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Glossary

A tool to interpret and understand the language associated with finance, corporate social responsibility and environmental sustainability.

sustainability iconSustainability terminology

E-Procurement

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This is a web-based procurement system, through which the company can purchase goods and services needed, eliminating or minimizing warehouse storage and stocks of materials.
EAD - Exposure at Default   Relating to positions on or off the books, it is defined as the estimated future value of an exposure at the time of default of a debtor. Only banks meeting the requirements for the adoption of the Advanced IRB are legitimised to estimate EAD. The others are required to make reference to statutory estimates.
ECB (European Central Bank)   The Bank created to monitor the monetary policy of the 12 countries that have converted to the euro from their national currencies.
ECF

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The brand ECF (Elementary Chlorine Free) indicates that the pulp used for paper production is bleached without using chlorine dioxide.
Ecological footprint

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As our feet leave a footprint on the ground, so our lifestyle leaves a mark on the Earth. The Ecological Footprint is a synthetic index that measures the impact of a given population, through its consumption, on a certain area. It represents the amount of biologically productive land and sea area necessary to supply the resources a human population consumes, and to assimilate associated waste. For its capacity to integrate into a single indicator a lot of information and for its communicative impact, the Ecological Footprint has been included in the set of the European Common Indicators.
Economic capital   Economic capital is an internally prescribed amount of capital. It is the amount of capital a bank or insurer should have to support the risks it faces.
EDF - Expected Default Frequency   Frequency of default, normally based on a sample inside or outside the bank, which represents the average risk level associable with an opposite party.
EIB (European Investment Bank)   The financial body of the European Union which grants loans and guarantees to finance certain categories of investment projects.
EMAS

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The EMAS certification (Eco-Management and Audit Scheme), adopted at European level with a standard (EU Regulation 761/2001), certifies the voluntary adoption by an organization of an Environmental Management System, periodic evaluation of such system and dissemination of information on its environmental performance to the public and other stakeholders. EMAS requires the preparation and publication of an environmental statement. The organization in question is listed on a European register.
Embedded value   The embedded value is an estimate of the economic value of a closed portfolio company, regardless of the value attributable to future production. Embedded value equals the company shareholders' equity adjusted to market value as of the date of valuation, plus the value of the policy portfolio as of the date of evaluation.
Emissions

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The release of a substance into the atmosphere. The polluting gases released into the atmosphere by human activities are responsible for photochemical smog. A significant part of air pollution, especially in urban areas of Western countries, is due to exhaust gases from motor vehicles. To protect the environment and health, restrictions have been introduced to reduce the levels of pollutants in the atmosphere, such as restrictions on the movement of polluting vehicles in the cities. The pollutants that are measured to assess the air quality in cities are: ozone, nitrogen oxides, sulfur oxides, PM10 and PM2.5, benzene and carbon monoxide.
Energy account

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Incentive system to promote the use of renewable energy , in force in Italy since September 2005. It envisages for the possibility of selling the energy produced by photovoltaic systems directly to GSE (Gestore dei servizi energetici) at a fixed rate for 20 years.
Energy certification

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From the environmental point of view becomes increasingly important to certify the commitment also in the energy field. For this reason in 2009 the UNI CEI EN 16001 certification was launched, which specifies the requirements for Energy Management Systems (see glossary entry). The European standard was the basis for the publication of the ISO 50001 (International Standard for Energy Management) in June 2011.
Energy manager

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The Italian law 10/1991 requires that all parties, public or private, which are large consumers of energy, expressed in tons of oil equivalent (toe), must adopt an "Energy Manager". The task can be performed by an employee or external consultant, through official assignment. The skill to carry out the task is not specified in detail by legislation, although technical-scientific training in energy is mentioned as the most appropriate. As this figure supports the decision maker, such training should also be associated with managerial skills and knowledge of the fundamentals of energy analysis.
Environmental and social risks

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Environmental risk is the possibility of causing damage due to incorrect handling of an environment variable or the negative environmental impacts that may result from an activity and the resulting penalties or compensation imposed. The environmental dimension also applies to the bank (credit risk), particularly in relation to the behaviour of its customers, especially corporate: environmental risk, in practice, is mainly related to the risk taken by corporate customers. We talk about social risk when the company violates the rules of labor protection or loyalty towards customers, or, still more serious, is held responsible, even indirectly, for serious human rights violations made by parties external to the company itself.
Environmental certification

