Climate Governance Initiative

Glossary of Climate Terms

Term Description Relevance to board directors
1.5-degree target The goal set in the Paris Agreement to limit global warming to 1.5 degrees celsius above pre-industrial levels. Ambitious corporate climate targets should be aligned with the Paris Agreement's 1.5-degree target.
9Rs of circularity A hierarchy for sustainable behaviour: Rethink, Refuse, Reduce, Reuse, Re-gift, Repair, Rent, Recycle, Rot. Provides a strategy for improving resource sustainability, thus reducing emissions.
Adaptation Activities to minimise impact of changing climate on entities and economies, by adjusting infrastructure, supply chains and key resources to become more resilient. What activities will your business need to undertake to adapt to the changing climate?
AFOLU Agriculture, Forestry and Land Use, which are a key source of emissions. AFOLU emissions may be relevant to your business' direct activity and its supply chain, and reducing emissions here can have cobenefits for nature and local communities.
Brown-spinning Selling off highly emissive parts of a business to buyers such as hedge funds, private equity firms.
Carbon credit An asset that represents a certain volume of emissions removed or avoided through offsetting projects. Companies may purchase and retire these credits to claim the emissions reductions for themselves. Your business may buy carbon credits in order to neutralise emissions that it cannot directly reduce.
Carbon market A system of trading carbon credits. Carbon markets may be voluntary or mandated by the government. Your business may be a participant in a mandatory carbon market if covered by the relevant trading system, or in the voluntary carbon market if it chooses to purchase carbon credits.
Carbon neutral Activity which results in no net increase in greenhouse gas emissions. To effectively tackle climate change, businesses should aim to become carbon neutral.
Carbon neutral targets A timeframe within which the sum of the carbon emissions produced by an organisation is offset by natural carbon sinks and/or carbon credits. As part of your organisation's climate strategy you could consider setting a carbon neutral target, which looks specifically at reducing and offsetting carbon emissions, rather than broader greenhouse gas emissions.
CDP Formerly known as the Carbon Disclosure Project, CDP is an NGO that focuses on sustainability reporting and disclosure. CDP produces many useful publications and initiatives that could help inform and guide your business through the net zero transition.
CH4 Methane, a powerful greenhouse gas that accounts for 16% of global emissions. Agriculture, waste and biomass are key sources of methane emissions Methane may be a key source of emissions for certain businesses, and given its warming potential reducing methane emissions can be particularly effective.
Climate change scenarios Hypothetical projections of future levels of greenhouse gas emissions and corresponding climate impacts. Climate change scenario analysis is vital to understanding a business' exposure to, and ability to mitigate, climate impacts.
Climate-related Opportunities Financial opportunities such as access to new markets and new technologies. Opportunities to build strategic competitive advantages.
CO2 Carbon dioxide, which makes up the majority of greenhouse gas emissions. Carbon dioxide is a byproduct of many human activities including electricity generation and fuel use. Carbon dioxide often makes up the majority of a business' greenhouse gas emissions.
CO2 equivalent A unit used to compare greenhouse gases of different warming potentials by converting the warming effect of other greenhouse gases into the corresponding volume of carbon dioxide. Your business' total impact on the climate may be measured through tonnes of CO2 equivalent greenhouse gases. This is also how governments tend to price emissions and how carbon credits are expressed.
COP21 The 21st conference of the parties to the United Nations Framework Convention on Climate Change. The Paris Agreement which guides international climate policy and was decided at COP21.
COP26 The 26th conference of the parties to the United Nations Framework Convention on Climate Change. COP26 saw many important climate developments including the launch of the Glasgow Financial Alliance for Net Zero and the finalisation of Paris Agreement rules.
Corporate citizenship Corporate citizenship refers to the set of activities or responsibilities of an organisation that help them make a positive contribution to society in general. Corporate citizenship also refers to standards that an organisation puts in place to meet corporate social responsibility. In different countries and jurisdictions, organisations are expected to adhere to certain responsibilities and actions in order to contribute to society in general.
Corporate Social Responsibility (CSR) A self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental impacts.
Disclosure frameworks and standards Guidance for businesses to identify, quantify and disclose specific climate and sustainability information with a business or financial impact in a consistent way for investors and wider stakeholders It is important to understand the different frameworks and standards for disclosure which are increasingly a requirement for companies in multiple jurisdictions, and will become part of your duties as a director.
