Wealth management glossary
We’ve written this guide to help make investment literature easier to understand and to clarify some of the more common terms. Emphasis has been placed on clarity and brevity rather than attempting to cover every complexity. We hope you find it useful and simple to digest. We have made every effort to ensure that the terms are accurately described, however, the descriptions are not definitive and they may differ from other interpretations used.
0-10
2°C limit or “2 degrees”
It is widely agreed that limiting the average rise in global temperatures to less than 2°C above pre-industrial levels by the end of this century may help prevent the worst of the natural disasters associated with global warming. See also "Paris Agreement".
A – C
A
Absolute return strategy
An absolute return investment strategy aims to deliver positive returns whatever the market does, rather than simply aiming to outperform a benchmark index.
ABC framework
A framework used to assess the depth of positive impact in a portfolio by categorising investments as:
- Avoiding harm (investments that do not cause material environmental or social harm or conflict with our sustainability objective).
- Benefiting stakeholders (investments which strive to create benefits for key stakeholders such as employees and local communities).
- Contributing to solutions (investments with more than 90% of their activities materially aligned to supporting one or more of the UN Sustainable Development Goals).
Active management
An investment management approach where a manager aims to beat the market through research, analysis and their own judgement. See also Passive management.
Active ownership
The proactive use of investor rights and influence, including voting, engagement and escalation, to encourage companies and active managers to improve environmental, social and governance (ESG) practices and manage long-term risks.
Alternative investments
Investments outside of the traditional asset classes of equities, bonds and cash. Alternative investments include property, hedge funds, commodities, private equity, and infrastructure.
Annualised return
For a period of greater than one year, a measure of the level of return that has been achieved on average each year.
Asset class
Broad groups of different types of investments. The main investment asset classes are equities, bonds and cash. Non traditional asset classes are known as alternative investments. However, an asset can be anything with commercial or exchange value owned by a business, institution or individual. This could include cash, real estate, art or vintage wines.
Avoided emissions
Quantify the reduction in greenhouse gas emissions enabled by a product or service compared to a higher-carbon alternative, for example renewable energy replacing fossil fuel generation.
B
Bear market
Defined by a prolonged drop in investment prices — generally, a bear market happens when a broad market index falls by 20% or more from its most recent high. The reverse of this is a bull market, which characterised by gains of 20% or more.
Benchmark
A standard, (usually an index or a market average) that an investment fund's performance can be measured against. Many funds are managed with reference to a stated benchmark.
Best-in-class
A company or country that leads its peers in terms of sustainability practices and performance.
Biodiversity
The diversity of ecosystems, species and genetic variation that underpins economic activity and ecosystem services. Biodiversity loss presents material operational and financial risks to companies, particularly through supply chains and regulatory pressures.
Blue chip
A high-quality and relatively low-risk investment. The term usually refers to stocks of large, well-established companies that have performed well over a long time. The term originally comes from poker, where the blue chips are the most valuable.
Bonds
Provide a way for governments and companies to raise money from investors for current spending requirements. In exchange for an upfront payment from investors, a bond will typically commit the issuer to make annual interest payments and to repay the initial investment amount on maturity at a specified date in the future.
Bottom up investing
Investment based on analysis of individual companies, whereby that company's history, management, and potential are considered more important than general market or sector trends (as opposed to top down investing).
Bull market
When the price of an asset or security rises continuously. The commonly accepted definition is when stock prices rise by 20%. Traders employ a variety of strategies, such as increased buy and hold and retracement, to profit off bull markets.
C
Carbon budget
The total volume of emissions that can be released while limiting global warming to a specific temperature threshold, such as 1.5°C.
Carbon Capture and Storage (CCS)
The process of capturing CO2, transporting it and permanently depositing it in an underground geological formation. This is carried out to reduce emissions of CO2 by the heavy emitting industries such as Utilities, Oil & Gas, Cement, Steel, Chemicals, Other Manufacturers, Heating.
Carbon footprint
A measure of a group, individual, company or country’s greenhouse gas emissions. Common metrics include total carbon emissions or carbon intensity.
Carbon intensity
A group, individual, company or country’s carbon emissions per £ million of sales.
Carbon negative
An entity whose activity removes more carbon emissions from the atmosphere than it adds.
Carbon neutral
Achieving a balance between greenhouse gas emissions produced and emissions offset, typically through carbon credits. This differs from “net zero”, which prioritises absolute emissions reduction before the use of offsets. Carbon neutrality is often (but not always) validated or certified by a third party. Use of these terms varies by region.
Carbon offsetting
Compensating for residual carbon emissions by funding activities that remove or reduce emissions elsewhere, such as reforestation or carbon capture projects.
Carbon pricing
Assigning a cost to emitting CO2 into the atmosphere, usually in the form of a fee per tonne of CO2 emitted, or limiting the total emissions firms can produce and issuing emissions permits. Putting an economic cost on emissions is widely considered to be the most efficient way to encourage polluters to reduce what they release into the atmosphere.
