Responsible Investment Glossary

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1

1.5°C aligned target

The targets we have set using the methodologies laid out by the Science Based Targets initiative. Covering our Scope 1, 2 and Scope 3 category 1-8 and 15 emissions.
Scope 1, 2 and 3 (category 1-8) emissions and Scope 3 category 15 emissions including our client holdings through common stock, corporate bonds, exchange traded funds, corporate loan, investments in real estate, preferred stock, REIT, private equity and debt.

A

Assets under management

The sum of the market value for all the investments managed on behalf of clients.

C

Carbon Footprint (i.e. financed carbon emissions)

This metric calculates the total carbon emissions for a portfolio normalised by the market value of the portfolio (for Scope 1+ Scope 2). 
Expressed in tonnes CO2e/M currency invested. For Rathbones Investment Management and Investec Wealth & Investment UK this will be tonnes CO2e/M USD invested. 
Rathbones Asset Management report tonnes CO2e/M GBP invested.

Carbon intensity metrics

Our operational carbon emissions, normalised by an associated denominator e.g. Funds Under Management and Administration, Full Time Equivalent or operating income.

Carbon related assets

The TCFD suggests defining carbon-related assets as those assets tied to the energy and utilities sectors under the Global Industry Classification Standard, excluding water utilities and independent power and renewable electricity producer industries.

CDP (previously known as the Carbon Disclosure Project)

Rathbones is a group level membership and discloses annual carbon reporting via the CDP questionnaire. 
From 2022 our submission includes our expanded data disclosure. 2021 and 2022 data includes Saunderson House. In 2023, we have rebased our data to include IW&I and will include them in the group submission.

Climate Action 100+

A global investor coalition engaging with the world’s largest corporate greenhouse gas emitters to take action on climate change.

Climate change mitigation alignment

This metric provides the proportion of investments that are aligned with the Climate Change Mitigation objective of the EU Taxonomy.

Climate-related opportunities

Business or financial opportunities resulting from efforts to address climate change. Efforts to mitigate and adapt to climate change can produce opportunities for organisations, such as through resource efficiency and cost saving, the adoption and utilisation of low-emission energy sources, the development of new products and services, and building resilience along the supply chain.

Climate risk

Risks that can harm the performance and valuation of our investments. This includes the physical risk of damage to assets or income. It also includes the transition risk that a company may be harmed by the global economy’s transition to net zero greenhouse gas emissions.

Climate scenario analysis

A process for identifying and assessing a potential range of outcomes of future events under conditions of uncertainty. In the case of climate change, for example, scenarios allow an organisation to explore and develop an understanding of how the physical and transition risks of climate change may impact its businesses, strategies, and financial performance over time.

Climate value-at-risk (Climate VaR)

Provides a forward-looking and return-based valuation assessment to measure climate related risks and opportunities in an investment portfolio. 

Collective

An investment vehicle, such as an investment trust, composed of a pool of different investments.

D

Decarbonisation

Decarbonisation means reducing the amount of greenhouse gas emissions that a society produces, as well as increasing the amount that is being absorbed.

E

Emissions

Our operational carbon emissions in tCO2e

Embedded emissions

The emissions associated with an investment company’s investments. For example, if Rathbones had a 1% share of a company with 20 million metric tons of CO2 emissions, Rathbones’ embedded emissions from that investment would be 0.2 million tons.

Engagement

Using our voice with companies, industry bodies and policymakers to address ESG issues of concern, improve ESG practices and disclosure, and bring about positive change. It includes many approaches, such as meetings with senior management, public statements, collaboration with other investors and tabling or voting on resolutions at company annual general meetings.

Entity

A firm or company which is regulated by the FCA and/or PRA or other local regulatory body.

ESG

A widely accepted shorthand term – in full, environmental, social and governance – that refers to the three main categories of non-financial risk that must be managed by companies in client and fund portfolios. Originally an adjective but increasingly used as a noun too.

ESG integration

Ongoing consideration of ESG factors within an investment analysis and decision-making process with the aim to improve risk-adjusted returns. 

Ethical investment

Investment that excludes or promotes investment in certain activities based on personal or corporate values. Common exclusions are weapons, alcohol and gambling.

F

Fiduciary duty

An obligation to act in someone’s best interest. We have a fiduciary duty to our clients.

Fossil fuel based revenue exposure

Rathbones (MSCI data): The weighted average of revenue exposure to thermal coal extraction, unconventional and conventional oil and gas extraction, oil and gas refining as well as revenue from thermal coal power generation.