Emissions trading schemes A type of carbon market where the government imposes a sector-based, regional, or nationwide cap on emissions. Companies operating within these schemes may only emit carbon according to how many allowances they own and may trade these allowances between themselves. Also called ‘cap and trade’. Businesses in certain sectors and certain jurisdictions must participate in emissions trading schemes. This can be a risk for high-emitting businesses that will need to purchase many allowances, but also an opportunity for businesses that decarbonise and sell remaining allowances.
Environmental, social and governance (ESG) criteria Used by investors to screen potential investments. Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change. Social criteria examine how it manages relationships with employees, suppliers, customer, and the communities where it operates. Governance deals with a company's leadership, executive pay, audits, internal controls, and shareholder rights. ESG criteria is increasingly used by potential investors to inform investment decision-making.
Fugitive emission Emissions that have been released into the atmosphere through leaks in pipes, containers, or other equipment. Businesses should ensure that they regularly monitor and repair their assets to avoid fugitive emissions.
GHG calculation tools Support businesses to calculate and estimate GHG emissions from different areas of their business activity operations The greatest emissions reductions can be achieved by identifying and targeting the highest emitting areas of your business activity.
GHG values Provide the Global Warming Potential (GWP) of different GHGs relative to CO2, enabling an organisation to calculate the carbon dioxide equivalent (CO2e) across all GHG emissions. By identifying and targeting areas in your business which create the most damaging emissions in terms of global warming potential, the most climate-positive impact can be achieved.
Global Warming Potential The heat absorbed by a greenhouse gas as a multiple of the heat absorbed by carbon dioxide. Methane has a global warming potential of 28, which means that one tonne of methane emissions has 28 times the impact of one tonne of carbon dioxide emissions. It is important to remember that some greenhouse gases have particularly high global warming potentials, which makes reducing emissions of even small amounts of those gases important.
Greenhouse Gas (GHG) GHGs absorb and emit infrared radiation in the wavelength range emitted by Earth. They include water vapour, carbon dioxide, methane, nitrous oxide, ozone, CFCs and HCFCs. This is the starting point for any organisation—what is your contribution to the problem?
Greenhouse Gas (GHG) calculation standards Standardised guidance for calculating the scope of an organisation's GHG emissions profile, or carbon footprint. Accurate and comparable GHG emissions data from your company will enable you to benchmark and measure your emissions over time to track trends from improvement measures and support public reporting and disclosure.
Greenwashing Giving the appearance of participating in activities that are environmentally friendly without actually taking meaningful climate action. You should ensure that your business avoids greenwashing by taking ambitious action to meet climate targets, and ensure that any statements are matched by effective climate action.
IEA The International Energy Agency, an international organisation that provides comprehensive analysis on energy. The IEA provides useful data and analysis that can help businesses understand the climate crisis and how they will be affected.
Insetting A strategy that involves companies paying for emissions reduction or removal projects within their own value chain. Insetting is a good way of neutralising residual emissions while also decarbonising your supply chain.
IPCC The Intergovernmental Panel on Climate Change, a UN-convened group that provides information on the science of climate change. The IPCC's reports provide important information on climate change and society's efforts to tackle it, and also inform policy that is likely to impact businesses.
ISSB The International Sustainability Standards Board, an IFRS-led initiative that aims to harmonise sustainability reporting and disclosure frameworks by creating global standards. Businesses should aim to comply with ISSB standards in order to meet their own net zero targets, and to comply with current or future regulations that may make reporting against these standards mandatory.
Liability Risk Potential financial or other liability to shareholders or stakeholders external to the business - in this context is tied to risk associated with climate change-related litigation - acts as a driver of mitigation or adaptation to physical risks. The risks to your business from legal prosecution related to climate and environmental claims.
Management system standards A framework for managing the risks and opportunities associated with a range of externalities and improving performance over time. Your business can consider adopting specific management system standards - such as ISS's widely adopted standards - to address climate, environment and sustainability goals.
Mitigation Measures that reduce greenhouse gas emissions by preventing activity that would have caused emissions. For example, switching to renewable energy or avoided deforestation. Mitigation is the main focus of any organisation's climate plan, as this refers to reducing emissions in the first place. Businesses may also buy carbon credits that represent mitigation measures, though these may be less reliable than removal-based credits.
N2O Nitrous oxide, a greenhouse gas that accounts for apporximately 6% of global emissions. Most N2O emissions originate from agriculture. Though N2O emissions make up a small proportion of total GHG emissions, the gas has a high warming potential so businesses should ensure that they are emitting as little N2O as possible.