Carbon Value-at-Risk (VaR)
A model developed by Schroders to measure how carbon pricing may affect a company’s profits. It estimates the impact on companies’ earnings of raising carbon prices to $100 per tonne.
CDP (formerly the Carbon Disclosure Project)
CDP runs a global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. As a signatory of CDP, we have access to its extensive research and database on climate change, water and forestry. We also submit to its climate change questionnaire annually.
Corporate bond
A bond issued by a company.
Ceiling
The maximum price or quantity permitted within a market or regulatory system. In carbon markets, a ceiling (or "cap") limits either the price of emissions allowances or the total volume of emissions that can be released, working alongside a floor price to create a predictable range for investors and emitters.
Correlation
Correlation is a measure of how securities or asset classes move in relation to each other. Highly correlated investments tend to move up and down together while investments with low correlation tend to perform in different ways in different market conditions, providing investors with diversification benefits. Correlation is measured between 1 (perfect correlation) and -1 (perfect opposite correlation). A correlation coefficient of 0 suggests there is no correlation.
Credit rating
Bond issuers can pay to have their bonds rated by a number of credit ratings agencies including Standard & Poors, Moody's and Fitch. The credit rating is designed to give investors an indication of the quality of the bond, providing a professional assessment of the risk that the issuer may default on interest and capital repayments. Credit ratings are subject to regular review and can and do change.
Circular economy
An economy designed to eliminate waste by keeping resources in use for as long as possible, through re-use, repair, remanufacturing and recycling, rather than following a linear take-make-dispose model.
Clean technology
A range of products, services and processes that reduce the use of natural resources, cut or eliminate emissions and waste, and improve environmental sustainability, for example wind turbines or electric vehicles.
Climate Action 100+
We were a founding signatory to CA100+, a collaborative investor-led engagement initiative covering over 160 of the world’s largest corporate greenhouse gas emitters, which together account for around 80% of global corporate industrial emissions. It asks companies to strengthen governance of climate change, curb emissions in line with the goals of the Paris Agreement and enhance climate-related financial disclosures. Phase 2, launched in June 2023 and running to 2030, shifted the focus from disclosure to the implementation of credible transition plans, with the Net Zero Company Benchmark assessing alignment against a 1.5°C pathway.
Climate adaptation
Actions taken to manage and reduce the physical impacts of climate change, such as building resilient infrastructure or adapting agricultural systems.
Climate change
Long-term shifts in global temperatures and weather patterns. While the climate has always varied naturally, the warming observed since the mid-twentieth century is primarily driven by human activity, principally the burning of fossil fuels. Climate change is a broader term than global warming, which refers specifically to the rise in average global surface temperature.
Climate Progress Dashboard
Schroders’ proprietary tool which tracks global progress towards limiting the rise in global temperatures to 2°C. The dashboard includes 12 objective indicators, from political action through to carbon prices and fossil fuel use. The information can help investors to understand the scale of change required and to identify areas of investment risk and opportunity.
Climate laggard
A company that is poorly positioned for the low-carbon transition, typically due to weak emissions disclosure, lack of targets or continued exposure to high-carbon activities.
Climate mitigation
Efforts to reduce or prevent greenhouse gas emissions, including renewable energy deployment, energy efficiency and decarbonisation of industries.
Climate neutral
Achieving net zero emissions across all greenhouse gases including methane and nitrous oxide, rather than just focusing on carbon dioxide.
Climate solutions
Investments in products, services or infrastructure that directly enable decarbonisation, environmental restoration or climate resilience, such as renewable energy, clean technologies and sustainable infrastructure.
Collective or collaborative engagement
Working together with other institutional shareholders to influence company management and effect positive change. Collective engagement may involve meeting companies jointly with other shareholders, via membership organisations or other more informal groupings. Climate Action 100+ is one example.
CONTEXT
A proprietary tool that provides a structured approach to analysing a company’s relationship with its stakeholders and the sustainability of its business model. Driven by more than 250 metrics from over 75 data sources, it provides clear, objective information on how companies are managing material ESG issues and generates deeper insights for investors.
Conference of the Parties (COP)
The highest decision-making body of the United Nations Framework Convention on Climate Change (UNFCCC) which meets annually to implement the Convention. The Convention’s aim is to stabilise greenhouse gases at an acceptable level. The Paris Agreement was born at COP21.
Corporate controversies
When a company or representative behaves in an improper, unethical or negligent way which negatively impacts stakeholders (e.g. causing a major accident or human rights breach), resulting in reputational damage to, and in some cases the complete collapse of, the firm.
Corporate governance
An oversight framework that was initially designed to ensure company management acted in the best interests of shareholders. In more recent years there has been a broader recognition of the value in considering all stakeholders.
Corporate responsibility
A company’s responsibility to operate its business in a way that positively impacts, or at least does not negatively impact, the environment or society.