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Certification is a statement which ensures that a particular business management system meets a specified standard. Environmental certification is a valid means of establishing their own corporate social responsibility also for financial institutions. From the environmental point of view, there are several recognized certification standards. At the moment the most important are ISO 14001 and EMAS certification (see glossary entries).
Environmental impact   Any environmental change, positive or negative, partly or fully deriving from the organisation's activity, products or services.
Environmental management systems

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An Environmental Management System is an organizational, technical and management structure, which is the "heart" and the engine of the activities and processes for the management of environmental aspects associated with the business activity. Internationally recognized guidelines are those of the International Organization for Standardization (ISO) and the Eco-Management and Audit Scheme (EMAS) - see glossary entries - which in recent years have provided companies operating in services and industry sectors with national and international standards of reference.
Environmental report

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The Environmental Report is the accounting tool that summarizes in a single document the environmental data collected in detail by the company IT system during the year. Its function is to present in quantitative and qualitative terms the type and extent of the environmental impact deriving from the company’s activity, such as the consumption and depletion of natural resources as well as the emission of pollutants. The environmental report is a management tool for internal use but may also have relevance outside: while on the one hand, it provides general information to the business management functions for the management and control of the interactions between business and environment (constituting a useful reference for the purpose of LCA analysis - see glossary entry - or to set up an Environmental Management System - see glossary entry), on the other it is the starting point for external communication tools.
EPS (Earnings per share )   Net profit divided by the average number of outstanding shares.
Equator principles

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The Equator Principles are a set of voluntary guidelines designed to ensure respect for the environment and social equity in international project financing. The principles are based on the environmental and social standards of the International Finance Corporation (IFC), the World Bank agency that deals with private investment in developing countries. They arise from the awareness of the responsibility that lies within the choice of projects be financed and the opportunity to promote environmental and social communities.
Equity hedge/long-short (Funds)   Funds that predominantly invest in stocks with the possibility of creating hedging strategies by means of short sales of the same stocks or strategies in derivatives contracts involving securities or market indexes.
Equity origination   Increase of a company's risk capital achieved by floating a new issue of stock.
ESCO

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The Energy Service Companies (ESCO) are companies which carry out actions to improve energy efficiency and/or to reduce energy consumption, taking the risk and releasing the final customer from any organizational burden and investment. The savings achieved are shared between the ESCO (that reuses them to repay the investments) and the final customer with different types of trade agreement on a pluriannual basis.
Eternit free

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This is the name of the campaign promoted by Legambiente aimed at removing asbestos and replacing it with photovoltaic panels. Intesa Sanpaolo and Legambiente have signed a protocol with the aim of promoting this project with customers.
Ethibel investment register

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Forum Ethibel is a leading European research organisation in the social and environmental ratings. The Investment Register consists of over 370 companies that, on a worldwide level, were deemed the most advanced in terms of sustainability. The research is based on an assessment carried out by VIGEO, the leading European expert in the assessment of companies and organisations with regard to their practices and performance on environmental, social and governance (“ESG”) issues.
Ethical finance - socially responsible finance

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Both definitions refer to a common concept, that is to a vision of financial intermediation, which includes considerations other than the sole maximization of profit, taking into account the effects it creates in terms of environmental protection, social equity and human rights promotion.
Ethical fund   An investment fund that acts according to SRI (Socially Responsible Investment) criteria.
Event driven (Funds)   Funds that invest in opportunities arising out of significant events regarding the company sphere, such as mergers, acquisitions, defaults and reorganisations.
EVT - Extreme Value Theory   Statistical methodologies that deal with extreme hypothetical deviations compared to the average probable distribution of specific events.
Exotics (derivatives)   Non-standard instruments unquoted on the regular markets, whose price is based on mathematical models.
External Audit   An examination of a company's accounting records and books conducted by an outside professional, in order to determine whether the company is maintaining records according to the generally accepted accounting principles (GAAP).
Facility (commission)   Commission calculated with reference to the amount of profit on a loan.
Factoring   Contract of cession of commercial credits, activated by specialised firms for purposes of management and collection, normally associated with the granting of a loan to the transferor.
Fair value   It is the consideration for which an asset could be exchanged or a liability extinguished, in a free transaction between acquainted with and independent parties.
Fair value hedge   Hedging against exposure to a variation in the fair value of a budgeted item, attributable to a particular risk.
Fairness/Legal opinion   An opinion given on request by experts of recognised professionalism and competence, as regards the congruity of the economic terms and/or lawfulness and/or technical aspects of a given transaction.
FASB (Financial Accounting Standards Board)   Independent agency which establishes U.S. GAAP.
FED (Federal Reserve System)   The organisation of the 12 Federal Reserve Banks that functions as the central bank of the U.S.A. The system controls monetary policy, regulates the cost of money and the money supply to local banks, and supervises international banking by means of its agreement with the central banks of other countries.
Financial inclusion

