Sustainability is a concept that we are hearing more and more frequently because it poses a growing concern for society as a whole - for both individuals and companies. Sustainability refers to satisfying current needs without compromising future generations’ ability to meet their needs, while striking a balance between economic growth, environmental protection, and social well-being. This is a guide to explain the most common acronyms we come across when talking about sustainable finance.
This is the acronym that is used to refer to the United Nations Sustainable Development Goals, which comprise 17 goals that were launched in 2016 to guide the policies and funding of the United Nations Development Program for the next 15 years. These goals seek to end poverty, protect the planet, and ensure peace and prosperity for all. They include climate change, economic inequality, innovation, sustainable consumption, and peace and justice among their priorities.
This acronym stands for the environmental, social, and corporate governance.
The Dow Jones Sustainability Index (DJSI) is the market’s international benchmark index to measure listed companies’ performance in environmental, social, and corporate governance issues. This index analyzes nearly 3,400 companies based on a “best in class” approach, meaning that only 10 percent of companies from each industry are selected. BBVA was included in the DJSI in 2018 and is also part of other international sustainability indexes such as the MSCI (formerly Morgan Stanley Capital International) ESG Leaders Index, the FTSE4Good Index (FTSE stands for Financial Times Stock Exchange), the Euronext Vigeo Index Eurozone and Europe 120, and the Ethibel Sustainability Excellence Europe and Global indexes.
The Green Bond Principles (GBP) are a set of standards that were published in 2014 to ensure the comparability of the real environmental impact of projects financed with green bonds. Thus, a green bond must fit one of the categories established in the Green Bond Principles such as renewable energy, energy efficiency, sustainable land use, biodiversity conservation, clean transportation, or climate change adaptation, among others. Similarly, there is a set of Social Bond Principles (SBP).
Green Loan Principles (GLP) were jointly developed by the leading financial institutions that are the most active in the green loan market and aim to promote the development and integrity of green loan products.
These principles seek to create a framework of market standards and guidelines, and they offer a consistent methodology that can be used throughout the green loan market. They also make it possible to maintain the flexibility of the loan and preserve the integrity of the green loan market while it develops.
Socially Responsible Investing is an approach to making financial investments based on environmental, social, and corporate governance (ESG) criteria. SRI takes a holistic approach to investment decisions by factoring in both financial and intangible criteria that can create value in the medium and long term.
The United Nations has also spearheaded the Principles for Responsible Investment. Under this initiative, the UN works with its international network of more than 1,400 signatories representing more than 50 countries in order to put the six Principles for Responsible Investment into practice. The goal is to foster an understanding of the impact that environmental, social, and corporate governance issues have on investments and advise signatories how they can incorporate this knowledge into their investment and active ownership decision-making. The six principles were defined by investors and are backed by the UN.
This acronym stands for United Nations Environment Programme Finance Initiative. It is a partnership established in 1992 between the United Nations and the global financial sector with the mission to promote sustainable finance. To this end, it encourages private sector involvement - specifically from the international financial sector - in order to improve the implementation of sustainability principles by financial institutions at all operational levels.