Credit ratings
An assessment of a borrower's ability to repay debts and the likelihood of default. Ratings are expressed through letter grades and help investors and lenders evaluate credit risk.
Credit risk
The risk that a bond issuer will default on their contractual obligation to make interest payment to investors.
Currency hedging
Reducing or removing the risk of incurring losses through currency movements. This is typically achieved through the use of derivatives such as futures or options.
Current yield
The annual income from an investment, expressed as a percentage of the current price. For example, if a bond that is worth £100 gives you an annual income of £6, the current yield is 6%.
D – F
D
Decarbonisation
The process of reducing a company, industry or country’s carbon emissions. Decarbonisation is a critical component of the world’s transition to a low-carbon economy.
Default risk
The risk that a bond issuer will not be able to meet their debt payments and subsequently default on their contractual obligation to investors.
Deforestation risk
The financial and reputational risks associated with exposure to activities that drive forest loss, particularly in supply chains linked to commodities such as cattle, soy and palm oil.
Derivatives
Financial contracts that derive their value from an underlying asset, used for speculation, hedging, and gaining exposure without owning the underlying asset.
Discretionary investment management
A service where a professional portfolio manager has the authority to make investment decisions on behalf of a client. Decisions will be based on the client's objectives and risk tolerance.
Diversification
Creating a portfolio from a range of different assets. This reduces the risk of loss through exposure to any individual asset and can help to reduce overall portfolio risk where assets have a low correlation.
Diversity, Equity and Inclusion (DEI)
Diversity refers to the differences people have in terms of their gender, age, ethnicity, sexual orientation, disability, religion, beliefs or other characteristics. Equity focuses on fairness and ensuring individuals have access to the same opportunities by recognising and addressing structural inequalities. Inclusion is about embracing and promoting diversity, and creating an environment where people feel valued, respected and able to contribute irrespective of their background or beliefs.
Divestment
The sale of an investment. Divestment may occur when the investee company consistently fails to meet investor expectations, often after attempts to engage with the company. Divestment may also be used to achieve social or political goals. For example, investors divested from South African assets during the apartheid era in protest against the regime.
Dividend yield
The annual dividend per share divided by the current share price. It is useful for comparing investments. For example, if a company's shares are trading at £100 and the annual dividend is £5, the dividend yield is 5%. However, if the company's shares are £200, the dividend yield is just 2.5%.
Double materiality
The principle that companies assess both how sustainability risks affect financial performance and how their activities impact society and the environment.
Draw down
A draw down is usually quoted as the percentage between the peak and trough of an investment during a specific period. It can help to compare an investment's possible reward to its risk. Alternatively, when investing in certain types of funds, particularly venture capital funds, it can also refer to when an investor commits to invest a sum of money but doesn't give it all to the fund manager immediately. The fund manager makes the investments and draws down money as required.
Duration
A measure of a bond investment's sensitivity to changes in interest rates. The longer the duration, the more sensitive it is. Calculating 'duration' for a fixed income investment such as a bond is a complicated sum. It takes into account the current value of the bond, the coupon or interest payment, the book cost, and the number of years the bond has left to run. Put simply, the higher the duration number the higher the potential return (and the greater the risk).
E
Earnings growth
The percentage change in a company's earnings per share, generally measured over one year.
Earnings yield
The earnings per share divided by the current market price.
Emerging market
Describes a country or economy that is becoming more advanced, usually by means of rapid growth and industrialization. These markets may carry higher risks due to political instability and currency volatility.
Engagement
Direct and collaborative dialogue with companies or asset managers to improve sustainability practices, manage ESG risks and enhance long-term value. Engagement may escalate through formal actions such as voting against directors where progress is insufficient.
Engagement escalation
The process of increasing pressure on companies when engagement fails, including voting against directors, divestment or public statements.
Ethical investing
An investment approach that selects or excludes investments according to an investor’s moral principles or beliefs, rather than solely on financial or sustainability grounds. Also known as “values-based investing”.
Environmental, Social, and Governance (ESG)
The three pillars of non-financial analysis, comprising:
- Environmental factors: This is the “E” of the term “ESG” (environmental, social and governance) and concerns issues related to pollution, climate change, energy use, natural resource use, waste management, biodiversity and other environmental challenges and opportunities.
- Governance factors: See “corporate governance”. This is the “G” in “ESG” and is about assessing how well a company is run. Governance factors include remuneration, board structure and corporate strategy.
- Social factors: This is the “S” of “ESG”. Social issues relate to how a company interacts with its employees, suppliers, customers, the communities it operates in, governments and regulators. These include, for example, labour standards, health and safety, supply chain management and nutrition and obesity.
ESG integration
An investment approach that incorporates ESG considerations into the investment decision alongside traditional financial analysis. ESG integration is about understanding the most significant ESG factors that an investment is exposed to, and making sure that you’re compensated for any associated risk.
