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Corporate Sustainability > Begrippen > Flashcards

Begrippen Flashcards

1
Q

zero-sum

A

belief that the more profit a firm makes, the less value for society (one party’s gain is balanced by another party’s loss)

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2
Q

high purpose-camaderie

A

organisations that score high on purpose and on dimensions of workplace camaderie (fun place to work)

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3
Q

high purpose-clarity

A

organisations that score high on purpose and on dimensions of management clarity (makes expectations clear, clear view of where organization is going and how to get there)

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4
Q

Carroll’s pyramid

A

Economic responsibilities, legal responsibilities, ethical responsibilities, philanthropic responsibilities

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5
Q

CSR vs ESG

A

CSR is a business model (strategy) that affects organizational processes and company culture and ESG is a model used by investors to examine the sustainability of a company

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6
Q

Friedman

A

There is one and only one social responsibility of business … to use its resources and engage in activities designed to increase its profits

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7
Q

stakeholder and shareholder view aligned

A

actions in favor of stakeholders ultimately resonate positively with profitability, and/or actions against stakeholders are eventually punished by decreases in the bottom line

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8
Q

Having a good CSR performance could increase revenues and decrease costs by

A
  • saving on resources and streamlining processes
  • attracting/binding customers
  • motivating and attracting certain employees
  • preventing stricter governmental intervention
  • decreasing risk of catastrophic events
  • having lower costs of equity and debt
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9
Q

Creating Shared Value (CSV)

A

creating economic value in a way that also creates value for society

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10
Q

how can CSV be done

A
  • reconceiving products and markets
  • redefine productivitiy
  • enabling local clusters development
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11
Q

CSV compared to traditional (Porter and Kramer)

A
  • society’s gains are even greater because business are far more effective than governments at marketing to embrace sustainable products/services
  • not philanthropy but self-interested behavior to create economic value by creating societal value
  • shareholders might care a lot about a firm’s CSR when powerful stakeholders create bad publicity and market pressure
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12
Q

sustainability accounting

A

placing a monetary value on firms’ externalities and accounting for it in firms’ strategy/reporting/firm value calculation

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13
Q

Impact accounting

A

monetized amounts of firms’ environmental and social impacts not currently captured in financial accounting

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14
Q

6 Capitals

A
  • Financial
  • Manufactured
  • Intellectual
  • Social
  • Human
  • Natural
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15
Q

Scope 1 (GHG emissions)

A

direct emissions from sources that are owned or controlled by a company, such as its production and transportation equipment

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16
Q

Scope 2 (GHG emissions)

A

emissions at facilities that generate electricity bought and consumed by the company

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17
Q

Scope 3 (GHG emissions)

A

emissions from upstream operations in a company’s supply chain and from downstream activities by the company’s customers and end-use consumers

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18
Q

balanced score card perspectives

A
  • financial
  • customer
  • internal
  • innovation and learning
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19
Q

financial perspective (SBSC)

A

align CSR initiatives with financial performance to ensure sustainability

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20
Q

customer perspective (SBSC)

A

enhance customer loyalty and satisfaction through CSR activities

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21
Q

internal perspective (SBSC)

A

improve internal processes to support CSR goals and operational efficiency

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22
Q

innovation and learning perspective (SBSC)

A

foster a culture of sustainability and continuous improvement within

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23
Q

common measure bias (SBSC)

A

comparing unique measures harder than common measures. Usually non-financial leading factors more unique, financials more common –> might lead to relative neglect of non-financials against the emphasizing of non-financial driving factors

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24
Q

greenwashing

A

misreporting of a firm’s environmental performance in an overly positive light

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25
Q

Problems with current sustainability reporting

A
  • no mandatory standards/audits
  • E-goals are aspirations, not targets
  • non-transparent supply chains
  • complexity of measurement
  • inattention to developing countries
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26
Q

EU taxonomy

A

common language tool for companies and investors to know which activities have a positive impact on climate/environment. Describes which economic activities are in line with the Paris Agreement

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27
Q

why do we need EU taxonomy

A
  • creates a frame of reference for investors and companies
  • supports companies in their efforts to plan and finance their transition
  • protects against greenwashing practices
  • helps accelerate financing of those projects that are already sustainable and those needed in the transition
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28
Q

6 environmental objectives

A
  • climate change mitigation
  • climate change adaption
  • sustainable use and protection of water and marine resources
  • transition to a circular economy
  • pollution prevention and control
  • protection and restoration of biodiversity and environment
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29
Q

checklist for an activity to qualify as environmentally sustainable aligned

A
  • substantially contribute to at least one environmental objective
  • do not significantly harm the other environmental objectives
  • comply with minimum social and governance safeguards
  • comply with technical screening criteria to determine whether an activity is aligned for the EU taxonomy
30
Q

3 KPIs that are reported to be eligible and aligned

A
  • Revenues
  • OPEX
  • CAPEX
31
Q

challenges implementation EU taxonomy

A
  • complexity and scope
  • data availability and quality
  • dynamic regulatory environment
32
Q

Non-governmental organizations (NGO)

A

tackle issues that are ignored by governments or where states have conflicting interests

