ESG Acronyms and What They Mean

Last updated on September 11, 2023

Forward-looking organizations are diving into environmental, social and governance (ESG) and sustainability, which can feel like ESG alphabet soup, a seemingly never-ending list of acronyms for varying ESG concepts, frameworks, rating agencies, regulations and regulatory bodies. It can be challenging to keep up, which is why we’ve developed this guide as a tool to quickly catch up.

Let’s get into it.

General sustainability definitions

Climate risk

Two types of climate risks exist, transition risks and physical risks. According to the EPA, transition risks are related to the transition to a lower-carbon economy, while physical risks are associated to the physical impacts of climate change.

Corporate Social Responsibility (CSR)

CSR is viewed as a form of self-regulation or a voluntary initiative by organizations to contribute to environmental or social goals and to be accountable to themselves, their stakeholders and broader society. Corporate Social Responsibility may also be referred to as corporate sustainability.

Diversity, Equity, and Inclusion (DEI)

DEI is a conceptual framework that promotes the fair treatment and full participation of all people within the workplace. DEI may also be referred to as JEDI, which stands for justice, equity, diversity, and inclusion.

Greenhouse Gas Emissions (GHG)

GHG emissions, including carbon dioxide, methane, and nitrous oxide, are one of the most popular ESG metrics reported on. They are easily quantifiable and strongly relate to how well an organization measures and manages its carbon footprint. GHG emissions are calculated in accordance with the GHG Protocol, which are standards for the accounting of GHG emissions.

Reporting frameworks

International Financial Reporting Standards (IFRS) Foundation

The IFRS Foundation is a not-for-profit organization that supports the development of global standards to providing information to support investment decisions. In 2021, the IFRS Foundation established the International Sustainability Standards Board (ISSB) which provides a global baseline of industry-agnostic and industry-specific sustainability disclosures, known as the IFRS Sustainability Disclosure Standards. The standards build on the previous work of the Climate Disclosure Standards Board (CDSB), the Task Force for Climate-related Financial Disclosures (TCFD), the Value Reporting Foundation’s Integrated Reporting Framework, industry-based SASB Standards and the World Economic Forum’s Stakeholder Capitalism Metrics.

Sustainability Accounting Standards Board Standards (SASB)

The SASB is an independent, not-for-profit organization aiming to create industry-specific sustainability standards across 77 industries. The standards reflect industry-specific material topics divided into five issue categories: environment, social capital, human capital, business model and innovation, leadership, and governance. The Sustainability Accounting Standards Board (SASB) was consolidated into the International Sustainability Standards Board (ISSB) in 2022.

Global Reporting Initiative (GRI)

The GRI is a framework that operates as a modular system with interconnected standards. These standards are the first recognized global standards helping organizations better understand and communicate their sustainability impacts on the economy, environment, and people in a comparable and credible way.

Integrated Reporting Framework (IR Framework)

The International IR Framework is a principles-based framework that focuses on three principles: value creation, value preservation and the identification and retention of financial, manufactured, intellectual, human, social and natural capital. As of August 2022, the IFRS Foundation assumed responsibility for the IR Framework.

Science Based Target initiative (SBTi)

The SBTi initiative was created to promote climate action within the private sector by assisting organizations in setting a science-based emissions reduction target in line with the Paris Agreement.

Taskforce on Climate-related Financial Disclosures (TCFD)

The TCFD is a framework that provides specific recommendations detailing how climate-related issues can impact an organization’s financial performance. The framework covers four areas: governance, strategy, risk management and metrics. Beginning in 2024, the TCFD will be consolidated into the International Sustainability Standards Board (ISSB).

Taskforce on Nature-related Financial Disclosures (TNFD)

The TNFD is a framework that builds on the TCFD but instead focuses on how nature related risk and opportunities are understood and communicated effectively. TNFD uses the same four topics as TCFD (governance, strategy, risk management and metrics) to assess the impact environmental reporting has on a company's financial position.

Climate Disclosure Standards Board (CDSB)

The CDSB framework was designed to help organizations prepare and present environmental and social information in mainstream reports for the benefit of investors. In January 2022, the CDSB was consolidated into the IFRS Foundation to support the work of the newly established International Sustainability Standards Board (ISSB). As a result, no further work or guidance will be produced or published by CDSB.

United Nations Sustainable Development Goals (UNSDGs)

The UNSDGs are 17 goals aimed at calling to action businesses and individuals in power to end poverty, protect the planet and create peace and prosperity by 2030. The goals have individual targets which can be utilized as a framework to measure and communicate progress.

International Organization for Standardization (ISO)

The ISO is an independent, non-governmental international organization with a membership of 168 national standards bodies. The ISO assists in facilitating world trade by providing common standards among different countries.