IW&I (ClarityAI data): This metric provides the proportion of the portfolio’s value that is exposed to companies that derive revenues from fossil fuels such as coal, oil and natural gas. Revenues derived from the following activities are included; exploration, mining or extraction, refining, distribution; transportation, storage and trade.

Full time employee

Full Time Equivalent (FTE) refers to the total number of working hours contributed by an employee or a group of employees on a full-time basis. Essentially, FTE represents the total workload (or the equivalent) of one full-time employee.

Funds under management

The sum of the absolute value of all assets of all funds managed by the firm or company, including assets acquired through the use of leverage and, for such purpose, derivative instruments shall be valued at their market value.

G

Governance

The system of rules, practices and processes in place to manage and control a company.

Greenbank

Greenbank (previously Rathbone Greenbank Investments) was established in 2004 as Rathbone Greenbank Investments, to be the ethical investment arm of Rathbones group. It offered one of the UK’s first tailored ethical portfolio services.

Green revenue exposure

The weighted average of revenue exposure to alternative energy, energy efficiency, green building, pollution prevention, sustainable water and sustainable agriculture.

I

ICAAP

Internal Capital Adequacy Assessment Process, part of Pillar 2 within the Basel Framework, represents a financial institution's own assessment of the capital needed to run the business.

ILAAP

Internal Liquidity Adequacy Assessment Process is an assessment of the liquidity risk a firm faces. The regulator evaluates this process and subsequently issues the Internal Liquidity Guidance (ILG).

ICARA

Through the Internal capital adequacy and risk assessment process, firms identify the risk of harm in their operations and provide appropriate resources to mitigate harm, whether as a going concern or when winding down.

Implied temperature rise

The Implied Temperature Rise (ITR) is a forward-looking metric which provides an indication of how well the assets held align with the ambitions of the Paris Agreement calculated in degrees Celsius.

Impact investment

Investment intended to generate a measurable, beneficial social or environmental impact alongside a financial return.

Institutional investor

Large institutions that invest correspondingly large amounts of money – as opposed to households. Examples are pension funds and investment management businesses such as Rathbones.

Investec Wealth & Investment UK (IW&I)

Investec Wealth & Investment (UK) has been a reliable partner in growing and safeguarding our clients' wealth since 1827. In 2023, we joined forces with Rathbones Group Plc, a company that shares our values and has a rich history.

J

Just transition

The idea that the transition to a green global economy takes place while also supporting those who stand to lose economically – be they countries, regions, industries, regions, communities, workers or consumers.

M

Materiality

Both the idea that ESG factors can affect the valuation of a company, and the notion that only certain aspects of ESG performance are directly relevant to a particular company. For example, biodiversity is more material to a global agribusiness, which could suffer consumer and investor boycotts for sourcing beef from pastureland created by destroying rainforest, than to an IT services company.

Modern slavery

The UK Government defines modern slavery as the recruitment, movement, harbouring or receiving of children, women or men through the use of force, coercion, abuse of vulnerability, deception or other means for the purpose of exploitation.

N

Net zero

Achieving net zero emissions means balancing the release of greenhouse gases into the atmosphere by absorbing or avoiding an equivalent amount.

Network for Greening the Financial System REMIND

The Regional Model of Investments and Development (REMIND) is used by the Network for Greening the Financial System is a numerical model that generates projections for the future evolution of the world economies with a special focus on the development of the energy sector and the implications for our world climate.

Non-executive director

A board member without a day-to-day management role at a company.

P

Paris Agreement

An international accord to limit global warming, adopted at the 2015 UN Climate Change Conference. Countries agreed to work to keep temperature increases to well below 2°C above pre-industrial levels, and preferably to 1.5°C. This involved reaching net zero emissions by the middle of this century.

Physical risk

Physical risks emanating from climate change can be event-driven (acute), such as increased severity of extreme weather events, e.g. cyclones, droughts, floods, and fires. They can also relate to longer-term shifts (chronic) in precipitation and temperature and increased variability in weather patterns or other long-term changes such as sea level rise. These risks may often be more easily identifiable in alternative assets, such as infrastructure and property.

Portfolio coverage

A methodology used by the Science Based Targets initiative (SBTi). Financial institutions commit to having a portion of their investees set their own SBTi-approved science-based targets such that the financial institution is on a linear path to 100% portfolio coverage by 2040 (in consistent emissions or monetary terms).

Principles for Responsible Investment (PRI)

A global initiative, backed by the United Nations, committed to advancing responsible investment through six aspirational principles.