33
Q

green revenues

A

share of revenues derived from products and services that provide environmental solutions

34
Q

controversies

A

companies’ actions against commitments (scandal)

35
Q

ESG trading

A

abnormal purchases of high ESG stocks and sales of low ESG stocks relative to the fund’s usual trading strategy –> negative associated with the fund’s future performance

36
Q

how ESG affects equity valuation, risk, and performance

A
  • cash flow channel
  • idiosyncratic risk channel
  • valuation channel
37
Q

cash flow channel

A

a strong ESG profile is associated with a competitive advantage, leading to higher profitability which leads to higher dividends (cash flows)

38
Q

idiosyncratic risk channel

A

a strong ESG profile is associated with better risk, management and compliance leading to lower specific (firm) downside risk

39
Q

valuation channel

A

a strong ESG profile is associated lower exposure to systematic risks, leading to lower cost of capital and therefore a higher valuation

40
Q

negative screening

A

exclusion from investment universe

41
Q

exclusion from investment universe

A

an approach that excludes specific investments such as companies, sectors, or countries

42
Q

positive screening

A
  • best-in-class investment selection
  • norms-based screening
  • integration of ESG factors in financial analysis
  • impact investing
43
Q

best-in-class investment selection

A

leading or best-performing investments are selected or weighted based on ESG criteria

44
Q

norms-based screening

A

screening of investments according to their compliance with international standards and norms

45
Q

integration of ESG factors in financial analysis

A

explicit inclusion by asset managers of ESG risks and opportunities into financial analysis

46
Q

impact investing

A

investments made in funds with the intention to generate social and environmental impact alongside a financial return

47
Q

engagement

A

engagement and voting on sustainability matters

48
Q

engagement and voting on sustainability matters

A

engagement activities through voting of shares and engagement with companies on ESG matters

49
Q

how can investors induce firms to act responsibly

A
  • (shareholder activism) find socially responsible firms and invest in them, help them grow, and do not support socially irresponsible firms
  • (active ownership) find socially irresponsible firms and invest in them and use your voice to push them: Engagement/Active Ownership (only big investors)
50
Q

passive index-based investment strategies

A

many investors practice this. They pay little attention to risks and opportunities in individual companies (less focus on ESG)

51
Q

attribution factor

A

represents the proportion of the company that the financial institution is financially responsible for

52
Q

green bond

A

debt security that is issued to raise capital to support climate-related or environmental projects

53
Q

UN SDG Framework

A

distinguishes between green, social and sustainable depending on the use of proceeds

54
Q

critical comments on green bonds

A
  • lack of contractual protection for green bond investors
  • quality of reporting metrics and transparency
  • issuer confusion and fatigue
  • perceived lack of pricing benefits for issuers
55
Q

fiduciary duty

A

asset managers should always act in the best financial interest of their investors

56
Q

corporate governance

A

process by which companies are directed and controlled. Primary participants are stakeholders, management and the board of directors

57
Q

political tension SEC regulation

A
  • increase compliance costs, particularly for SMEs harming their competitiveness
  • focusing on reporting ESG-factors diverts attention from primary objective
58
Q

Kenneth Pucker

A

problem of overselling sustainability reporting. We are confusing output with impact (change). More reporting but CO2 emissions are still growing because no mandatory standards, E-goals are aspirations and not targets, complexity measurement, and supply chains lack transparency

59
Q

ESG rating disagreement

A

because of different objective functions or a conflict of interest, lack of consensus on term corporate sustainability, correlation is low, disagreement due to scope, more disclosures

60
Q

CSR definition (voluntary dimension)

A

a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis

61
Q

sustainability definition

A

meeting the needs of the present without compromising the ability of future generations to meet their own needs

62
Q

definition CSR (normative dimension)

A

the responsibility of enterprises for their impacts on society and outlines what an enterprise should do to meet that responsibility

63
Q

several approaches to categorize and empirically substantiate the link between CSP and CFP

A

1) cost and risk reduction
2) gaining competitive advantage: justify benefits over costs
3) developing reputation and legitimacy
4) seeking win-win outcomes: strategy integration, learning and innovation

64
Q

countermeasures information assymetry

A
  • signalling
  • screening
  • monitoring
65
Q

key features of sustainability reporting

A

1) diversity of topics
2) diversity in measurement
3) diversity of users
4) diversity in objective functions
5) voluntary nature of CSR activities
6) central role of externalities
7) long term horizon

66
Q

targeted transparency

A

aim to nudge firms toward changing their business activities in a socially desirable way

67
Q

ESG profile competitive advantage

A
  • more efficient use of resources
  • better human capital management & development
  • long-term business plans and incentives
68
Q

ESG profile better risk management and compliane

A
  • better monitoring
  • less severe incidents
69
Q

ESG profile lower exposure to systematic risks

A
  • less vulnerable to systematic market shocks
  • lower cost of capital
70
Q

5 ways ESG can create value

A
  • top-line growth
  • cost reductions
  • regulatory and legal interventions
  • productivity uplift
  • investment and asset optimization

Corporate Sustainability (1 decks)

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