4. Usual terms

The Paris Agreement - is the first-ever universal, legally binding global climate change agreement, imposing legal obligations on all participants to achieve the objective of limiting the global average temperature increase to below 2˚C above pre-industrial levels (1990), with additional efforts to achieve a limit of 1.5˚C.

Climate change mitigation - the process of keeping global average temperature increase well below 2°C and continuing efforts to limit global warming to 1.5°C above pre-industrial levels, as required by the Paris Agreement.

Climate change adaptation - the process of adjusting to actual and projected climate change and its effects.

Financial advisor:

  • insurance intermediary who provides insurance advice on IBIP;;
  • insurance company providing insurance advice on IBIP;
  • credit institution providing investment advice;
  • investment firm providing investment advice;
  • AIFM providing investment advice in accordance with Article 6(4)(b)(i) of Directive 2011/61/EU; or
  • UCITS management company providing investment advice in accordance with Article 6(3)(b)(i) of Directive 2009/65/EC.

Greenwashing - the process of conveying a false impression or providing misleading information about how a company's products are more environmentally sound. Greenwashing is considered an unsubstantiated claim to deceive consumers or investors into believing that a company's products or manufacturing process are environmentally friendly. Greenwashing is used by companies both to increase sales and to gain access to financing.

Circular economy - an economic system in which the value of products, materials and other resources in the economy is maintained for as long as possible, increasing the efficiency of their use in production and consumption and thereby reducing negative environmental impacts. The ultimate goal of a circular economy is to minimise waste and hazardous substances released into the environment at all stages of the life cycle of products and services, including through the waste hierarchy.

Sustainability factors - environmental, social and governance issues, such as respect for human rights or anti-corruption and anti-bribery issues.

ESG (Environmental, Social and Governance) factors - are environmental, social or governance factors that may affect an entity's financial performance. These include:

  • Environmental factors - refer to the impact, negative or positive, that an entity has on the environment, e.g. pollution or greenhouse gas emissions and include:
  • Climate mitigation;
  • Adaptation to climate change;
  • Protecting biodiversity;
  • Sustainable use and protection of water and maritime resources
  • Transition to a circular economy, waste avoidance and recycling;
  • Avoiding and reducing environmental pollution;
  • Protecting healthy ecosystems;
  • Sustainable land use.

Social factors - refers to how an entity relates to employees, customers or the communities where it operates, and includes:

  • Compliance with recognised labour standards (no child labour, forced labour or discrimination);
  • Compliance with occupational safety and health;
  • Adequate remuneration, fair working conditions, diversity and opportunities for training and development;
  • Trade union rights and freedom of assembly;
  • Ensuring product safety, including health protection;
  • Application of the same requirements to supply chain entities;
  • Inclusive projects and consideration of the interests of communities and social minorities.

Governance - refers to the way an entity is run and includes elements such as management compensation, internal control, transparency or audit and include:

  • Fiscal honesty;
  • Anti-corruption measures;
  • Sustainability management by the board;
  • Board remuneration based on sustainability criteria;
  • Facilitation of whistleblowing;
  • Employee rights guarantee;
  • Data protection guarantee;
  • Disclosure of information.

Green finance [1] - financing investments that provide environmental benefits in the broader context of environmentally sustainable development. Green finance involves efforts to internalise environmental externalities and adjust risk perceptions to incentivise green investments and reduce environmentally harmful ones. Green finance covers a wide range of financial institutions and asset classes and includes both public and private finance. Green finance involves the effective management of environmental risks throughout the financial system.


Sustainable finance - integrating environmental, social or governance (ESG [2]) criteria into financial services and supporting sustainable economic growth.

Green Deal - sets the direction for various European policies for the next 5 years (adopted in December 2019) and is a roadmap of what the European Commission intends to do to help achieve climate neutrality.

Sustainable investment:

  • investment in an economic activity that contributes to an environmental objective, measured for example by key indicators on the efficient use of energy resources, renewable energy, raw materials, water and land, on waste generation and greenhouse gas emissions, and on the effects on biodiversity and the circular economy; or
  • investment in an economic activity that contributes to a social objective, in particular an investment that contributes to combating inequality or that promotes social cohesion, social inclusion and labour relations; or
  • investments in human capital or in economically or socially disadvantaged communities, provided that such investments do not significantly harm any of these objectives and that the companies invested in follow good governance practices, in particular with regard to sound management structures, labour relations, remuneration of relevant staff and tax compliance.

Green equity investment - Investments in companies and projects involving green capital. This type of investment is most often made through investments in indexes or equity funds built on green criteria. In recent years, many indexes have been developed to identify and track the performance of green sectors, companies and investments. While index providers are relatively transparent about their methodologies for identifying green companies for their indexes, the methods for delimiting "green" used by green equity funds are often complex and contested. Thus, labels and certification schemes have been developed to certify the greenness of funds. Overall, the methodologies used to delimit "green" are highly heterogeneous in the listed green equity segment and need to be harmonised.

Green bonds - fixed income financial instruments that are used to finance projects that have positive environmental and/or climate benefits.

Taxonomy - system of classifying elements of a group (e.g. economic activities) into different categories according to some criteria.

Sustainability risk - an environmental, social or governance event or condition that, if it occurs, could cause a significant actual or potential adverse effect on the value of the investment.

Climate risks are classified into:

  • Physical risk - represents the risk of materialisation of adverse impacts directly following the effects of global warming. It is generated by the increased frequency and severity of extreme weather events such as landslides, floods or fires. Non-financial companies are exposed to this risk due to potential negative effects on assets, production processes or markets. The financial sector is exposed both indirectly, through loans or financing to companies at risk, and directly, in the case of insurers.
  • Transition risk arising from how the economy is transitioning to a low-carbon economy. This includes, in particular, regulatory risks, which may impose additional restrictions or costs on polluting or emission-intensive companies. Transition risk also stems from reputational risks for polluting or greenhouse gas-intensive companies, for example changing consumer or financier perceptions, which can lead to difficulties in sales or access to finance.

Financial market participant:

  • insurance company providing an insurance-based investment product (IBIP);
  • investment firm offering portfolio management services;
  • institution for occupational retirement provision (IORP);
  • a pension product originator;
  • an alternative investment fund manager (AIFM);;
  • a provider of pan-European personal pension products (PEPP);
  • a manager of an eligible venture capital fund registered in accordance with Article 14 of Regulation (EU) No. 345/2013;
  • a manager of an eligible social entrepreneurship fund registered in accordance with Article 15 of Regulation (EU) No. 346/2013;
  • management company of an undertaking for collective investment in transferable securities (a UCITS management company);
  • credit institution providing portfolio management services.


Insurance-based investment product or "IBIP":

  • an insurance product that has a term or surrender value and whose term or surrender value is exposed, in whole or in part, directly or indirectly, to market fluctuations; or
  • an insurance product that is made available to a professional investor and which offers a maturity or surrender value which is exposed, in whole or in part, directly or indirectly, to market fluctuations





[1] GFSG definition


[2] Environmental, Social and Governance