ESG fund ratings
A rating, most commonly provided by third-party commercial providers like MSCI and Morningstar, that looks at a fund’s underlying holdings and scores its overall ESG risk based on specific metrics. The choice of metrics and the resulting rating vary amongst different providers.
ESG indices
IIndices traditionally track the performance of a basket of bonds or shares, such as the FTSE 100. A growing number of indices track investments by screening out certain industries or, more recently, by evaluating which companies qualify based on ESG measures. FTSE4Good indices, for example, exclude companies that do not meet specific ESG criteria.
European Green Deal
A policy framework and package of measures that aim to make Europe climate neutral by 2050, boosting the economy through green technology, creating sustainable industry and transport and cutting pollution. The 2050 climate neutrality objective, and an intermediate target of at least a 55% net reduction in emissions by 2030 against 1990 levels, were made legally binding by the European Climate Law in 2021.
Execution only
An investment service where the client makes investment decisions without receiving any advice or recommendations from a financial professional. The client takes full responsibility for their investment decisions.
Externalities
The positive or negative impacts of a company’s activities on society and the environment that are not fully reflected in financial statements, often quantified through impact tools.
F
Financed emissions
Greenhouse gas emissions associated with a financial institution’s investments and lending activities, representing indirect emissions exposure.
Fixed income
Types of investment that pay investors fixed interest or dividend payments until their maturity date. At maturity, investors are repaid the principal amount they invested. Government and corporate bonds are the most common types of fixed-income products.
Floor price
The minimum price set for an asset, commodity or carbon allowance, below which it is not permitted to trade. In the context of sustainability, a carbon floor price provides emitters with greater certainty on the cost of pollution and helps sustain the incentive to decarbonise even when market prices fall.
Fossil fuels
Natural, non-renewable energy sources, such as coal, oil and gas. These are naturally high in carbon and the gases released from burning them (such as carbon dioxide) are the primary driver of observed climate change, as set out by the Intergovernmental Panel on Climate Change in its Sixth Assessment Report (2023).
Frontier market
A subset of emerging markets that are considered less established and less developed. These markets are typically smaller, less liquid, and less accessible than traditional emerging markets.
Future
A standardized contract to buy or sell an asset at a predetermined price and date in the future.
G – I
G
Gearing
The use of borrowing to increase investment exposure. While gearing can amplify returns when investments perform well, it can also magnify losses if markets fall, making it a higher-risk strategy.
Gender pay gap
A gender equality measure that shows the difference in average or median earnings between men and women.
Government bonds
A bond issued by a government.
Green bond
A bond in which the proceeds are used by the issuing company or government specifically to fund new and existing projects with environmental benefits such as renewable energy and energy efficiency projects.
Greenhouse gases (GHG)
Carbon dioxide, methane, nitrous oxide and fluorinated gases. These gases trap heat close to the surface of the earth and are a key cause of climate change.
Greenwashing
Falsely communicating the environmental credentials of a product, service or organisation to make a company seem more environmentally friendly than it really is.
Gross redemption yield
The total return you could receive on a bond including the interest or coupon plus any capital growth.
H
Hedge fund
A collective name for funds targeting absolute returns through investment in financial markets and/or applying non-traditional portfolio management techniques. Hedge funds can invest using a broad array of strategies, ranging from conservative to aggressive.
High yield bond
A speculative bond with a credit rating below investment grade. Generally, the higher the risk of default by the bond issuer, the greater the interest or coupon.
Historic yield
The distributions declared over the past 12 months expressed as a percentage of the mid-market price, as at the date shown. It does not include any preliminary charge and investors may be subject to tax on the distribution. So, for example, if a bond has paid £10 over the last year, and the current price is £100, the historic yield is 10%.
Human capital management
The management of a company’s workforce, including recruitment, development, retention and wellbeing, recognising employees as a key driver of productivity, innovation and long-term value creation.
Human rights
Basic rights that belong to all human beings. They include the right to life, liberty, freedom from slavery and torture, and freedom of opinion and expression. The Universal Declaration of Human Rights (1948) is widely recognised as a benchmark of these basic standards.
I
Impact investing
An investment approach with a dual objective of aiming to deliver measurable positive outcomes for people and the planet alongside delivering financial returns. Positive social and environmental outcomes are often aligned to the UN Sustainable Development Goals.
ImpactIQ
ImpactIQ measures the impact that companies have on society and the environment. We developed these tools based on over 20 years of ESG investing experience. Used as part of our investment process, ImpactIQ examines the externalities of companies, the risks that unsustainable practices pose to their business, as well as their overall alignment with the UN SDGs (Sustainable Development Goals).
Impact measurement
The process of quantifying the positive and negative environmental and social outcomes of investments, often using metrics such as carbon avoided, people reached, or externalities translated into financial value.
Income distribution
The distribution of income to unit holders of pooled funds in proportion to the number of units held.