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Financial inclusion means access to banking services for individuals who do not have the necessary requirements and for this reason are often at risk of social exclusion. One of the tools to promote financial inclusion is Microcredit (see glossary entry), which provides funding in relation to the individual and his project, based on a relationship of trust between lender and beneficiary. A typical instrument in international cooperation, with increasing frequency it is also used in developed countries: this phenomenon is due to the fact that the growth of total income in these countries has not solved - and in some cases, has exacerbated - the problem of equity distribution. The gap between the richest group and the poorest remains large and, in absolute terms, the number of households who live below the poverty line increases. Furthermore, the heterogeneity of the composition of the society (both cultural and ethnic) has contributed to establish areas of marginality.
Financial instruments quoted in an active market   A financial instrument is considered as quoted on an active market if the quotations, reflecting normal market transactions, are promptly and regularly available through organised markets (exchanges), middlemen, brokers, intermediaries, companies operating in the sector, quotation services or authorised bodies, and such prices represent effective and regular market transactions taking place over a normal period of reference.
FIRE

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The Italian Federation for Rational use of Energy - FIRE - is an independent technical scientific and non-profit association, founded in 1987, whose purpose is to promote the efficient use of energy, by supporting, through institutional activities and services, those who operate in this sector and by promoting a positive evolution of the legislative and regulatory framework.
Float (or floating capital)   Number of shares of a company that are outstanding and available for trading by the public.
Forward Rate Agreement   See "Forwards."
Forwards   Forward contracts on interest rates, exchange rates or stock indexes, generally negotiated in over-the-counter markets and whose conditions are established at the time when the contract is entered into, but which will be fulfilled at a predetermined future date, by means of the receipt or payment of differentials calculated with reference to parameters that vary according to the purpose of the contract.
Front office   The complex of operating units designed to deal directly with the clientele.
FSC

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The FSC certification identifies products which contain wood from forests managed properly and responsibly, according to strict environmental, social and economic standards.
FTSE 100 (Financial Times Stock Exchange 100 share index)   An index of the share prices of the UK's 100 largest companies (by market capitalisation).
FTSE4GOOD   Index of the socially responsible investments.
FTSE4Good

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The FTSE4Good Index Series was set up in 2001 by the Financial Times and the London Stock Exchange in order to measure the performance of companies in terms of compliance with globally recognized corporate responsibility standards and to promote investment in those that best meet these criteria. The information used to decide whether to include a company in the indices is collected and verified by EIRIS (Ethical Investment Research Service), a leading independent worldwide agency, which provides comprehensive and reliable information to all actors in the field of socially responsible investing.
Funding   The procurement of capital, in various forms, to finance the company business or particular financial transactions.
Futures   Standardised future contracts under which the parties agree to exchange securities or physical commodities at a fixed forward price and at a future date. Such contracts are normally traded on organised markets, where their execution is guaranteed. In practice, futures on securities often do not involve the physical exchange of the underlying value.
GAAP (Generally Accepted Accounting Principles)   A widely accepted set of rules, conventions, standards, and procedures for reporting financial information.
Global compact

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The UN Global Compact is a voluntary initiative launched by the United Nations, which aims at promoting corporate social responsibility in businesses through the adherence to ten fundamental principles relating to human rights, labour, the environment and the fight against corruption.
Human Rights
> - to support and respect the protection of internationally proclaimed human rights
- to make sure that they are not complicit in human rights abuses
Labour
- to uphold the freedom of association and the effective recognition of the right to collective bargaining
- to eliminate all forms of forced and compulsory labour
- to abstain from the use of child labour
- to eliminate discrimination in respect of employment and occupation
Environment
- to support a precautionary approach to environmental challenges
- to undertake initiatives to promote greater environmental responsibility
- to encourage the development and diffusion of environmentally-friendly technologies
Anti-Corruption
- to work against corruption in all its forms, including extortion and bribery.
Global custody   An integrated package of services including, in addition to the custody of securities, the performance of administrative activities relating to the settlement of securities, collections and payments, the deposit bank and management of un-invested liquidity, as well as various forms of reporting on the performance of the portfolio.
Goodwill   The value attached to intangible assets as part of the purchase price of a shareholding in a going concern.
Greca   Identifies a situation of greater or lesser sensitivity with which a derivative contract, typically an option, reacts to variations in the value of the underlying asset, or other parameters of reference (typically intrinsic volatility, interest rates, stock prices, dividends and correlations).
Green paper ec – july 18, 2001

