Glossary

or stewardship refers to responsible investments where the shareholder exercises their voting rights and purposefully aims to enter into a dialogue with companies when sustainability principles are at risk. They do this in the interest of their investor or beneficiary as part of their fiduciary duties.

Asset owners are those that own assets. The largest asset owners include sovereign funds, pension funds, charitable foundations and insurance companies. Asset owners may be commercially focused or operate on a non-profit basis. Members of SVVK-ASIR – pension institutions and insurance companies – are some of the largest asset owners in Switzerland.

The unit of measurement CO2 equivalent (abbreviated as CO2e) was introduced as a way of making the climate impact of various greenhouse gases comparable and converting this into the global warming potential of CO2.

A carbon footprint indicates the amount of carbon dioxide that is released as a result of a process or an activity. The carbon footprint of an investment denotes the amount of carbon dioxide and other greenhouse gas emissions (often expressed as the CO2 equivalent or CO2e) generated by a product, company or portfolio. The carbon footprint can be calculated for an individual investment position or for an entire investment portfolio. To determine the carbon footprint of an investment portfolio, the carbon footprints of the individual positions are aggregated. The Greenhouse Gas Protocol is an internationally recognised and widely applied standard for accounting calculations for greenhouse gas emissions, and comprises Scope 1, Scope 2 and Scope 3 emissions.

Carbon intensity measures the amount of carbon dioxide (CO2) emitted relative to a reference amount. Examples include the carbon intensity of an investment portfolio (number of tonnes of CO2 equivalents per unit of assets managed – tCO2e per million CHF) or the carbon intensity of a building (amount of CO2 equivalents per area – CO2e/m²).

Decarbonisation refers to the drastic reduction of the amount of CO2 in the atmosphere. Decarbonising all economic activities is essential to limiting global warming to 1.5°C. The decarbonisation of financial assets means a reduction in the CO2 emissions per Swiss franc invested. This is achieved through the (partial) sale of participations in companies in the portfolio with a high carbon intensity. However, this kind of decarbonisation is not the same as actual decarbonisation in the real economy as participation in these companies will move to different owners but the CO2 emissions will remain the same. A change can only come about if enough investors do the same and the negative consequences of this are so considerable that it is worthwhile for the company to reform its business model. This mode of action is, however, subject to collaboration issues on the one hand and, on the other, these reforms also require the votes and support of the investors – and they can only offer these if they continue to be involved with the company.

Materiality is the accounting concept that relates to a matter that is financially relevant, so is important (material), and that a company must not withhold from its investors. In the past couple of decades, this term has also been expanded to cover sustainability matters. Double materiality takes a dual perspective that looks at the impact of sustainability matters on a company’s financial performance and the impact of the business model on the environment and people.

Both the EU and Switzerland insist on the double materiality concept in sustainability reporting – this ensures that a comprehensive picture of the situation can be obtained. See, for example, the Corporate Sustainability Reporting Directive (CSRD) or the Swiss ordinance on mandatory climate disclosures for large companies.

In an investment context, engagement refers to the dialogue between an investor (shareholder or creditor) and the issuer of a security (generally a company), which aims to improve corporate practice. Investors make their expectations clear through direct discussions and written communication. Engagement can, however, also involve other stakeholders, such as political decision-makers. Given the current scientific situation, engagement is the most effective means through which investors can make a positive change within the stock and bond market (capital market).

ESG stands for environmental, social and governance – the three overarching aspects of sustainability. Today, ESG is synonymous with sustainable investment. The term first appeared in 2004 in a UNEP report drawn up with Swiss support. E, S and G were presented as new "factors" that considerably influence the performance of stocks but had, thus far, not been considered to a sufficient extent. The term soon found broad appeal and gradually superseded the old abbreviation of "SRI" (socially responsible investing) as it presented a comprehensive concept and was – supposedly – free from the subjective assessment of what made an investment ethical. The emergence of ESG ratings meant that it became possible to easily generate investment products.

Taking ESG aspects into account when conducting analyses and making investment decisions, with the aim of reducing risk and improving returns. On the one hand, it represents an ideal state of affairs. On the other hand, it does not set out how earnestly these considerations must be made. This makes it susceptible to misuse, or "greenwashing", and requires a clear definition of what is meant by integration. At the time of its publication, the "Does ESG integration impact the real economy?" report commissioned by the Swiss Federal Office for the Environment was unable to establish a clearly positive impact on the real economy.