Index-linked bonds
Bonds where coupon and capital payments are linked to movements in inflation. The inflation measure used is specified beforehand.
Indices
A data series that track the performance of a group of assets or a market. They provide benchmarks for comparing investment performance and help investors track trends and make informed decisions.
Integrated reporting
Company reporting that articulates the relationship between a company’s strategy, governance and performance, and how this creates value for a range of stakeholders. The Integrated Reporting Framework, originally developed by the International Integrated Reporting Council and now maintained by the IFRS Foundation, is widely recognised as the core standard in this area.
Intergovernmental Panel on Climate Change (IPCC)
The IPCC is the United Nations body for assessing the science related to climate change.
Investment advisory
The provision of personalised advice based on the analysis of a client’s financial situation, goals and risk tolerance.
Investment grade bonds
The highest quality bonds as assessed by a credit ratings agency. To be deemed investment grade, a bond must have a credit rating of at least BBB (Standard& Poor's) or Baa3 (Moody's).
Investment trust
An investment trust is a closed ended collective investment scheme with a limited number of shares that pools together assets of a number of different investors with the aim of increasing flexibility and lowering costs. They are companies that trade in their own right which means that the price of the shares are subject to supply and demand. Unlike an open ended fund, the manager does not have to deal with fund flows and therefore never a forced seller/buyer.
IRR (Internal Rate of Return)
Is a financial metric used to evaluate the profitability of an investment over time. It shows the annual rate of growth an investment is projected to generate, taking into account all the payments in and out over the investment period.
ISA (Individual Savings Account)
An ISA is basically a type of tax-free savings account. There are two main types, a Cash ISA and a Stocks and Shares ISA. You can put money into a Cash ISA and you don't pay tax on any interest you receive. Invest in a Stock and Shares ISA, and you don't pay tax on any further dividends or capital gains.
J – M
J
Just transition
The principle that the shift to a low-carbon economy should be fair and inclusive, ensuring that workers and communities are not disproportionately affected.
L
Large cap
See Market capitalisation.
Leverage
The use of borrowed funds, either directly or through the use of a financial instrument, to increase investment returns.
Liquidity
Invested money being readily available. For example, mutual funds are liquid because their shares can be redeemed for current value (which may be more or less than the original cost) on any business day.
Long/short strategy
A strategy, used primarily by hedge funds, that involves taking long positions (buying a holding) in stocks that are expected to increase in value and short positions (borrowing a stock you don't own and selling it in the hope of repurchasing it at a lower price to return to the stock lender) in stocks that are expected to decrease in value.
Low-carbon economy
An economy that emits minimal carbon into the atmosphere. Typically, this means using low-carbon power sources rather than fossil fuels.
Low correlation
A measure of the degree to which the returns of an investment move independently of another asset, market or benchmark. Low-correlation assets can help diversify a portfolio and reduce overall volatility, and are often sought in sustainable strategies to balance thematic or transition-related exposures.
M
Market beta
A measure of how sensitive an investment is to movements in the broader market. A beta of 1 means the investment is expected to move broadly in line with the market, while a beta above 1 suggests greater sensitivity and volatility, and a beta below 1 suggests lower sensitivity.
Market capitalisation
A measure of a company's size, calculated by multiplying the total number of shares in issue by the current share price. Companies are commonly grouped according to size as small cap, mid cap or large cap. There is no consensus on the monetary boundaries of these ranges but as a rough guide in the US market: large cap is over $10 billion, mid cap is $2 billion–$10 billion and small cap is $250 million–$2 billion.
Maturity date
Refers to the date on which the principal amount of a loan, bond, or other financial instrument becomes due and is repaid to the investor.
Microfinance
Financial services typically offered to those traditionally excluded from the formal banking sector such as entrepreneurs, small business owners, the unemployed or low-income groups or individuals.
Mid cap
See Market capitalisation.
Modern slavery
Although no standard definition exists, modern slavery can broadly be thought of as the exploitation of people who are coerced into an activity by someone who controls them. It can take many forms including forced or bonded labour, human trafficking or child labour.
Mutual fund
A professionally managed collective investment scheme that pools money from a large number of investors.
N – P
N
NASDAQ
The National Association of Securities Dealers Automated Quotations (NASDAQ) system is owned and operated by the National Association of Securities Dealers. NASDAQ is a computerised system that gives brokers and dealers quotes for securities traded over-the-counter, as well as for many New York Stock Exchange-listed securities.
Natural capital
Natural assets such as ecosystems, biodiversity, water and soil that provide critical services to the economy. Degradation of natural capital creates operational, regulatory and financial risks for businesses and investors.
Natural Capital Investment Alliance (NCIA)
Launched in January 2021 under the Sustainable Markets Initiative, founded by King Charles III when Prince of Wales, the NCIA aims to accelerate the development of natural capital as a mainstream investment theme. It brings together global asset owners and managers, with an initial target to mobilise $10bn of private capital into natural capital investments by 2022.
