Carbon credit – a permit that allows the holder to emit one tonne of carbon dioxide or the equivalent amount of another greenhouse gas. If the holder exceeds the cap, they have to buy extra credits or are fined. If the permit is not used in full, the balance can be traded at a profit. In this way, the holder is incentivised to reduce emissions. The plan is to reduce the number of carbon credits over time.
Carbon footprint – a measure of the total amount of greenhouse gasses – primarily carbon dioxide – released into the atmosphere as a result of the activities of an individual, company or other entity.
Carbon neutrality – having a net zero carbon footprint (no net release of carbon dioxide or other greenhouse gases into the atmosphere) through carbon offsetting or eliminating carbon emissions altogether.
Carbon offsetting – removing or offsetting an amount of carbon omitted by a certain activity. This can be through the purchase of carbon credits or through other actions such as planting trees.
Carbon pricing – the cost applied to carbon pollution in order to encourage polluters to lower the amount of greenhouse gases they emit into the atmosphere. This cost may be levied in the form of a carbon tax or through the requirement to purchase a permit through the ‘cap-and trade’ system (see carbon credit above).
Child labour policy – funds or investments that have policies in place to ensure they do not invest in companies that employ children.
Clean energy – energy that is from a non-polluting source, such as solar, wind and wave power.
Clean energy/renewables policy – funds that invest in companies in the clean energy and renewable energy sectors. Fund strategies vary and, in particular, the proportion of investment in these areas may vary significantly.
Climate Action 100+ – an initiative taken by the investment industry to ensure the world’s largest corporate greenhouse gas emitters take the necessary action on climate change. Signatories engage with companies to curb emissions, improve governance and strengthen climate-related financial disclosures.
Climate change – a term commonly used to describe significant changes in the measures of climate, such as temperature, rainfall, or wind, that last for an extended period of time.
Climate risks – risks linked to climate change that have the potential to affect companies, industries and wider economies. As well as physical risks, these include potential regulatory action, litigation and competitive and reputational risks that can be associated with climate change.
Coal, oil and/or gas majors policy – funds or investments that avoid investing in major coal, oil and/or gas (extraction) companies. Funds vary – some may exclude all companies that extract oil. Others may have exposure to oil extraction via more diversified energy companies.
Corporate engagement – using shareholder power to influence corporate behaviour through direct engagement with a company.
Corporate governance – the rules, practices, and processes used to direct and manage a company. The main force influencing corporate governance is a company’s board of directors, although the board can be influenced by, for example, shareholders, creditors, customers and suppliers.