ESG Framework and Standards

Question 1

1. TCFD (Task Force on Climate-related Financial Disclosures)

Answer 1

Purpose: To provide a consistent framework for companies to disclose climate-related risks and opportunities, helping investors make informed decisions.
Application:
- Assessing physical risks (e.g., extreme weather) and transition risks (e.g., carbon pricing).
- Integrating climate risk into financial planning and strategy.
Example: A company reports its scenario analysis on the potential impacts of climate change on its supply chain.

Question 2

2. GRI (Global Reporting Initiative)

Answer 2

Purpose: To help organizations measure and disclose their broader sustainability impacts (economic, environmental, and social).
Application:
- Reporting on metrics like greenhouse gas emissions, employee diversity, and supply chain impacts.
- Ensures comparability and transparency in sustainability reporting.
Example: A manufacturing firm publishes an annual sustainability report detailing its energy use and community engagement.

Question 3

3. SASB (Sustainability Accounting Standards Board)

Answer 3

Purpose: To provide industry-specific standards for financially material sustainability topics.
Application:
- Linking sustainability performance to financial outcomes, tailored to the industry.
Example: A tech company focuses on data security metrics, while an energy firm reports on greenhouse gas intensity.

Question 4

4. CDP (Carbon Disclosure Project)

Answer 4

Purpose: To encourage companies to disclose environmental data, focusing on climate change, water security, and deforestation.
Application:
- Measuring and managing carbon emissions (Scopes 1, 2, and 3).
Example: A retailer discloses its supply chain’s carbon footprint and commits to reducing emissions.

Question 5

5. SDGs (Sustainable Development Goals)

Answer 5

Purpose: To align business strategies with global development priorities (poverty reduction, clean energy, gender equality, etc.).
Application:
- Mapping business activities to specific SDG targets.
Example: A company commits to SDG 12 (Responsible Consumption and Production) by reducing waste and adopting circular economy principles.

Question 6

6. ISO Standards (e.g., ISO 14001)

Answer 6

Purpose: To standardize best practices for environmental management and sustainability.
Application:
- Implementing an environmental management system (EMS) to minimize environmental impact.
Example: A factory achieves ISO 14001 certification by reducing water use and improving waste management.

Question 7

7. SBTi (Science-Based Targets Initiative)

Answer 7

Purpose: To encourage companies to set emissions reduction targets aligned with climate science.
Application:
- Setting and achieving targets for limiting global warming to 1.5°C.
Example: An apparel brand pledges to reduce its emissions by 50% by 2030, verified by SBTi.

Question 8

8. UN PRI (Principles for Responsible Investment)

Answer 8

Purpose: To integrate ESG factors into investment decisions, promoting responsible investing.
Application:
- Engaging with companies to improve ESG performance.
Example: An asset manager considers ESG factors when investing in renewable energy projects.

Question 9

9. EU Taxonomy

Answer 9

Purpose: To classify sustainable economic activities and guide sustainable investments.
Application:
- Ensuring investments meet EU sustainability criteria.
Example: A bank evaluates its portfolio to align with the Taxonomy’s green activity definitions.

Question 10

10. GHG Protocol (Greenhouse Gas Protocol)

Answer 10

Purpose: To provide a standardized approach for measuring and managing greenhouse gas emissions.
Application:
- Calculating Scope 1, 2, and 3 emissions for carbon management strategies.
Example: A logistics company uses the GHG Protocol to track emissions from its fleet and supply chain.

Question 11

11. TNFD (Taskforce on Nature-related Financial Disclosures)

Answer 11

Purpose: To develop a framework for organizations to report and act on nature-related risks.
Application:
- Measuring biodiversity impacts and dependencies in business activities.
Example: A food company maps its supply chain to identify risks related to deforestation.

Question 12

12. CDSB (Climate Disclosure Standards Board)

Answer 12

Purpose: To provide a framework for reporting environmental and climate-related information within financial reports.
Application:
- Enhancing consistency in climate disclosures to support investment decisions.
Example: A corporation integrates climate risks into its annual financial statements using CDSB.