Nature-related risks
Financial risks arising from a company’s dependence on or impact on natural capital, including biodiversity loss, deforestation and ecosystem degradation.
NAV
Net Asset Value per share (NAV) is the current dollar value of a single mutual fund share, also known as share price. The fund's NAV is calculated daily by taking the fund's total assets, subtracting the fund's liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge. The process of calculating the NAV is called pricing.
Net zero
A state where greenhouse gas emissions are reduced as far as possible and any residual emissions are balanced by removals, with companies and portfolios expected to demonstrate credible targets, transition plans and measurable progress over time.
Net Zero Asset Managers (NZAM)
An international group of asset managers supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C. We were a founding member. NZAM suspended its activities in January 2025 following the departure of several signatories, and relaunched on 25 February 2026 with more than 250 asset managers signed up to an updated commitment statement. The revised statement remains anchored in the objectives of the Paris Agreement but removes the explicit requirement to align portfolios with net zero by 2050; signatories now set their own targets and strategies independently and report on progress annually.
NURS
Non-UCITS Retail Schemes (NURS) are funds set up and managed in accordance with FCA regulations for such schemes. NURS rules allow funds to access additional asset classes over and above UCITS.
O
OEIC
An Open Ended Investment Company is a type of collective investment scheme. It is open ended, so the number of shares in the fund goes up as money is put in and goes down as it is taken out.
Open-end
This refers to a pooled investment vehicle, such as a unit trust or OEIC that can issue unlimited numbers of units or shares. This means the number of units or shares in the fund goes up as money is put in and goes down as it is taken out.
Options
When you buy an option, you have the right (but not the obligation) to buy a particular asset at an agreed price, on or before the date when your option expires.
Overweight
When a portfolio or fund has a greater percentage of one asset class, sector, geographical region or stock than the index or benchmark that it is measured against.
P
Paris Aligned
Referring to investments or strategies consistent with limiting global warming to well below 2°C, in line with the Paris Agreement.
Paris Agreement
A global commitment, agreed at COP21 in Paris in 2015, to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit it to 1.5°C. See also “2 degrees”.
Passive management
A style of investment management that aims to replicate the performance of a set benchmark. See also active management.
Physical risks of climate change
Risks to assets, operations and supply chains arising from the physical impacts of climate change, including acute events (e.g. floods, wildfires) and chronic changes (e.g. sea-level rise, temperature increases). Schroders’ physical risk framework measures the potential costs of physical climate hazards on a company’s physical assets.
Price-to-book value
The ratio used to compare a company's share price with its book value (the book value is the actual value of the company assets minus its liabilities). It can be abbreviated as the P/B ratio.
Private equity
Equity securities of companies that are not listed on a public exchange. Transfer of private equity is strictly regulated; therefore, any investor looking to sell his/her stake in a private company has to find a buyer in the absence of a marketplace.
Proxy voting
When a shareholder delegates their vote to another who votes on their behalf at company meetings. This allows the shareholder to exercise their right to vote without being physically present. Most institutional investors vote by proxy online, via phone or via email, often with the help of a third party to process voting instructions.
Q – T
R
Real return
The return generated by an investment, having been adjusted for the effects of inflation. If an investment grew in value by 5% return over one year, and the rate of inflation was 2%, the real return would be 3%.
Redemption
The repayment of the principal sum at maturity of an investment.
Redemption yield
The yield is the return earned on a bond. The redemption yield allows for any gain or loss of the original capital, which is paid back on the date of maturity. The return on a bond if it is held to its maturity date, reflecting not only the interest payments a bondholder will receive, but also the gain/loss made when it matures. Yield calculations on bonds aim to show the return as a percentage of either its nominal value or its current price.
Renewable energy
Energy collected from resources that are naturally replenished such as sunlight, wind, water and geothermal heat.
Responsible investing
An investment approach that considers ESG risks and opportunities as part of the investment process and uses engagement and voting to generate sustainable, long-term financial returns. See also “sustainable investing”.
Risk premium (plural: premia)
The extra return over cash that an investor expects to earn as compensation for owning an investment that is not risk free, so its value could go down as well as up. There are some risk premia where the extra return expected is over and above the return earned from another risk premium. For example, the small company share risk premium is the extra return an investor expects to receive over and above the return from large company shares as compensation for investing in higher risk small companies.
S
Science-Based Targets initiative (SBTi)
The SBTi defines and promotes best practice in science-based target setting. Offering a range of target setting resources and guidance, it independently assesses and approves companies’ targets in line with its criteri
Science-based targets
Carbon emissions reduction targets that are consistent with what the latest climate science says is necessary to keep global warming well below 2°C from pre-industrial levels.
Scope 1 emissions
Direct emissions that come from sources owned or controlled by the emitter, such as emissions from company vehicles.