European Sustainability Reporting Standards (ESRS)

The ESRS is a set of standards and rules that companies subject to the Corporate Sustainability Reporting Directive must disclose according to.

Primary rating agencies

Dow Jones Sustainability Index (DJSI)

The DJSI ranks public companies based on industry-specific criteria referred to as the Corporate Sustainability Assessment (CSA), which weigh equally on economic, environmental, and social dimensions. Many investors seek socially conscious investments, making the DJSI a popular benchmark for private wealth managers.

Morgan Stanley Capital International (MSCI)

MSCI is an investment research firm that provides ESG ratings and climate search tools based on public data to allow relevant ESG information to be available to the public. MSCI is focused on institutional investors and the company’s focus is agnostic.

Institutional Shareholder Services (ISS)

ISS provides web-based access to ESG ratings on corporations and investment funds. The ratings are applied across a twelve-point grading system from A+ (excellent performance) to D- (poor performance). ISS publishes information for all general stakeholders and focuses primarily on public company data.

Carbon Disclosure Project (CDP)

The CDP is a self-reported survey that measures corporate and city action on climate change and forest/water security. The company or city is given a letter grade for how detailed and comprehensive their response, awareness, management, and progress to act on sustainability efforts are. CDP's metrics separate companies based on their understanding and application of climate-related changes represented by a letter score.

Regulations

Corporate Sustainability Reporting Directive (CSRD)

Currently in effect, the CSRD is a European Union (EU) regulation that requires companies to report on the impact of corporate activities on the environment and society and requires the audit (assurance) of reported information. Companies based in the U.S. with operations or activity in the EU will be required to adhere to the CSRD beginning in 2025. Subsequently, ESRS were developed to outline the information and metrics companies need to report to comply with CSRD.

Sustainable Finance Disclosure Regulation (SFDR)

Currently in effect, the SFDR is a European Union regulation that sets out environmental, social and governance disclosure requirements for financial market participants active within the European Union. The SFDR applies to all portfolio and fund managers, financial advisors and pension providers participating in European Union financial markets in any capacity.

Federal Acquisition Regulation section 5(b)(i) (FAR)

DoD, GSA, and NASA issued a proposed rule on November 14, 2022, to amend the FAR to require certain federal contractors disclose their GHG emissions and climate-related financial risk and set science-based targets to reduce their GHG emissions.

Climate-related Financial Disclosure (CFD)

The CFD regulations are part of the United Kingdom’s efforts to make climate-related financial disclosure mandatory across the economy by 2025. The regulation applies to UK-registered companies and financial institutions.

Corporate Sustainability Due Diligence Directive (CSDDD)

The European Commission proposed CSDDD directive that, if passed, would require EU companies and potentially non-EU companies to establish due diligence procedures to address adverse impacts of their actions within companies and across the supply chain on human rights and the environment.

Regulatory bodies

International Sustainability Standards Board (ISSB)

The ISSB is an organization that develops standards for the International Financial Reporting Standards (IFRS) Foundation. The standards, known as the IFRS Sustainability Disclosure Standards provide a framework for sustainability disclosures, mandates, and jurisdiction-specific requirements to provide ESG information to all stakeholder groups. ISSB has a global company scope and focuses on global standards.

Value Reporting Foundation (VRF)

The VRF was a nonprofit organization that was created through the consolidation of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council IIRC in 2021. The Value Reporting Foundation (VRF) was further consolidated into the International Sustainability Standards Board (ISSB) in 2022. The Sustainability Disclosure Standards, which were created by the ISSB, include VRF guidance and resources. Although consolidated, the International IR framework and Sustainability Accounting Standards Board (SASB) standards will remain as complementary tools.

International Integrated Reporting Council (IIRC)

The IIRC was a global coalition of regulators, investors, companies, standard setters, the accounting profession, academia, and NGOs. The IIRC developed the international IR framework to address the topics of value creation, preservation within corporate reporting and to provide a foundation for the future. The International Integrated Reporting Council (IIRC) was consolidated into the Value Reporting Foundation (VRF), which was further consolidated into the International Sustainability Standards Board (ISSB) in 2022.

U.S. Securities and Exchange Commission (SEC)

The SEC is a federal agency that has proposed a rule that publicly traded companies be required to disclose GHG emissions, climate-related risks, impacts and risk management processes within registration statements and annually (10-K). While the rule only directly applies to public companies, it also impacts many private companies that are in larger public company supply chains.

The European Financial Reporting Advisory Group (EFRAG)

The EFRAG, a private organization established in 2001 to ensure European views were incorporated into financial and sustainability reporting, EFRAG served as technical advisor to European Commission under CSRD in drafting the ESRS standards providing the information and metrics for reporting to comply with CSRD.

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