or on behalf of others, and does not own more than half of such investment funds. Also sometimes known as an asset manager.|
|Investment consultant||An agent that provides advisory and consultancy services, including—but not limited to—custodial services, investment policy development, strategic asset allocation, investment research, and investment manager selection, appointment and/or monitoring. Services provided do not include active investment management and fiduciary management.|
|Selection (external investment manager)||All actions that lead up to choosing an external investment manager (e.g. shortlisting, questionnaires, meetings).|
|Appointment (external investment manager)||The formalisation of the relationship between an investor and the external investment manager, by setting the investment mandate, including specific goals and objectives, via contractual agreements, side letters or other legal documentation.|
|Monitoring (external investment manager)||The regular review and assessment of the quality of the activities of the external investment manager during the investment period.|
|Segregated mandate(s)||Externally managed investment portfolios run exclusively on the investor’s behalf and in accordance with the investment mandate set by the investor. This mandate may include requirements for the consideration of ESG factors in the investment process or guidelines on engagement or voting.|
|Pooled fund(s) or pooled investment(s)||Externally managed investment portfolios that aggregate assets from individual investors for the purposes of investment. In general, investors in these funds tend to have less influence over the investment criteria for these funds than for segregated mandates.|
|Standing investments (RE)||Real estate properties where construction work has been completed and which are owned for the purpose of leasing and producing rental income. The level of occupancy is not relevant for this definition. Also known as operating buildings. This is in line with GRESB’s definition.|
|Major renovations (and development projects) (RE)||Alterations that affect more than 50 per cent of the total building floor area or cause relocation of more than 50 per cent of regular building occupants. Major renovation projects refer to buildings that were under construction at any time during the reporting year. This is in line with GRESB’s definition.|
|New construction (RE)||Includes all activities to obtain or change building or land use permissions and financing. Includes construction work for the project with the intention of enhancing the property’s value. Development of new buildings and additions to existing buildings that affect usable space can be treated as new construction. New construction projects refer to buildings that were under construction at any time during the reporting year. This is in line with GRESB’s definition.|
|External property managers (third-party property managers)||Organisations that manage all types of property assets (e.g. retail, commercial and residential) for other organisations. They provide advice and support in a range of areas (e.g. facilities management, accounting, compliance, maintenance and utilisation).|
|Selection (external property manager)||All actions that lead up to choosing an external property manager (e.g. shortlisting, questionnaires, meetings).|
|Appointment (external property manager)||The formalisation of the relationship between an investor and the external property manager through agreements, side letters or other documentation establishing specific goals and objectives.|
|Monitoring (external property managers)||Performance evaluation and incentives put in place for external property managers to employ sustainable processes in their day-to-day work. This is in line with GRESB’s definition.|
|Standing investments (INF)||Assets where construction work has been completed and which are owned for the purpose of providing a service in exchange for an income. Also known as an operating asset. This is in line with GRESB’s definition.|
|Operating assets||Assets where construction work has been completed and which are owned for the purpose of providing a service in exchange for an income. Also known as standing investments. This is in line with GRESB’s definition.|
|Major renovations (INF)||Alterations that affect more than 50 per cent of the total asset or cause relocation of more than 50 per cent of regular building occupants. Major renovation projects refer to assets that were under construction at any time during the reporting year. This is in line with GRESB’s definition.|
|New construction (INF)||Includes all activities to obtain or change building or land use permissions and financing. Includes construction work for the project with the intention of enhancing the asset’s value. Development of new facilities and additions to existing facilities can be treated as new construction. New construction projects refer to facilities that were under construction at any time during the reporting year. This is in line with GRESB’s definition.|
|Third-party operators||Organisations that manage or maintain all types of infrastructure assets (e.g. highways, airports) for other organisations.|
|Selection (third-party operator)||All actions that lead up to choosing a third-party operator (e.g. shortlisting, questionnaires, meetings).|
|Appointment (third-party operator)||The formalisation of the relationship between an investor and the third-party operator through agreements, side letters or other documentation establishing specific goals and objectives.|
|Monitoring (third-party operator)||Performance evaluation and incentives put in place for the third-party operator to employ sustainable processes in its day-to-day work.|
|General partner / manager (GP)||An investment firm that raises private equity funds, with the responsibility to select and manage investments.|
|Limited partners/clients (LP)||Organisations that act as investors in a fund and do not take part in its active management. Limited partners/clients include institutional investors, sovereign and endowment funds, family offices and high-net-worth individuals.|
|Limited Partnership Agreement||Legal documentation that outlines the fundamental terms governing the operations of a fund, including the rights and responsibilities of the parties.|
|Side letter||An agreement entered into by the general partner (GP) and a specific limited partner (LP), clarifying and/or supplementing the terms of the fund documentation when applied to that LP.|
|IFC Performance Standards||An international benchmark for identifying and managing environmental and social risk, adopted by many organisations as a key component of their environmental and social risk management.|
|Environmental and social management systems||A management system consisting of procedures, management commitment, delineation of roles and responsibilities and guidance followed, to review and manage environmental and social issues and risks.|
|ESG action plan||A detailed plan outlining actions needed to manage ESG-related risks and opportunities. An action plan has four major elements:
(1) Specific tasks: what will be done and by whom;
(2) Time horizon: when will it be done;
(3) Resource allocation: what specific funds are available for specific activities;
(4) Measurable outcomes.