Scope 2 emissions
Indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the company.
Scope 3 emissions
Indirect emissions occurring across a company’s value chain, including suppliers, product use and disposal, typically representing the largest share of total emissions.
Scope 3 emissions Upstream
Indirect emissions that occur across a company’s supply chain, associated with the production of goods and services it purchases. These include emissions from suppliers, raw materials, transportation of inputs and other activities prior to a company’s own operations.
Scope 3 emissions Downstream
Indirect emissions that occur after a company’s products or services leave its direct control. These include emissions from the use of products by customers, product distribution, and end-of-life treatment such as disposal or recycling.
Screening
An investment approach that filters companies based on pre-defined criteria before investment. Negative screening deliberately excludes certain companies because of their involvement in undesirable activities or sectors. Positive screening deliberately includes companies that lead their peer groups in terms of sustainability practices and performance. Positive screening is also known as a “best-in-class investment”.
Security
General term for an equity or debt instrument issued by a government or company.
Series A, B, and C
These are funding rounds that generally follow the earliest-stage "seed funding" or "angel investing. " They provide outside investors with the opportunity to invest in a more established, growing company. Series A, B, and C funding rounds are each separate fund-raising occurrences, with Series A occurring straight after the initial “seed” or “angel” funding, and Series B following Series A, and so forth.
Shareholder activism
A form of engagement where investors use their shareholder rights to promote change at a company, typically at a transformational level.
Shareholder resolution
A proposal submitted by a shareholder for consideration at a company’s general meeting, requesting that the company takes particular action.
Share blocking
When restrictions are placed on the trading of shares which are to be voted on prior to an annual general meeting.
Sharpe ratio
A risk-adjusted measure that measures reward per unit of risk. The higher the sharpe ratio, the better. The numerator is the difference between the Fund's annualized return and the annualized return of the risk-free instrument (T-Bills).
Short selling (also referred to as shorting, taking a short position, going short)
Selling assets that you have borrowed from a third party, and then buying them back at a later date to return to the lender. The short seller hopes to profit from a decline in the price of the assets between the sale and the repurchase.
Sin stocks
Investments associated with activities considered to be “unethical” or “immoral” according to an investor’s personal values or beliefs. Activities may include tobacco, alcohol, gambling and adult entertainment.
Small cap
See Market Capitalisation.
Social bonds
A bond in which the proceeds are used by the issuing company or government specifically to fund new and existing projects with social benefits such as affordable healthcare and housing.
Stakeholder
A group, entity or individual impacted by a company or country’s activity. Shareholders have historically been the priority stakeholder. More recently, however, companies and investors are realising the importance of their relationships with employees, suppliers, customers, the environment, communities and the governments and regulators with which they deal.
Stagflation
Persistent high inflation combined with high unemployment and stagnant demand in a country's economy.
Stewardship
Actively influencing the responsible allocation, oversight and engagement of capital to create long-term sustainable value. See also “active ownership”.
Stewardship codes
A set of standards that help set stewardship expectations and best practice for asset managers and asset owners. These codes are established on a country-by-country basis.
Stranded assets
Assets that suffer from premature write-downs, devaluation or conversion to liabilities, because they are unable to deliver an economic return over the longer term. Fossil fuel reserves are the most commonly known example.
Sustainability
The ability to adapt to changing pressures and responsibilities in order to survive and add value in the long term. This ability is strongly linked to a company or country maintaining strong relationships with its stakeholders.
Sustainability Disclosure Requirements (SDR)
The Financial Conduct Authority’s regime for sustainable investment products, with final rules set out in PS23/16 (November 2023). It comprises an anti-greenwashing rule for all FCA-authorised firms, in force from 31 May 2024, requiring sustainability-related claims to be fair, clear and not misleading; mandatory naming and marketing rules; product- and entity-level disclosures; and four voluntary investment labels for UK asset managers: Sustainability Focus, Sustainability Improvers, Sustainability Impact and Sustainability Mixed Goals. The regime aims to combat greenwashing, enhance transparency and help consumers navigate the market for sustainable investment products.
Sustainability factors
Any factor that can affect the value of an investment in the long term. This includes ESG factors.
Sustainability risk
A change or event in any factor that can have a negative impact on the long-term value of an investment. This includes ESG factors.
Sustainability Accounting Standards Board (SASB)
Founded in 2011 to establish industry-specific sustainability reporting standards used worldwide, and well known for its materiality map. Following the consolidation of the Value Reporting Foundation into the IFRS Foundation in August 2022, the SASB Standards are now maintained by the International Sustainability Standards Board (ISSB).
Sustainable investing
Although sustainable investing involves ESG integration, it takes things further by focusing on the most sustainable companies that lead their sector when it comes to ESG practices. Both the ESG integration and sustainable investing approaches are about engaging with company management to make sure the firm is being run in the best possible way.
