ESG (environmental, social, governance) is a radical departure from “green,” ESG’s antecedent. ESG takes a more holistic approach to sustainability, and with it comes a number of new terms and acronyms. Here are some of the common terms you should know if you’re just starting your ESG journey.
A way to evaluate ESG performance by comparing your building or portfolio’s performance against ones with similar assets.
BREEAM (Building Research Establishment Environmental Assessment Method)
BREEAM is the world’s longest established method of assessing, rating, and certifying the sustainability of buildings created by BRE Group.
The process by which organizations quantify their greenhouse gas emissions, to better understand climate impact and set goals to limit emissions.
Formerly the Carbon Disclosure Project, CDP is an non-profit organization that helps companies and cities disclose their environmental impact.
CRREM (Carbon Risk Real Estate Monitor)
CRREM is a tool developed by the European Union to help the real estate industry establish pathways for their real assets to align with carbon reduction targets. It also highlights which buildings are liable to become stranded at some point in the future.
CSR (Corporate sustainability report)
A periodical (usually annual) report meant to publicize a firm’s environmental and social goals, the actions it has taken to achieve those goals, and the results of those efforts.
The process of phasing out carbon emissions from fossil fuels, either by eliminating or offsetting their use. The long-term goal of decarbonization is to create a carbon-free economy.
ECORE (ESG Circle of Real Estate)
ECORE is an initiative to develop a scoring standard to make sustainability in real estate portfolios transparent, measurable, and comparable. The ECORE initiative was founded in 2020 by Union Investment Group, in Frankfurt, Germany.
A program run by the U.S. Environmental Protection Agency and the U.S. Department of Energy. An ENERGY STAR certification in real estate indicates that a building has met or exceeded the program’s energy efficiency standards.
ESG (Environmental, Social, Governance)
Investors are increasingly applying ESG performance indicators to identify potential risks and opportunities.
- E focuses on a company’s environmental impact, such as efforts to reduce energy use or carbon emissions output.
- S describes ways in which a company manages employee relations, working conditions, and connections with communities
- G accounts for business ethics, board diversity, and shareholder rights
GHG (Greenhouse gasses)
GHGs absorb and emit radiant energy within the thermal infrared range, causing the greenhouse effect which ultimately leads to global warming.
A fixed-income financial instrument designed to raise money for projects that will benefit the environment.
An agreement in which building tenants commit or are incentivized to participate in energy and water conservation, waste reduction, and other sustainable actions.
The false representation of information in order to convey an organization, building, or portfolio as more environmentally friendly than it really is.
Formerly the Global Real Estate Sustainability Benchmark. GRESB helps real estate investors assess the sustainability performance of commercial real estate portfolios around the globe.
GRI (Global Reporting Initiative)
GRI is an international standards organization that helps businesses and governments and other organizations understand and communicate their impacts on issues including climate change, human rights, and corruption.
LEED (Leadership in Energy and Environmental Design)
LEED is a global green building certification program run by the U.S. Green Building Council.
Local Law 97 (LL97)
New York’s Local Law 97 is an ordinance that imposes carbon emissions limits for all large buildings and requires all large buildings to report annual emissions to the city starting in 2024. New York City will issue hefty fines to buildings based on how much they exceed those limits. Failure to report emissions will cost building owners $0.50 per square foot per month, and the city will impose annual fines of $268 for each metric ton of carbon emitted over the city’s limit.
Describes a scenario in which one remaining greenhouse gas emissions are balanced out by an equal amount of greenhouse gas removals.
The capacity for an entity to survive and prosper in the face of shocks, or abrupt events, and stressors, or slow-burning threats like rising levels.
A set of goals established by the Science-Based Targets Initiative that were developed in line with the scale of reductions required to keep global warming below 2 degrees Celcius from pre-industrial levels.
SBTI (Science-Based Targets Initiative)
SBTI is part of the World Resources Institute, which defines and promotes best practices in emissions reductions and net-zero targets in line with climate science.
Scope I, II, III, and IV emissions
- Scope I describes direct greenhouse gas emissions from building energy use.
- Scope 2 includes indirect emissions from purchased electricity, steam, heating and cooling.
- Scope 3 includes indirect emissions that occur throughout a company’s supply chain.
- Scope 4 describes avoided emissions, such as tenant commuting, energy footprint, and waste.
SFDR (Sustainable Finance Disclosure Regulation)
SFDR is a set of ESG-based regulations introduced by the European Union that are designed to reorient capital towards more sustainable businesses.
Properties that will not meet future energy efficiency standards and whose energy upgrade will not be financially viable.
TCFD (Task Force on Climate-related Financial Disclosures)
TCFD was created by the Financial Stability Board to provide recommendations for improving and increasing reporting of climate-related financial information.
Triple bottom line
A concept in which businesses should commit to measuring their social and environmental impact, in addition to their financial performance/profit (aka the standard “bottom line”). This is often broken down into “ the three Ps”: profit, people, and the planet.
Triple net lease
An agreement in which tenants pay their own utility bills and aren’t required to share energy usage data with building owners.
Looking to learn more about ESG? Check out our Real Estate Professional’s Guide to Getting Started with ESG. This guide contains the ESG Glossary and much more information to help you quickly ramp up your ESG knowledge.