Glossary of Investment Terms

ESG: Environmental, Social, and Governance criteria are a set of standards that socially conscious investors use to evaluate a company in order to screen potential investments. Environmental criteria look at how a company interacts with its natural environment. Social criteria deal with how a company interacts and manages relationships with employees, customers, suppliers, and the community in which it operates. Governance examines a company’s leadership, accounts, internal controls, executive pay, and shareholder rights.[7]

IMPACT INVESTING: A type of investing that seeks to generate certain social/environmental effects along with financial gain.[8]

INVESTING WITH A SOCIAL IMPACT LENS: Requires investors to reflect on a company’s dedication to corporate social responsibility. Investors must look at their sense of duty to serve society in a positive way before becoming involved with a company.[9]

INVESTMENT POLICY STATEMENT: Document drafted by the portfolio manager in consultation with the client outlining general investment objectives and discussing strategies that the manager should use in order to meet these goals. The policy statement includes specific information on asset allocation, risk tolerance, and liquidity requirements.[10]

INVESTMENT THESIS: An abstract idea that is the basis for a functional investment strategy. Aims to aid investors in evaluating investment ideas, ideally helping them to select the best ideas to meet their investment objectives.[11]

MATERIALITY: The concept of materiality recognizes that some information is important to investors who are making investment decisions.[12]

MISSION-ALIGNED INVESTING: The practice of aligning a charitable organization’s mission for social or environmental impact with the group’s management and investment assets.[13]

PROXY VOTING: Shareholders of corporations have the right to vote on matters such as electing directors, selecting an auditor, approving a merger, or selling the company as well as shareholder resolutions. The company informs shareholders of the annual meeting, the matters that are up for a vote, and instructions for voting. Shareholders can vote by mailing their ballots (proxies) instead of attending the company’s meeting, or by voting in person.[14]

SHAREHOLDER ENGAGEMENT/ACTIVISM: When shareholders use their rights as owners of a publicly-traded corporation in order to effect change within or for the corporation. This can refer to both addressing issues of social change and also changing a company’s management.[15]

SHAREHOLDER RESOLUTION: Shareholders with meaningful shares in a company can introduce relevant issues to be voted on at the company’s annual meeting. Shareholder resolutions do not have to be adopted by companies, even if they win a majority vote. They do allow investors to present their ideas to company management and other shareholders.[16]

Endnotes

[7] ESG (Environmental, Social, and Governance Criteria), n.d. In Investopedia Online. https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp (Accessed 25 May 2018).

[8] Impact Investing, n.d. In Investopedia Online. https://www.investopedia.com/terms/i/impact-investing.asp (Accessed 25 May 2018).

[9] Ibid.

[10] Investment Policy Statement, n.d. In Investopedia Online. https://www.investopedia.com/terms/i/ips.asp (Accessed 25 May 2018).

[11] Investment Thesis, n.d. In Investopedia Online. https://www.investopedia.com/terms/i/investment-thesis.asp (Accessed 25 May 2018).

[12] Sustainability Accounting Standards Board, n.d. “Why is it Important? About Materiality.” https://www.sasb.org/materiality/important (Accessed 25 May 2018).

[13] Confluence Philanthropy, n.d. “What is Mission-Related Investing/Impact Investing?” http://www.confluencephilanthropy.org/What-Is-Mission/Impact-Investing (Accessed 25 May 2018).

[14] Proxy Statement, n.d. In InvestingAnswers Online. http://www.investinganswers.com/financial-dictionary/laws-regulations/proxy-statement-2349 (Accessed 10 July 2018).

[15] Shareholder Activist, n.d. In Investopedia Online. https://www.investopedia.com/terms/s/shareholderactivist.asp (Accessed 25 May 2018).

[16] Fontinelle, Amy, n.d. “Ethical Investing: Investor Activism and Shareholder Advocacy.” In Investopedia Online. https://www.investopedia.com/university/ethical-investing/ethical-investing7.asp (Accessed 25 May 2018).