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The Green Paper "Promoting a European framework for corporate social responsibility" published in July 2001 was the first step of the European Union to promote corporate social responsibility at both European and international level in order to make the most of existing experiences, encourage the development of innovative practices, improve transparency and strengthen the reliability of assessment and validation of the various initiatives undertaken in Europe. In this paper an updated definition of Corporate Social Responsibility is given: "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis." The Green Paper was followed by several Communications of the European Commission (2001, 2002, 2006) and in October 2011 a new strategy was presented - A renewed EU strategy 2011-14 for Corporate Social Responsibility (COM 2011/681). In particular, the new document: takes note of the initiatives and of the changes from the previous Commission Communications on CSR (Green Book, Communications); believes that a change of pace and a more incisive and articulate intervention are necessary; proposes a new definition of CSR (simpler but broader); sets out the agenda for 2011-2014 The definition of CSR is thus reformulated: "the responsibility of enterprises for their impacts on society".
Greenhouse gases

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This term defines the gases in the atmosphere which withhold part of the solar radiation and cause warming. They can be either natural or anthropogenic, ie caused by human activities (such as the burning of hydrocarbons). Their increasing concentration in the atmosphere produces a heating effect of the Earth's surface and lower atmosphere and encourages the warming trend of the land surface and climate change. Among the various greenhouse gases the Kyoto Protocol takes into account a basket of 6 greenhouse gases as particularly harmful to the atmosphere: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6).
GRI - global reporting initiative sustainability reporting guidelines

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The Global Reporting Initiative (GRI) is a non-profit organization that has pioneered and developed a comprehensive Sustainability Reporting Framework that is widely used around the world. Adherence to these guidelines is voluntary and enables all organizations (businesses, associations, etc.) to measure and report their economic, environmental, social and governance performance. Launched in 1997, the Global Reporting Initiative enjoys strategic partnerships with the United Nations Environment Programme (UNEP) and the UN Global Compact (see glossary entries).
Health and safety

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Each company must take the measures necessary to ensure that its employees perform their duties safely and without damaging their health.
The key elements for achieving this goal are:
Identification of the key figures for the health and safety management
• Person responsible for protection and prevention
• Physician responsible for the assessment of the risks that can lead to occupational diseases
• Workers' representative for safety issues
• First aid and fire-fighting officers
Annual meeting on security
• the key figures for security management must meet at least once a year to make or update the risk assessment and define actions for improvement
Risk Assessment
• this must be carried out by the Safety Officer in collaboration with the relative physician, the safety representative and all the other relevant persons (employer, production manager, etc.)
• it must be updated annually
Improvement plan
• on the basis of risk assessment, the activities needed to reduce must be defined
Training
• All employees must be constantly trained, informed and made aware of the importance of Health & Safety in the workplace through specific training for key personnel and for workers exposed to specific risks (eg handling chemicals, using forklifts etc.) and a generic training on system security management (roles, organization, tools).

Health & Safety takes on even greater importance when you have multiple companies working in the same place. In these cases it is important that the company that coordinates the work makes sure that all the other companies have adopted protection and prevention measures. Moreover, the evaluation of the risks of interference among the different companies’ activities becomes crucial.
Hedge accounting   Rules pertaining to the accounting of hedges.
Hedge fund   Fund of a speculative nature, which is allowed to use aggressive strategies that are unavailable to mutual funds. Restricted by law to a limited number of investors per fund, most hedge funds set extremely high minimum investment amounts (¿ 500.000 in Italy). As with traditional mutual funds, investors in hedge funds pay a management fee; however, hedge funds also collect a percentage of the profits (usually 20%).
Hold   Recommendation of an analyst neither to buy or sell a stock .
Holding   Financial or limited company which owns the majority of the shares of other companies or is part of another company and controls its board of directors.
IAS/IFRS   The IAS (International Accounting Standards) are issued by the International Accounting Standards Board (IASB). The standards issued after July 2002 are called IFRS (International Financial Reporting Standards).
IDEM (Italian Derivatives Market)   Market segment of the Italian Stock Exchange (Borsa Italiana) dedicated to derivatives.
IFC

