Glossary

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

• Companies with significant FLAG emissions in scope 1
• Companies whose primary business activity is agricultural or forestry commodity production.

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

Facilitated emissions refer to GHG emissions associated with activities performed by financial institutions when arranging finance, such as securitization and advisory services (IFRS, 2022). Facilitated emissions and financed emissions differ from each other in that facilitated emissions are off-balance sheet (e.g., insurance underwriting, capital markets underwriting, brokerage, mandated asset management), whereas financed emissions are derived from on-balance sheet exposure (representing direct financing) (PCAF, 2022a). Generally, facilitated emissions activities are fee-generating and do not provide direct financing.

Ferry (RoPax) is a type of maritime vessel. It includes:

• Air cushion vehicle passenger
• Air cushion vehicle passenger/RoRo (vehicles)
• Passenger/Container ship
• Passenger/Landing craft
• Passenger/RoRo ship (vehicles)
• Passenger/RoRo ship (vehicles), inland waterways
• Passenger/RoRo ship (vehicles/rail)

Ferry (passenger only) is a type of maritime vessel. It includes:

• Passenger ship
• Passenger ship, inland waterways

Absolute emissions that banks and investors finance through their loans and investments (PCAF, 2022a). Financed emissions can be calculated and disclosed by financial institutions at an asset class level or at portfolio level. Financed emissions are separate from “facilitated emissions” and should be separately reported.

A consolidation approach used for GHG inventories defined in the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. A company has financial control over the operation if it has the ability to direct the financial and operating policies of the operation with a view to gaining economic benefits from its activities (adapted from WRI & WBCSD, 2004 ).

The SBTi defines a financial institution as an entity that generates 5% or more of its revenue from investment, lending, or insurance activities. This includes but is not limited to banks, asset managers and private equity firms, asset owners and insurance companies, and mortgage real estate investment trusts (REITs). Real economy companies that have more than 5% of revenue from financial activities are encouraged to use SBTi to set targets on those activities in addition to their corporate targets. Currently, public financial institutions are not covered within the SBTi framework.

The five main types of fluorinated GHGs are hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), nitrogen trifluoride (NF3), and other fully fluorinated GHGs. These fluorinated GHGs can be emitted from F-gas production as by-products, reactants, intermediates, or products, and from process vents, leaks, container venting, or destruction processes (U.S. EPA, 2023).

Land spanning more than 0.5 hectares with trees higher than 5 meters and a canopy cover of more than 10% or trees able to reach these thresholds in situ. It does not include land that is predominantly under agricultural or other land use. Forest includes natural forests and tree plantations. For the purpose of implementing “no-deforestation” supply chain commitments, the focus is on preventing the conversion of natural forests (Accountability Framework initiative, 2019).

The process of assisting the recovery of a forest (natural or managed), as well as its associated conservation values, which has been degraded or damaged but is still above 10% canopy cover.

FLAG designates the SBTi Forest, Land and Agriculture project, sectors, methodologies and targets. The terms “FLAG-related emissions” and “Agriculture, Forestry and Other Land Use (AFOLU) emissions” are used interchangeably in the SBTi FLAG Guidance.

An adjustment applied by SBTi target-setting tools to calculate the ambition of near-term scope 1 and 2 absolute and intensity targets that do not use the most recent reporting year as the base year.

Emissions of GHGs that are not produced intentionally by a stack or vent. Fugitive emissions may include leaks from industrial plants and pipelines (IPCC, 2006)

A company’s total number of common shares that will be outstanding and potentially transferable after all possible sources of conversion, such as convertible bonds and employee stock options, are exercised (Investopedia, 2021).

This refers to a pooled investment fund that invests in other funds. Its portfolio consists of the different underlying portfolios of other funds, rather than investments in securities/assets directly.

Being of such a nature that one part or quantity may be replaced by another equal part or quantity in the satisfaction of an obligation.

The annual accounting and disclosure of GHG emissions associated with loans and investments at a fixed point in time in line with financial accounting periods.

Goals set by an organization to reduce direct or indirect emissions by a specified amount.

Most of the impacts of GHG emissions do not fall on those conducting the activities – instead they fall on future generations or people living in developing countries, for example – so those responsible for the emissions do not pay the cost. The adverse effects of GHGs are therefore “external” to the market. This leads to the market failure of climate change. The GHG externality is accompanied by a number of other market failures, including those arising from a lack of information about how to reduce emissions, network effects and a lack of innovation incentives (LSE, 2014).

The exhaustive calculated GHG emissions arising from activities within a company's organizational boundary and value chain corresponding to scope 1 and 2 GHG emissions and scope 3 GHG emissions respectively, displayed with all scope 1 emissions aggregated, all scope 2 emissions aggregated and scope 3 GHG emissions disaggregated by categories 1-15. GHG inventories also include biogenic emissions, but these are reported separately from the scopes.

The activities and their associated direct and indirect emissions that are included in the GHG inventory. It results from the chosen organizational and operational boundaries (adapted from (WRI & WBCSD, 2004)).

Expresses the GHG inventory boundary as the percentage of emissions in the GHG boundary out of total emissions (i.e., including exclusions). This total can be one or multiple emissions scopes and categories and may vary depending on the accounting year.

Withdrawals of a GHG and/or a precursor from the atmosphere by a sink (IPCC, 2018).

A preliminary method to estimate GHG emissions, typically using lower quality data and calculation methods, to determine the size of GHG emissions in each of the scope 3 categories (WRI & WBCSD, 2013).