GHG stands for greenhouse gases, which refers to gases in the atmosphere that cause the greenhouse effect. They absorb and reflect back the thermal radiation given off by the Earth and thereby warm the Earth. The key greenhouse gas is carbon dioxide, or CO2, which is emitted when fossil fuels are burned. Other greenhouse gases are nitrous oxide, methane and ozone.

Greenwashing refers to false claims about the sustainability of products and services in order to suggest to customers that their purchases will have a positive impact on sustainability. Following a comprehensive ruling by the EU, Switzerland (FINMA) is now also striving to take action against greenwashing in the financial sector. Where greenwashing targets environmental aspects, then this is referred to as impact-washing or SDG-washing, as this claims to have a positive impact on the achievement of the UN Sustainable Development Goals (SDGs). A frequent point of criticism is a lack of evidence of an additional impact that would not have otherwise occurred without the investment – also known as additionality. In practice, however, proving a positive impact is not an easy undertaking. There is no standardised method for measuring this, and it is mostly only identifiable over a longer period of time.

Net zero emissions by 2050 is the target set by the Paris Agreement. It does not refer to zero emissions, but instead allows for residual greenhouse gases to be offset or compensated. Therefore, net zero presupposes negative emissions, as can be achieved through sustainable reforestation or carbon capture. While these technologies are necessary, they are still in the early stages and even serve as a pretext for further postponing the necessary transition of production processes away from fossil fuel-based energy sources.

The normative basis defines the activities of SVVK-ASIR. It refers to the legal norms and values defined in Switzerland by democratic consensus. These norms are expressed in the Swiss Federal Constitution, in laws and ordinances, and in the international agreements ratified by Switzerland. This approach ensures that we are as objective as possible.

The OECD Guidelines for Multinational Enterprises on Responsible Business Conduct provide the basis for the duty of those in the private sector to adhere to internationally recognised standards and to avoid negative impacts on the environment and people. SVVK-ASIR makes reference to the OECD Guidelines in its normative basis, and they therefore form a key foundation for SVVK-ASIR’s engagement dialogue. The OECD, the Organisation for Economic Co-operation and Development, was originally established to coordinate the US aid provided after the Second World War under the Marshall Plan. It played a key role in rebuilding Europe and facilitating collaboration between the nations involved. And it still does this, although now on a global scale and while promoting the development of international standards, including those relating to human rights and sustainability.

The Real Estate Investment Data Association (REIDA) was formed by major Swiss real estate investors with the purpose of establishing a common basis for comparison. With its CO2 benchmark, REIDA also strives to do this in relation to the climate and, in doing so, helps to standardise the measurement of CO2 emissions from real estate. Some members of SVVK-ASIR helped to found REIDA and are still involved in the association.

The Science Based Targets initiative (SBTi) is a joint initiative organised by the UN Global Compact (UNGC), environmental protection organisations (WWF, WRI) and an investor initiative (CDP – the Carbon Disclosure Project). Working together, those involved developed methods and criteria for effective climate protection measures for companies and a procedure for auditing corporate targets; and whether or not these targets are validated by the SBTi is a key consideration for investors when determining the credibility of CO2 targets.

Scope refers to the extent to which greenhouse gas (GHG) emissions are attributed to a company. A distinction is made between Scope 1, Scope 2 and Scope 3 emissions, and these are defined in the internationally recognised Greenhouse Gas (GHG) Protocol:

Scope 1 emissions are direct emissions that are caused by the company, e.g. by energy sources at the company’s headquarters.

Scope 2 emissions are indirect emissions, e.g. caused by the production of purchased electricity.

Scope 3 emissions are indirect emissions along the value chain, e.g. caused by suppliers. These often account for the largest proportion of CO2 emissions and are more difficult to calculate than Scope 1 and Scope 2.

see "Active Ownership".

The Task Force on Climate-Related Financial Disclosures (TCFD) provides recommendations to companies as to how they can publish climate-related risks and opportunities in such a way that investors can understand them and use them as a basis for making decisions.

The 11 recommendations of the TCFD cover four areas: governance, i.e. responsibility and oversight of climate-related risks; strategy; the integration of the strategy into the company’s risk management system; and the climate-related metrics and targets used. In Switzerland, the ordinance on mandatory climate disclosures for large companies makes direct reference to the TCFD.

The Taskforce on Nature-related Financial Disclosures (TNFD) refers to the risks that arise from the dependence on natural resources and intact ecosystems. Its approach takes inspiration from the success of the TCFD in the area of climate-related risks (see glossary). The TNFD provides recommendations to companies as to how they can publish nature-related risks and dependencies in such a way that investors can understand them. The first few companies are currently testing TNFD reporting, which is still in the very early days of its development (as at March 2024).