This is in line with GRESB’s definition.
|Green buildings||Buildings designed, constructed, operated, maintained, renovated and destroyed using environmentally-friendly and resource-efficient processes.|
|Energy efficiency/clean technology (energy technologies)||Products, services, infrastructure or technologies that proactively address the growing global demand for energy while minimising effects on the environment. This includes technologies and systems that promote efficiency of industrial operations and industrial automation and controls and optimisation systems; infrastructure, technologies and systems that increase the efficiency of power management, power distribution, power storage and demand-side management; and technologies and products that focus on using renewable energy sources to transport vehicles (including cars and buses).|
|Green leases||A lease for a property that, within its terms or through an attached schedule, includes provisions that encourage the landlord, occupier or both to carry out their roles in a sustainable way. The details of the provisions and the means of encouraging sustainable behaviour are negotiated between the parties, but typically relate to the achievement of specific ESG targets (e.g. for energy, water use and waste management). Clauses in green leases may also include the use of sustainable materials when possible and sharing of environmental data between landlord and occupier.|
|Non-corporate pension or superannuation or retirement or provident fund or plan||An organisation that manages non-corporate retirement and/or pension plan-related assets. The organisation may have trustees or members of the board who are responsible for prudential operations, and some of the organisation’s obligations might be codified by law.|
|Corporate pension or superannuation or retirement or provident fund or plan||An organisation that manages corporate retirement and/or pension plan-related assets. The organisation may have trustees who are responsible for prudential operations, and some of the organisation’s obligations might be codified by law.|
|Insurance company||A financial institution that sells insurance or provides reinsurance services in the life and/or non-life insurance markets. Insurance companies are asset owners insofar as they have invested capital. This category does not include insurance consultants or insurance brokers. It does include those insurance companies that offer pension, superannuation or retirement products, along with more conventional insurance products.|
|Foundation||A charitable non-governmental non-profit organisation that usually derives its money from a family, an individual, or a corporation. Its principal fund is managed by its own trustees or directors. A private foundation generates income by investing its initial donation, often disbursing the bulk of its investment income each year to desired charitable activities.|
|Endowment||An investment fund often used by non-profits, universities, hospitals and churches, funded by donations that may or may not have a stated purpose in the donor’s bequest. Many non-profit organisations set up an endowment to sustain their fundraising efforts over a long period because its principal balance remains intact and the interest it generates is used for operating or fundraising purposes. The investment income from dividends is usually devoted to charitable efforts.|
|Development finance institution||A financial institution that provides equity capital, loan capital or other forms of finance to fund activities or entities expected to contribute to economic development.|
|Reserve - sovereign or government-controlled fund||Sovereign wealth funds, treasury investment funds, stabilisation funds and government reserve funds (including those designed to provide a potential buffer for future pensions but without defined member accounts). These funds meet one or more of the following criteria:
a) More than 50 per cent of the AUM are owned by the government;
b) The government has authority to appoint the board of directors and/or the CEO; and/or
c) The government has direct or indirect influence on investment decisions.