Net zero The point at which human activity is causing no net change in greenhouse gas emissions. This is achieved through reducing greenhouse gas emissions as far as possible and then neutralising any remaining emissions using greenhouse gas removal. Businesses should aim to become net zero and play a role in broader global efforts to reach this point.
Net zero targets A timeframe within which an organisation will achieve net zero GHG emissions via mitigation (emissions reduction) measures and through permanently removing an equivalent amount of atmospheric carbon dioxide (e.g. through the use of carbon credits) where mitigation measures are not feasible. With growing awareness and business support for a global net zero transition, your organisation may consider setting a target to reach net-zero emissions by 2050, with interim 2030 targets, supporting the goals of the Paris Agreement.
Operational Emissions Scope 1 and Scope 2 Emissions combined. The focus of many current emissions reduction targets
Paris Climate Agreement The Paris Climate Agreement under the UNFCCC was negotiated by representatives of 196 state parties at the 21st Conference of the Parties in Paris in 2015. The standard against which your organisation will be judged. Are you doing your fair share?
Physical Risk Risk of direct impacts from issues such as the disruption of operations or destruction of property. The risks from the physical changes in the climate
Removal Measures that directly soak up greenhouse gases (GHGs) from the atmosphere, which can be achieved through natural, geological or technological methods. Your business may purchase carbon credits that represent greenhouse gas removals, help fund and develop emerging removal methods, or even directly implement greenhouse gas removal if possible.
Reporting frameworks and standards Guidance for publicly reporting on a range of economic, environmental and social impacts in a consistent way for investors and wider stakeholders. Transparent reporting is important to showcase the sustainability of your organisation, making it attractive to investors and avoiding accusations of greenwash.
SBTi The Science-Based Targets Initiative, which sets standards and promotes best practice for corporate climate targets. The Science-Based Targets Initiative can help your business set an ambitious, evidence-based and realistic path to reach net zero.
Science based targets Align the latest climate science to meet the goals of the Paris Agreement - limiting global warming to well-below 2 degrees Celsius above pre-industrial levels, and pursuing efforts towards 1.5 degrees Celsius. Ambitious, evidence-based and realistic targets for your business to meet the goals of Paris Agreement
Scope 1 Emissions Emissions released on site from combustion of fossil fuels, through processing or from leakage of GHGs. These emissions are within your control and the direct result of your operations
Scope 2 Emissions Emissions released in the generation of any energy sources imported to your site - usually from electricity production. These emissions are effectively bought so can be managed through contractual arrangements.
Scope 3 Emissions Value chain emissions emitted in the making or transport of products you buy and the transport and use of products you sell. Emissions from others in your value chain. Requires working with others and likely to be the focus of future targets.
Stakeholder capitalism A form of capitalism in which companies seek long-term value creation by taking into account the needs of all their stakeholders, and society at large, placing people and planet as central stakeholders. Stakeholder capitalism enables organisations to create long-term value, build resilience and contribute to the global sustainability goals helping to future proof business models and contribute to society as a whole, placing people and planet as central stakeholders.
Sustainability An umbrella term addressing the different aspects of sustainable development. Embedded into this term are concerns for environmental, social and economic issues. Ensuring the long-term sustainability of your company will build resilience, enhance your business profile and can help to attract investment.
Sustainability indices Benchmark companies on a range of ESG metrics providing important information for investors. Your business may want to consider its position in sustainability indices which can be an important tool for investor decision making.
Sustainable Development Defined by the UN Brundtland Commission (1987) as 'meeting the needs of the present without compromising the ability of future generations to meet their own needs.' In 2015 the Millennium Development Goals were replaced with the UN Sustainable Development Goals (SDGs) which outline 17 goals - 'a blueprint to achieve a better and more sustainable future for all' by 2030. Building sustainable development into your business strategy and operations is key to ensuring the long-term resilience of your company.
Taskforce on Climate-related Financial Disclosures (TCFD) framework Industry-led Task Force to develop climate-related disclosures that "promote more informed investment, credit [or lending], and insurance underwriting decisions." This provides you with generally accepted global financial framework for reporting climate risks.
Tipping Point A tipping point is a critical threshold beyond which a system reorganises, often abruptly and/or irreversibly. Identifies the critical point in time beyond which certian consequences are irreversible.
Transition Risk Risk of indirect impacts from issues such as policy constraints on emissions, imposition of carbon tax, water restrictions, land use restrictions or incentives, and market demand and supply shifts. The risks from changes driven from governments and markets.