General cargo is a type of maritime vessel. It includes:

• Barge carrier
• Deck cargo ship
• General cargo ship
• General cargo ship (with RoRo facility)
• General cargo ship, self-discharging
• General cargo, inland waterways
• General cargo/passenger ship
• General cargo/passenger ship, inland waterways
• General cargo/tanker
• Heavy load carrier
• Heavy load carrier, semi-submersible
• Livestock carrier
• Munitions carrier
• Nuclear fuel carrier
• Nuclear fuel carrier (with RoRo facility)
• Open hatch cargo ship
• Palletised cargo ship
• Yacht carrier, semi-submersible

General partner refers to private equity fund management firms since most private equity funds take the form of limited partnerships that are required by law to have a general partner responsible for the operation of the limited partnership. General partner can refer to the management entity or to individual partners within such entities. General partners raise capital from third-party investors, into a specific fund which will then be invested into certain types of assets according to an investment strategy. General partners thus identify the assets to be invested in, execute those investments, and then manage them until eventual exit (Fraser-Sampson, 2010).

Financial flows (such as lending, equity positions, or underwriting and advisory services) associated with zero- or low-carbon assets or activities. This term is often used to reflect non-climate-specific “green” activities as well, such as “green” bonds, which can support climate relevant activities or water conservation, and other related activities.

The green premium is the extra price producers can extract – and customers are willing to pay – over and above other price “extras” such as those relating to the physical characteristics or carbon costs associated with producing a commodity (CRU Group, 2023).

Comprehensive global standardized frameworks to measure and manage GHG emissions from private and public sector operations, value chains, and mitigation actions. The GHG Protocol supplies the world's most widely used GHG accounting standards. The Corporate Accounting and Reporting Standard provides the accounting platform for virtually every corporate GHG reporting program in the world.

Gasses which absorb and re-emit infrared radiation, thereby trapping it in Earth’s atmosphere and causing the GHG effect. They include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).

Greenwashing is the act of making false or misleading statements about the environmental benefits of a product or practice. It can be a way for companies to continue or expand their polluting as well as related harmful behaviors, all while gaming the system or profiting off well-intentioned, sustainably minded consumers (NRDC, 2023).

Financial flows toward activities and technologies that contribute significantly to GHG emissions.

Also known as growth equity or expansion capital, this is a type of often minority private equity investment in relatively mature companies looking for primary capital to expand and improve operations or enter new markets to accelerate business growth. Growth capital is separate from venture capital (Investment Council, 2021).

Headline climate claims are short, marketing-focused claims used to convey climate-related achievements and they should be supported by narrative claims which are, typically, longer descriptive claims made to convey more detailed progress or status-based achievements, for example, describing actions undertaken or planned and sharing data about achievements made (Gold Standard, 2023).

A pooled alternative investment fund often characterized by its more complex investment strategies that generally can only be marketed to accredited investors (with a high net worth).

High-carbon technology or infrastructure lock-in occurs when fossil fuel-intensive systems perpetuate, delay or prevent the transition to low-carbon alternatives (WRI, 2021).

Blue hydrogen is produced mainly from natural gas, using a process called steam reforming. Carbon dioxide is also produced as a by-product but is captured and permanently stored.

Green hydrogen is defined as hydrogen produced from electrolysis of water using renewable electricity (National Grid plc., 2023).

Grey hydrogen is the most common form of hydrogen production. It is formed from natural gas, or methane using steam methane reformation, but without capturing the GHG made in the process (National Grid plc., 2023).

White hydrogen is a naturally occurring, geological hydrogen found in underground deposits and created through fracking. There are no strategies to exploit this hydrogen at present (National Grid plc., 2023).

IMAGE is an integrated assessment model framework that simulates global and regional environmental consequences of changes in human activities.

An IPCC special report on the impacts of global warming of 1.5°C above pre-industrial levels and related global GHG emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty.

Emissions that are a consequence of the activities of the reporting entity but occur at sources owned or controlled by another entity (WRI & WBCSD, 2004). Indirect emissions are accounted for in scope 2 and scope 3 inventories.

Indirect land use change (iLUC) occurs outside the area of focus as a consequence of change in use or management of land within the area of focus. iLUC is often mediated by markets or driven by policy shifts in land use that cannot be directly attributed to land-use management decisions of individuals or groups. From the perspective of a company, iLUC is defined as a recent carbon stock loss (i.e., previous 20 years) due to land conversion on lands not owned or controlled by the company or in its supply chain, induced by a change in demand for products produced or sourced by the company.

Like private debt, infrastructure debt is not traded or issued in an open market. Private infrastructure debt can be loaned to both listed and unlisted companies. Infrastructure debt funds invest in debt linked directly to projects and to corporate entities dependent on the debt strategy. Infrastructure debt funds target project finance—however, there is no single definition among investors of what constitutes infrastructure. As a result, sector and risk exposures of funds differ (Cambridge Associates, 2018).

Investing in the equity of infrastructure assets to gain ownership and control. Examples of infrastructure assets include utilities (e.g., gas, electric, water distribution), transportation (e.g., airports, roads, bridges), social infrastructure (e.g., hospitals, schools), and energy (e.g., power plants, pipelines, solar and wind farms) (Mergers & Inquisitions, 2021).

Used to describe climate mitigation projects or programs wholly contained within the scope 3 value chain boundary of a company or projects partially within its scope 3 supply chain boundary (spanning their supply chain and other companies’ supply chains).

Emissions associated with a financial institution’s insurance underwriting and related activities. Insured emissions are a subset of facilitated emissions.

Models that seek to combine knowledge from multiple disciplines in the form of equations and/or algorithms in order to explore complex environmental problems. As such, they describe the full chain of climate change, from production of GHGs to atmospheric responses. This necessarily includes relevant links and feedback loops between socioeconomic and biophysical processes.

United Nations body for assessing the science related to climate change.