Development finance institutions are not included in this category.
|Family office||All forms of organisations and services involved in managing large private fortunes. These can be organised either as family-owned companies, in which the family wealth is pooled, or as companies or bank departments that provide financial services for these clients while the family retains decision-making powers. Where the family office operates on behalf of one single family or where 90 per cent of the assets belong to one family, they will be considered PRI asset owners. Where the wealth is managed on behalf of multiple families, they will be considered PRI investment managers.|
|Central bank||A public institution that manages the currency of a country or group of countries and controls the money supply. The main objective of a central bank is to maintain price stability by setting interest rates. A central bank is not a commercial bank and, therefore, is not motivated by profit; hence, it is considered a PRI asset owner.|
|Co-operative||A co-operative bank is a bank controlled by its members. Customers and members are represented in the bank’s governance structure and can become members/owners with relatively small investments. They tend to invest locally, focusing on SMEs and households.|
|Trade union||An organisation whose members are usually workers or employees. Trade unions seek to protect their members’ interests through collective and enterprise bargaining, mediation and members’ representation at disciplinary or grievance hearings. Trade unions can sign up with the PRI, where they have a significant reserve fund.|
|Bank||A financial institution licensed to receive deposits and make loans. Banks may also provide financial services, such as wealth management, currency exchange and safe-deposit boxes. Commercial banks with lending activities should not sign the PRI; instead they are encouraged to sign the Principles for Responsible Banking (PRB). In the case of universal banks, PRI usually recommends signing up their asset-management or wealth-management subsidiaries.|
|Fund management||An investment firm that invests directly in companies and other assets and not via third-party funds. This includes investors that perform investment research internally and provide list(s) of eligible (or ineligible) securities to sub-advisor(s).|
|Fund of funds, manager of managers, sub-advised products||A fund of funds (FOF)—also known as a multi-manager investment—is an investment vehicle that invests in other funds. Its portfolio contains different underlying portfolios of other funds. These holdings replace any direct investment in bonds, stocks and other types of securities. This also includes funds of hedge funds.
A manager of managers (MoM) approach is a type of oversight investment strategy whereby a manager chooses managers for an investment program and regularly monitors their performance.
A sub-advised fund is a fund managed by a management team or firm different from the management team or firm that holds the assets. A sub-advised fund may consist of specialty or niche investments, for which the main fund managers seek outside expertise.
|Execution and advisory||Services offered by wealth managers that exclude investment decision-making. Advisory services refer to structures in which the wealth manager provides investment recommendations and suggestions to the client, who makes the final investment decision. Execution-only services refer to structures in which the wealth manager solely carries out the investment decisions made by the client, following the client’s instructions.|
|Wealth management||Organisations offering investment services that include portfolio management and financial planning services, primarily for high-net-worth individuals.|
|Fiduciary management or other outsourced discretionary fund allocation||Organisations that are appointed by or on behalf of an investor to execute their investment strategy, policy or manager selection and some or all of the day-to-day investment decision-making and implementation.|
|Pension category: Defined benefit||A pension plan that provides a specified payment amount in retirement. Employers guarantee a specific retirement benefit amount for each participant, based on factors such as the employee’s salary and years of service. This is also commonly known as a traditional pension plan.|
|Pension category: Defined contribution||A pension plan that allows employees and employers (if they choose) to contribute and invest funds over time to save for retirement. These pension plans will be funded primarily by the employee, but many employers make matching contributions up to a certain amount. It does not guarantee a specific benefit amount; benefits depend on the contributed amounts and the performance of the investment.|
|Pension category: Hybrid||A mixed pension plan that includes elements of defined benefit and defined contribution. This can take many forms; for example, a defined benefit scheme with a defined contribution top-up.|
|Sovereign wealth fund||A state-owned investment fund comprised of assets generated by the government, often derived from a country’s surplus reserves, which provide a benefit for a country’s economy and its citizens.|
|Subsidiary||An entity partly or wholly controlled by another entity, known as the parent or holding company. The parent or holding company holds a large proportion (or all) of the voting rights in a subsidiary, allowing the parent to exert direct or indirect control over the subsidiary. If the parent or holding company holds 100% of the subsidiary’s voting rights, the subsidiary is considered a ‘wholly owned subsidiary’.|
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For the purposes of PRI’s reporting framework, Investment trusts and Real estate investment trusts (REITs) are categorised as listed equities. Where the signatory acts as the sole manager of a specific Investment trust or REIT, this should be reported as “Investment trusts (REITs and similar publicly quoted vehicles)” in the PRI reporting framework.