Glossary

The investment basics

Fiduciary duty

The responsibility of charity trustees to act exclusively in the best interests of their charity in the management of its affairs and the application of its property to further the charity’s purposes for the public benefit.  

A unit of ownership in a company. If you own shares, you own part of the company. 

Someone who owns shares in a company. 

A market where shares and other publicly traded investments are bought and sold. 

A company whose shares are available to buy and sell on a public stock exchange. Anyone can buy or sell them. 

Investments that are not traded on public stock exchanges, such as private equity, private debt, infrastructure and some property investments. 

Companies or investments whose shares or interests are not traded on a public stock exchange. 

Countries whose economies and financial markets are still developing relative to established “developed” markets. Definitions for emerging markets vary between ISPs. 

A structure where different groups of investors hold different classes of units or shares in the same underlying company or fund. The classes can have different features, such as different voting rights. 

Investments representing ownership in a company. Investors can make money through increases in the share price and dividends but can also lose money if the company falls in value. 

A way of lending money to a company, government or other organisation. The borrower normally pays interest and repays the original amount at an agreed date. 

Investments in companies that are listed and traded on public stock exchanges. 

Money lent to companies, governments or other borrowers through bonds or similar instruments that can usually be traded in public markets. 

An investment approach that combines different asset classes, such as equities, bonds, property and private markets, into one product/fund. 

A pool of money collected from investors and managed together according to a defined investment strategy. 

A fund that invests in other investment funds rather than mainly investing directly in individual companies or assets. 

A fund that generally has a fixed lifespan and does not allow investors to withdraw their money whenever they choose. Private equity funds are often structured this way. 

Arrangements where investment or funding is provided to support activities intended to achieve measurable social outcomes, with payments or financial returns linked in some way to those outcomes. 

A group of investments designed to represent a particular market or part of a market. An index can be used to track performance or as a benchmark. 

The full set of investments that an investment service provider could potentially invest in after considering factors such as geography, asset class, size, liquidity and exclusions. 

Impact and sustainability

Impact investing

Investing with the intention of generating positive, measurable social or environmental impact alongside a financial return. 

Environmental, social and governance issues that an investor may consider when assessing an investment. These factors can affect an investment’s financial performance and its wider effects on people and the planet. There are many topics under each heading, but common examples include climate change (E), workers’ rights (S), and board governance (G). 

Investing in ways that take environmental, social and/or governance (ESG) factors into account, and often try to contribute to, or be aligned with, more positive outcomes. It is a broader term than impact investing and does not necessarily mean that creating positive impact is the primary objective of the product/fund. 

The intention to deliberately create positive social or environmental impact through an investment, rather than impact simply being an accidental by-product. 

The difference an investor or investment makes compared with what would have happened without that investment or intervention. 

Investing around a particular theme or issue (or set of themes/issues).  

Ensuring people can access useful, affordable financial products and services such as bank accounts, credit, insurance and payments. 

A model where assets or businesses are owned and/or controlled by members of a community, rather than solely by private investors or distant owners. 

Pay gap reporting measures the difference in average earnings between groups of employees, such as women and men, across an organisation. It is different from equal-pay analysis, which asks whether people are being paid differently for the same work. 

Investment returns and performance

Financial return / return

The money gained or lost from an investment over a period, usually expressed as a percentage and often, though not always, reported on an annualised basis. It can come from increases in value, interest or dividends. 

The possibility that an investment does not perform as expected, including losing money or money not being available when it is needed. Financial risk can come from several sources, including changes in markets, borrowers failing to repay money, currency movements, concentration in particular investments, and difficulty selling an investment to get money when you need it (liquidity). 

A measure of the annualised return on an investment that takes into account the timing of money invested and money received. It is particularly common in private markets. 

The total value received or remaining from an investment divided by the amount originally invested. For example, 2x means £2 of value for every £1 invested. It is particularly common in private markets. 

A stated financial return that the investment service provider aims to achieve, often expressed as a percentage per year. 

A financial return target linked to inflation as measured by an index like the Consumer Price Index (CPI) or the Retail Price Index (RPI). For example, “CPI + 3%” means aiming to achieve a financial return three percentage points above inflation each year. 

A measure of how the prices of a basket of goods and services change over time. It is commonly used to measure inflation and often used in financial return targets for investors. 

A standard used to judge financial return performance. It is often an index representing the market an investment is intended to perform against. 

Specific indices and market terms

MSCI World Index

An index tracking large and mid-sized companies across developed countries. It covers approximately 85% of the total value of company shares that are available for investors to buy and sell in each country. 

A widely used US stock market index tracking 500 large US companies. 

A widely used global bond index covering investment-grade fixed income markets across major developed and emerging markets. 

A commonly used nickname for seven very large US technology and technology-related companies whose share prices have had a particularly large influence on US stock market performance. The companies are: Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla. 

The very largest publicly listed companies, generally measured by their market value (typically having capitalisation of $200 billion or more). Market value is calculated by multiplying the share price by the number of shares in issue. 

Moderately sized listed companies, generally measured by their market value (typically having capitalisation of $250 million to $2 billion). Market value is calculated by multiplying the share price by the number of shares in issue. 

Liquidity and access to money

Liquidity

How easily and quickly an investment can be turned into cash without having to accept a significant reduction in price. 

The risk that an investment cannot be sold or redeemed quickly enough, or without taking a significant loss in value. 

An investment that can be withdrawn or sold periodically, but not necessarily whenever the investor wants. For example, it might allow quarterly withdrawals subject to notice periods or limits. 

A period during which investors are restricted from withdrawing their money. 

Investment practice and influence

Engagement / active engagement

When an investor actively communicates with companies, investment service providers, policymakers or other organisation to encourage change or better practices. It is a common practice by investors focused on impact and sustainable investing. 

Taking stronger action when engagement is not producing enough progress. For company engagement, this might include voting against management, filing shareholder resolutions, collaborating with other investors or ultimately selling the investment (divesting). 

Rules that prevent an investor from investing in certain companies, sectors, activities or countries because of ethical, environmental, social or other concerns. 

Specific social and environmental themes

B Corp(s)

Companies certified by B Lab against standards covering social, environmental and governance performance, transparency and accountability. Certification is independently assessed and verified. 

The legal responsibilities of States in their conduct with each other, and their treatment of individuals within State boundaries. Its domain encompasses a wide range of issues of international concern such as human rights, disarmament, international crime, refugees, migration, problems of nationality, the treatment of prisoners, the use of force, and the conduct of war, among others. It also regulates the global commons, such as the environment, sustainable development, international waters, outer space, global communications and world trade.  

As defined by the 1948 UN Genocide Convention, genocide means any of the following acts committed with intent to destroy, in whole or in part, a national, ethnic, racial or religious group, as such: 

  • Killing members of the group; 
  • Causing serious bodily or mental harm to members of the group; 
  • Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part; 
  • Imposing measures intended to prevent births within the group; 
  • Forcibly transferring children of the group to another group. 

Weapons considered especially harmful or unacceptable because of their nature or effects. The term often includes weapons such as cluster munitions, anti-personnel mines, and sometimes nuclear weapons; exact investment definitions vary. 

Weapons that are not nuclear, chemical or biological weapons. They include firearms, artillery, tanks, aircraft and conventional missiles.