SustainEx
SSchroders’ proprietary impact measurement tool. SustainEx quantifies the positive and negative environmental and social impacts of companies by translating externalities into financial value.
T
Task Force on Climate-related Financial Disclosures (TCFD)
A voluntary standard for climate-focused disclosures that aims to create consistent and comparable reporting of climate-related risks. TCFD is widely used by companies, banks, and investors. The TCFD disbanded in October 2023; its recommendations are now incorporated into IFRS S2 (ISSB), with the IFRS Foundation monitoring progress on behalf of the FSB.
Task Force on Nature-related Financial Disclosures (TNFD)
A voluntary framework for organisations to assess and disclose nature-related risks, dependencies and impacts.
Temperature Alignments (Implied Temperature Rise – ITR)
A forward-looking metric that estimates the level of global warming a company or portfolio is aligned with, based on emissions pathways and targets.
ThemEx
Schroders’ proprietary tool which aims to measure, for every company, how their products and/or services are positively or negatively aligned to each Sustainable Development Goal. This enables our investment teams to understand and track alignment of their portfolios to one or multiple SDG themes, whilst also enabling reporting to clients.
Thematic investing
Investing in companies that align to a particular investment theme such as renewable energy, waste and water management, education or healthcare innovation.
Top-down investing
an investment strategy which finds the best sectors or industries to invest in, based on analysis of the corporate sector as a whole and general economic trends (as opposed to bottom up investing).
Total expense ratio (TER)
The total fees involved in managing and operating a fund. The TER included the annual management fee and other charges, for example legal, admin, and audit costs. Following the introduction of KIIDs, TERs have been replaced with OCFs.
Total return
The total return on an investment, including any capital appreciation (or depreciation) plus any income from interest or dividends. It is measured over a set period, and is given as a percentage of the value of the investment at the start of that period.
Transition hedge
An investment or strategy used to offset the financial risks arising from the shift to a low-carbon economy. Transition hedges may include exposure to climate solutions, carbon markets or companies well-positioned for decarbonisation, helping to protect portfolios from policy, regulatory or technological disruption. See also "transition risk".
Transition plan
A company’s strategy outlining how it will reduce emissions and align with net zero targets, including capital investment and operational changes.
Transition risk
Financial risks arising from the transition to a low-carbon economy, including policy, regulatory, technological and market changes. These can result in stranded assets, rising costs or falling revenues for companies unable to adapt.
Triple bottom line accounting
An accounting approach that considers a company’s social (people) and environmental (planet) impacts in addition to its bottom line (profits) to understand the full cost of doing business.
TVPI (Total Value to Paid-In)
Is a financial metric used to show how much value a private equity investment has created compared to the amount of money originally invested. It shows, as a ratio, the total value (including both cash flows returned and the current value of what is still held) divided by the total amount invested so far.
U – Z
U
UCITS (Undertakings for Collective Investments in Transferable Securities)
UCITS funds are authorised funds that can be sold in any country in the EU. UCITS III regulations allow funds to invest in a wider range of financial instruments, including derivatives.
Underweight
When a portfolio or fund has a lower percentage weighting in an asset class, sector, geographical region or stock than the index or benchmark against which it is measured.
UN Global Compact
A voluntary pact of the United Nations to promote responsible business through its ten universally accepted principles and encourage action to advance broader societal goals, such as the UN Sustainable Development Goals (SDGs).
UN Principles for Responsible Investing (PRI)
A UN-supported international network of investors, launched in 2006, whose six principles set out voluntary commitments by asset owners and asset managers to incorporate ESG issues into their investment processes, active ownership and reporting, and to promote responsible investment across the industry.
UN Sustainable Development Goals (SDG)
A collection of 17 goals reflecting the biggest challenges facing global societies, environments and economies today. The United Nations describes the SDGs as a “blueprint to achieve a better and more sustainable future for all”.
V
Volatility
A statistical measure of the fluctuations of a security's price. It can also be used to describe fluctuations in a particular market. High volatility is an indication of higher risk.
Voting
Public equity investors typically have the right to vote on company and shareholder resolutions at annual and extraordinary general meetings (AGMs and EGMs) on issues such as electing directors, authorising remuneration or requests for the company to set emissions targets.
Vote against management
Shareholders may vote “for” or “against” proposals. Shareholders whose votes do not align with the outcome preferred by management would be classified as a vote against management.
Y
Yield
A measure of the income return earned on an investment. In the case of a share, the yield is the annual dividend payment expressed as a percentage of the market price of the share. For property, it is the rental income as a percentage of the capital value. For bonds, the yield is the annual interest as a percentage of the current market price.
Yield spread
The difference in yield between different types of bonds (for example, between government bonds and corporate bonds).
Yield to maturity
The rate of return anticipated on a bond if it is held until the maturity date.
Z
Zero carbon
A company whose emissions are zero, not achieved through carbon offsetting, but simply because they do not generate any carbon emissions. Not to be confused with net zero.