Glossary

Climate tipping points represent a certain temperature threshold where there is unstoppable and self-perpetuating change in a climate system – change which would take effect on timescales varying from a few years to centuries (McKay et al., 2022).

Risks for financial institutions related to the physical impacts of climate change as well as the transition to a low-carbon economy (e.g., legal, technology, reputation) (adapted from (TCFD, 2017).

A positive effect that a policy or measure aimed at one objective has on another objective, thereby increasing the total benefit to society or the environment. Co-benefits are also referred to as ancillary benefits (IPCC, 2018).

Loans for the purchase, refinance, maintenance, or operation of commercial real estate (CRE). For the purposes of target validation, this includes all real estate loans (i.e., residential and service buildings) that are not provided to consumers.

Announcement to show intention to submit a near-term or net-zero science-based emissions reduction target in accordance with SBTi standards within a specific period.

Actions companies take to help society avoid or reduce emissions outside of their value chain.

Demonstration that requirements of a standard are fulfilled.

Refers to how an organization sets boundaries for GHG accounting. Types of consolidation approaches are equity share, financial control and operational control as per the GHG Protocol Corporate Standard (WRI & WBCSD, 2004).

A loan given to consumers to finance specific types of expenditures. A consumer loan is any type of loan made to a consumer by a creditor. For example, a mortgage or a motor vehicle loan.

Container is a type of maritime vessel. It includes:

• Container ship (fully cellular)
• Container ship (fully cellular), inland waterways
• Container ship (fully cellular/RoRo facility)

A consolidation approach used for GHG inventories defined in the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. Under the control approach, a company accounts for 100 percent of the GHG emissions from operations over which it has control. It does not account for GHG emissions from operations in which it owns an interest but has no control (WRI & WBCSD, 2004).

Conversion includes severe degradation or the introduction of management practices that result in a substantial and sustained change in the ecosystem’s former species composition, structure or function. Change to natural ecosystems that meets this definition is considered to be conversion regardless of whether or not it is legal.

Change of a natural ecosystem to another land use or profound change in a natural ecosystem’s species composition, structure or function. Deforestation is one form of conversion (conversion of natural forests).

Corporate hybrid securities an investor can choose to turn into a certain number of shares of the company's common stock after a predetermined time span or on a specific date (Investopedia, 2023).

This asset class includes all investments in debt securities without known use of proceeds (regardless of how they are traded) that are issued by listed companies (i.e., those that have equity listed and traded on a stock exchange, including financial institutions).

Goals set by a corporation to reduce its impact on the climate. Targets may include a variety of GHG emissions across different corporate activities (i.e., operations, value chain, or products) and may focus on emissions abatement, neutralization, or beyond value chain mitigation.

Money that is owed by companies rather than by governments or individual people.

All emissions that occur in the life cycle of purchased products or services, up to the point of receipt by the reporting company (excluding emissions from sources that are owned or controlled by the reporting company) (WRI & WBCSD, 2004).

One-size-fits-all pathway for companies to calculate near-term and long-term absolute reduction science-based targets (SBTs) eligible for all companies except where a sector-specific pathway is mandatory.

Cruise is a type of maritime vessel. It includes:

• Cruise ship, inland waterways
• Passenger/Cruise

A financing instrument that normally requires repayment of a specified amount by the borrower at a certain date in the future, often with interest payments being made by the borrower in the interim.

In contrast to equity finance, debt finance is a method of raising capital by selling debt instruments, such as bonds or notes. Typically, the funds are paid off with interest at an agreed upon later date.

The process by which countries, individuals or other entities aim to achieve zero fossil carbon existence. Typically refers to a reduction of the carbon emissions associated with electricity, industry and transport (IPCC, 2018).

Loss of natural forest as a result of (1) conversion to agriculture or other non-forest land use, (2) conversion to a tree plantation, or (3) severe and sustained degradation.

Changes within a natural ecosystem that significantly and negatively affect its species composition, structure and/or function and reduce the ecosystem’s capacity to supply products, support biodiversity and/or deliver ecosystem services. Degradation may be considered conversion if it:

a) is large-scale and progressive or enduring;

b) alters ecosystem composition, structure, and function to the extent that regeneration to a previous state is unlikely; or

c) leads to a change in land use (e.g., to agriculture or other use that is not a natural forest or other natural ecosystem) (Accountability Framework initiative, 2019).

Emissions from sources that are owned or controlled by the reporting entity (WRI & WBCSD, 2004).

Chemical process by which CO2 is captured directly from the ambient air, with or without subsequent storage.

Chemical process by which CO2 is captured directly from the ambient air, with subsequent storage. Also known as direct air capture and storage (DACS) (IPCC, 2018). The captured CO2 can be injected into geological reservoirs or used to make long-lasting products.

Direct land use change (dLUC) occurs when a new land use displaces a different former land use. From the perspective of a company, dLUC is defined as a recent (previous 20 years) carbon stock loss due to land conversion directly on the area of land under consideration.

Public sharing of information by companies. In the context of the SBTi, information related to science-based targets and metrics that inform the target. Disclosure is a mechanism for transparency.

Debt normally involving securities purchases in the secondary market – rather than new origination of debt or structured equity (PitchBook, 2024).

