Glossary of key terms

1.2 Glossary of key terms

Term

Net zero for financial services

Just transition

ESG

Sustainable finance

Transition finance

UN SDGs

Definition

“Align all financing with pathways that align global warming to 1.5° with no or limited overshoot, and neutralises all residual emissions through the financing of activities that permanently remove an equivalent amount of atmospheric carbon dioxide2” (SBTi) Note that the above definition relates to carbon dioxide only, however we suggest all greenhouse gases should be considered in the transition to net zero

“A just transition means greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind” (International Labour Organisation)

Environmental, Social and Governance - a consistent framework and lens used by firms to evaluate company performance and risk across key criteria within each of the “E”, “S” and “G” domains

Finance targeted towards generating positive impacts for people, planet – or a combination of the two, often using the “ESG” framework and/or aligned to the UN’s Sustainable Development Goals (SDGs)

“Transition finance is intended for economic activities that are emissions-intensive, do not currently have a viable green substitute (technologically, economically or both), but are important for socio-economic development” (OECD)

UN Sustainable Development Goals – established in 2015 with a target year of 2030; these are 17 broad objectives across a range of social, economic and environmental themes; Nations report data to the UN against specific indicators, which is aggregated and reported on annually3

2 Science Based Targets initiative, Foundations for science-based net zero target setting in the Financial sector, April 2022, SBTi-FinanceNet-Zero-Foundations-paper.pdf (sciencebasedtargets.org)