Proxy voting

Voting on resolutions at company meetings by a party appointed by the underlying investor, such as an investment manager.

R

Rathbones Asset Management

Rathbones Asset Management (RAM) is an active management house offering a range of investment solutions to meet the capital growth and income requirements of our clients.

Rathbones Group plc

Rathbones is a leading provider of individual wealth management, asset management, and related services to private clients, charities, trustees, and professional partners.

Rathbones Investment Management

Rathbones Investment Management (RIM) carries out individual investment and wealth management for private clients, charities, trustees, and professional partners.

Rathbones Investment Management International

Rathbones Investment Management International (RIMI) caters to the investment needs of individuals and families, charities, and professional advisers who are looking for offshore investment management.

Resolution

An item of business at a meeting of shareholders. A resolution is a formal decision taken at a meeting through a vote. Resolutions are usually proposed by the company, according to local regulatory requirements. However, a minority are proposed, or ‘tabled’, by shareholders (see ‘shareholder resolution’ below).

Responsible investment

The purposeful integration of ESG considerations into investment management processes and ownership practices.

Revenue

The income generated from normal business operations.

Risk appetite

The amount and type of risk that an organisation is willing to take in order to meet their strategic objectives.

S

Science Based Targets initiative

Science-based targets provide companies with a roadmap for reducing their emissions at the pace and scale that the science tells us is necessary for a 1.5°C world. In most cases, companies ask an organisation called the Science Based Targets initiative to check and approve them.

Scope 1, 2 and 3 emissions

Defined by an international body called the Greenhouse Gas Protocol, the scopes are categories used to measure the different types of carbon emissions of companies. Scope 1 emissions are generated directly by the business (e.g., its facilities and vehicles). Scope 2 covers emissions caused by something a company uses, such as electricity. Scope 3 is notoriously hard to measure but covers other emissions for which a company is responsible, such as emissions generated when its products are used, and – for a financial services company – emissions generated by its investments.

Shareholder resolution

A proposal submitted by shareholders to the management of a publicly listed company. Shareholders vote to accept or reject it at the annual general meeting.

Stewardship

Investors’ use of their rights and influence to protect and enhance overall long-term value for clients, including the common economic, social, and environmental assets on which their interests depend.

Sustainable Development Goals

A set of 17 goals set out by the United Nations, which are designed to make life better for people without harming the ability of future generations to meet their needs. That includes not damaging the planet. Each goal contains several targets. For example, Goal 3 is Good Health and Well-Being, and Target 3.b is to create vaccines and medicines for developing country diseases and to make essential medicines and vaccines affordable.

Sustainable investment

Investment in companies with business models that help the planet or society – or at least that don’t harm the planet or society. Sustainable investors often anchor their investing to the Sustainable Development Goals (see earlier).

Systemic risks

Risks that may impede the healthy functioning of society, ecosystems, and the economy – and so may affect the prospects for investment risk and return.

T

Task Force on Climate-related Financial Disclosures (TCFD)

The TCFD was created in 2017 to encourage companies to report their annual emissions and include in their annual reports risks to their business because of climate change. In 2022, the UK became the first major economy to require large companies and financial institutions to make disclosures aligned with the TCFD framework. In October 2023, the TCFD disbanded and its work was transferred to the IFRS Foundation.

Total carbon emissions

This metric measures the absolute greenhouse gas (GHG) emissions associated with a portfolio and is expressed in CO2 equivalent tonnes (for Scope 1 + Scope 2).

Transition risk

Climate-related risks associated with the transition to a lower-carbon global economy, the most common of which relate to policy and legal actions, technology changes, market responses, and reputational considerations.

W

Weighted average carbon intensity (WACI)

Measured in (tCO2e/currencyM sales), this assesses the sensitivity of our held securities to an increase in carbon prices and our progress towards the Paris Agreement target. 
For Rathbones Investment Management and Investec Wealth & Investment UK this will be tonnes CO2e/M USD sales. Rathbones Asset Management report tonnes CO2e/M GBP sales.

Weighted average carbon intensity (WACI) i.e. financed carbon intensity

This metric calculates the carbon intensity of the portfolio weighted by the amount invested in each company, which serves as a measurement of emissions performance of the portfolio (for Scope 1 + Scope 2). Expressed in tonnes CO2e / currencyM revenue. For Rathbones Investment Management and Investec Wealth & Investment UK this will be tonnes CO2e/M USD revenue Rathbones Asset Management report tonnes CO2e/M GBP revenue.