Process of selling subsidiary assets, investments, or divisions of a company in order to maximize the value of the parent company. Also known as divestiture, divestment is effectively the opposite of an investment (adapted from (Investopedia, 2021). In the context of SBTi, divestment is often associated with highly emitting assets, e.g., fossil fuel assets and it can be a strategy to decarbonize the operations, value chain, and/or portfolio of a company.

A type of double counting in which the same emission reduction or removal is claimed by two different entities towards achieving mitigation targets or goals. The double claiming of emissions reductions and removals often happens between a company’s GHG inventory and the national inventory where that mitigation outcome occurred.

In the context of voluntary carbon markets, double claiming can occur between a country, jurisdiction or other entity that reports lower emissions or higher removals for the purpose of demonstrating achievement of a mitigation target or goal, and the entity retiring the carbon credit for the purpose of making a claim (adapted from ICVCM, 2022).

A situation in which a single emission reduction and/or removal is counted more than once towards achieving mitigation targets or goals (adapted from (ICVCM, 2022). Double counting may refer to a situation in which a quantity of GHG emissions is included in more than one organization’s GHG inventory. This can occur across scopes (scope 1, 2 and 3) and within a single scope due to differing consolidation approaches, differing emissions calculation methodologies, and the intentional design of emissions accounting standards.

El Niño refers to the above-average sea-surface temperatures that periodically develop across the east-central equatorial Pacific Ocean. It represents the warm phase of the El Niño-Southern Oscillation (ENSO) cycle. El Niño episodes typically occur every 3 to 5 years, and last 9 to 12 months, affecting patterns of rainfall, atmospheric pressure, and global atmospheric circulation (National Weather Service & NOAA, 2017).

Upfront embodied emissions mean emissions that are generated before the building is used. In the context of the SBTi buildings project, upfront embodied emissions refer to the emissions in the life-cycle stage A1-A5, which include emissions from construction materials and a construction site of a new building.

The GHG emissions, measured in carbon dioxide equivalent (CO₂e), associated with extraction, production and transport of materials or products over a defined period (e.g. cradle-to-gate or cradle-to-grave). In the buildings sector, the term usually refers to the emissions from materials and construction processes throughout the whole life cycle of a building to distinguish them from in-use (operational) emissions from energy used in operating the building.

Emissions per a specific unit, for example: tCO2e/$million invested, tCO2e/MWh, tCO2e/ton produced, tCO2e/$million company revenue.

Measures that companies take to prevent, reduce, or eliminate sources of GHG emissions within or beyond their value chain. Examples include reducing energy use, switching to renewable energy, and reducing chemical fertilizer use.

Enhanced oil recovery, also called tertiary recovery, is the extraction of crude oil from an oil field that cannot be extracted otherwise. There are three major techniques of EOR: gas methods, thermal methods, and chemical methods.

Enhancing the removal of CO2 from the atmosphere through dissolution of silicate and carbonate rocks by grinding these minerals to small particles and actively applying them to soils, coasts or oceans (IPCC, 2018).

The sum of the market capitalization of ordinary shares at fiscal year-end, the market capitalization of preferred shares at fiscal year-end, and the book values of total debt and minorities’ interests. No deductions of cash or cash equivalents are made to avoid the possibility of negative enterprise values (PCAF, 2022a).

Instruments used to quantify, verify and track the environmental benefits associated with commodities, activities or projects.

Refers to EEIO emissions factors that can be used to estimate cradle-to-gate (all upstream) GHG emissions for a given industry or product category.

Equity is the principle of fairness in burden sharing and is a basis for understanding how the impacts and responses to climate change, including costs and benefits, are distributed in and by society in more or less equal ways. It is often aligned with ideas of equality, fairness and justice and applied with respect to equity in the responsibility for, and distribution of, climate impacts and policies across society, generations, and gender, and in the sense of who participates and controls the processes of decision-making (IPChttps://www.ipcc.ch/site/assets/uploads/sites/2/2022/06/SR15_AnnexI.pdfC, 2018).

Ownership in a company or project. There are various types of equity, but equity typically refers to shareholder equity, which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off (PCAF, 2022a).

Equity financing is the process of raising capital through the sale of shares.

A consolidation approach used for GHG inventories under which a company accounts for the GHG emissions from operations according to its share of equity in the operation. The equity share reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation (WRI & WBCSD, 2004).

GHG emissions that are not disclosed within the annual GHG inventory in absolute emissions terms, but are relevant to a company's operations (if scope 1 and 2) and/or value chain (if scope 3) as per the accounting principles outlined in GHG Protocol.

GHG emissions that are disclosed within the annual GHG inventory, but are not covered by the target(s) set.

A target that applies to a company’s GHG emissions from AFOLU (Agriculture, forestry, and other land use), including GHG emissions associated with land use change (LUC), emissions from land management, and biogenic removals.

As per SBTi FLAG Guidance (Anderson et al., 2022), FLAG demand-side companies are generally:

• Companies with the majority of FLAG emissions in scope 3 of their inventory;
• Companies who are selling directly to end-use customers or governments;
• Companies with significant business activities categorized as consumer product goods;

Please note that this is a non-exhaustive list of FLAG demand-side companies.