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IFC is a member of the World Bank Group and it is the largest global development institution focusing on the private sector in developing countries.
IFRS (International Financial Reporting Standards)   As from 2005, all European listed companies must report in conformity with IFRS (previously known as IAS). This means that the majority of assets and liabilities have to be valued and classified differently.
ILO

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The International Labour Organization (ILO) is the UN agency in charge of promoting opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and human dignity. The main aims of the ILO are to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue on work-related issues.
IMF (International Monetary Fund)   A specialised agency of the United Nations established in 1945 to promote international trade, stabilise exchange rates, and help countries experiencing short-term balance of payments difficulties to maintain their exchange rates.
Impairment   When referred to a financial asset, a situation of impairment is identified when the book value of the asset exceeds the estimated recoverable amount of the same.
Index linked   Policies whose performance at maturity depends on the performance of a parameter of reference, which may be a stock index, a basket of securities or some other indicator.
Indirect bank collection   Securities and the like owned by third parties on deposit, not issued by the bank at nominal value, excluding certificates of deposit and bank bonds.
Indirect environmental impact   Environmental change deriving from the activities of third party organisations directly related to the main one. In the case of a bank, for example, reference is made to the impact of customer companies performing activities financed with resources lent by the bank.
Institutional investors   Entities with large amounts to invest, such as investment companies, mutual funds, brokerages, insurance companies, pension funds, and investment banks.
Intangible assets

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These are assets you cannot touch or see but have value for the company, such as brand, patents, human resources, know-how, the rate of customer satisfaction etc.
Integrated report

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The Integrated Report is a process that provides for the reporting of the results of an organization through the alignment of financial and non-financial data (and not a mere combination of this information in an Annual Report or in an additional section to the Financial Report). Financial information is thus integrated with information on strategy, development plans, risks, opportunities and issues related to governance and social and environmental impacts.
Internal dealing   Transactions of purchase and sale performed by the directors and other "relevant people", that is those people who, by virtue of their position, have access to privileged information concerning shares (excluding non convertible bonds) of the same company.
Intraday   Used to refer to an investment/divestment transaction performed in the course of a single day involving the negotiation of a security. It is also used with reference to prices quoted during any one day.
Investment banking   Dealing in the sale and purchase of financial instruments and portfolio management, either jointly or separately.
Investment grade   Term used with reference to quality bonds that have received a medium/high rating (e.g., no less than BBB on Standard & Poor's index).
Investments in fixed assets   Fixed assets owned for the purpose of obtaining income and/or benefiting from an increase in their value.
Investor relations   A department in most medium and large public companies that provides investors and market intermediaries with an accurate account of the company.
IPO (Initial public offering)   A company's first sale of stock to the public.
IRS - Interest Rate Swap   A binding agreement in which two parties agree to exchange flows on some predetermined notional amount with a fixed/variable or variable/variable rate.
ISO (International Standards Organization)   World federation of organisations setting national technical standards. The main reference standards issued include the ISO 14001 (related to environmental management systems) and the ISO 9000 (related to quality systems).
Issuer   An entity that places a financial asset in the marketplace.
Joint venture   A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share the profits and losses of the enterprise.
Junior   In a securitisation transaction it is the lowest-ranking portion of the securities issued, being the first to bear losses that may occur in the course of the recovery of the underlying assets.
Junk bond   A high-risk, non-investment-grade bond with a low credit rating, usually BB or lower; as a consequence, it usually has a high yield.
KPI

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KPI is the abbreviation for "Key Performance Indicators". It represents the set of indicators to measure the performance of a particular activity or process.
Kyoto Protocol   Protocol applying the United Nations Conference Framework Convention on Climate Change. The Protocol imposes the reduction of greenhouse gas emissions both to industrialised countries and to countries with transition economies, on the basis of "mutual but differentiated responsibilities". Such reductions are to be achieved between 2008-2012 so as to obtain a global reduction of the emissions of 3.8% compared to 1990 values.
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