ESG in APAC

Carbon credits

Tradable credits (representing 1 ton of carbon dioxide equivalent) generated through voluntary emissions reduction activities. Carbon credits can represent emissions reductions achieved through either avoidance (preventing GHG emissions from entering the atmosphere) or removal (taking GHGs from the atmosphere). Carbon crediting mechanisms include those administered by international organisations (e.g. Kyoto Protocol (including the Clean Development Mechanism)), non-governmental organisations (e.g. Verra and Gold Standard) and governments.

Carbon tax

A fee levied by a government on covered entities for their GHG emissions, with the government setting the price of emissions (the tax rate).

CBAM

Carbon border adjustment mechanism - a policy tool, first implemented by the EU, to impose a fair price on carbon emitted during the production of carbon-intensive goods entering the EU and to encourage cleaner industrial production in non-EU countries.  

Circular economy

An economic model that promotes a more efficient use of resources by applying the three guiding principles of reduce, reuse and recycle to create a circular value chain. This is a departure from the traditional linear economic model, which is based on a take-make-consume-dispose pattern. Examples of circular economy policy instruments include eco-design requirements, EPR schemes for waste and green public procurement.

Comply-or-explain

An approach to disclosure whereby a company must either report on a provision or, if it does not, provide considered reasons for not doing so.

Double materiality

An approach to disclosure which assesses materiality by reference to information that is necessary to understand the reporting entity’s impacts on sustainability matters (impact materiality) and sustainability matters that could reasonably be expected to affect its financial prospects (financial materiality). 

EPR or extended producer responsibility

A policy tool in which a producer’s responsibility for a product is extended to the post-consumer stage of a product’s life cycle, thereby shifting the cost of end-of-life management from local institutions and consumers to the producers (“polluter pays” principle) and fostering a circular economy.

ESG

Environmental, social and governance.

ETS or emissions trading system

In an ETS, the government places a limit on the amount of GHG emissions from covered entities. Typically, entities must surrender emission units (or allowances) to cover their emissions within a compliance period. Each emission unit represents the right to emit a certain volume of emissions and can be traded between covered entities or sometimes with other traders. The carbon price in these systems is usually a function of supply and demand for emission units.

FY

Financial year.

GHG or greenhouse gas

The seven greenhouse gases listed in the Kyoto Protocol: carbon dioxide; methane; nitrous oxide; hydrofluorocarbons; nitrogen trifluoride; perfluorocarbons; and sulphur hexafluoride.

GHG Protocol

Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004).

GRI 

Global Reporting Initiative, an international independent standards organisation founded by, amongst others, the United Nations Environmental Programme, to develop sustainability reporting standards.

GRI Standards

A set of interrelated sustainability reporting standards that enable organisations to report publicly on their economic, environmental and social impacts and contribution towards sustainable development developed by the Global Sustainability Standards Board of the GRI.

Human rights and/or environmental due diligence

The process through which enterprises identify, prevent, mitigate and account for how they address their actual and potential adverse human rights and/or environmental impacts in their own operations and their value chain.

IFRS S1

General Requirements for Disclosure of Sustainability-related Financial Information published by the ISSB in June 2023.

IFRS S2

Climate-related Disclosures published by the ISSB in June 2023.

IOSCO

International Organization of Securities Commissions.

ISSB

International Sustainability Standards Board, an independent, private-sector body that was established by the International Financial Reporting Standards Foundation to develop globally consistent sustainability-related financial reporting standards.

ISSB Standards

IFRS S1 and IFRS S2.

NDCs or nationally determined contributions

National climate action plans of each country under the Paris Agreement, outlining how it plans to reduce GHGs to help meet the global goal of limiting temperature rise to 1.5ºC and adapt to the impacts of climate change. The Paris Agreement requires that NDCs are updated every five years, with the third round due in 2025.

SASB

Sustainability Accounting Standards Board, a non-profit organisation, founded in 2011 to develop sustainability accounting standards. In August 2022, the ISSB assumed responsibility for the SASB standards.

Scope 1 emissions

Direct GHG emissions that occur from sources that are owned or controlled by the reporting entity.

Scope 2 emissions

Indirect GHG emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the reporting entity.

Scope 3 emissions

All indirect GHG emissions (not included in Scope 2) that occur in the value chain of the reporting entity, including both upstream and downstream emissions.

Single materiality

An approach to disclosure which assesses materiality by reference to sustainability matters that could reasonably be expected to affect the reporting entity’s prospects (financial materiality).

TCFD

Task Force on Climate-related Financial Disclosures, a task force created by the Financial Stability Board to improve and increase reporting of climate-related financial information. On October 12, 2023, the TCFD fulfilled its remit and disbanded, passing responsibility for monitoring the progress of companies’ climate-related disclosures to the International Financial Reporting Standards Foundation.

TCFD Recommendations

The recommendations of the Task Force on Climate-related Financial Disclosures issued by the TCFD in June 2017.

TNFD

Task Force on Nature-related Financial Disclosures, a market-led and government-supported initiative to develop a set of disclosure recommendations and guidance that encourage and enable businesses and finance to assess, report and act on their nature-related dependencies, impacts, risks and opportunities.   

Transition plan

A transition plan is generally understood to be an aspect of a company’s overall business strategy that outlines its action plan to mitigate or adapt to climate-related risks for its transition towards a lower carbon economy, including actions such as reducing its GHG emissions.