04 - ESG Frameworks

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ESG Frameworks — ISS & STOXX Glossary

About This Section

This glossary covers reporting frameworks, disclosure standards, taxonomies, and international sustainability initiatives. Terms are sourced from STOXX and ISS Governance official documentation, methodology guides, and publications.

~36 terms across multiple sources.

B

CDP (Carbon Disclosure Project)

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“You cannot manage what you do not measure, and CDP provides the global measurement system for corporate environmental impact.”

— Paul Dickinson, founder of CDP

CDP is a not-for-profit charity that runs a global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts. Founded in 2000, CDP collects self-reported data on climate change, water security, and deforestation through annual questionnaires sent to thousands of companies worldwide. Responses are scored from A (leadership) to D- (disclosure), with F indicating failure to disclose.

Note

CDP matters because it provides one of the largest standardized datasets on corporate environmental performance. ISS ESG and STOXX index methodologies frequently reference CDP scores and disclosure status when screening companies for climate-related risks and inclusion in sustainability indices. Investors use CDP data to compare how transparently companies report emissions and resource use.

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Convention on Cluster Munitions

▰ 1

The Convention on Cluster Munitions (CCM) is an international treaty adopted in Dublin in 2008 and entered into force in 2010. It prohibits the use, production, stockpiling, and transfer of cluster munitions — weapons that release submunitions (“bomblets”) over a wide area — and establishes a framework for victim assistance, clearance of contaminated areas, and stockpile destruction. Over 110 states have joined the convention. Cluster munitions are considered particularly indiscriminate because of their wide-area effects and the high failure rate of submunitions, which remain as de facto landmines long after conflicts end.

Note

The Convention on Cluster Munitions is one of the key treaties referenced in controversial weapons screening across the ESG industry. ISS ESG identifies companies involved in the production of cluster munitions or key components, and STOXX ESG indices systematically exclude these companies. Cluster munitions screening is mandated or recommended by numerous national regulations — notably Belgian and Norwegian law — and is standard practice in responsible investment frameworks. Involvement in cluster munitions is considered one of the most severe norms violations in ESG assessment.

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CSRD (Corporate Sustainability Reporting Directive)

▰▰ 10

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“The CSRD transforms sustainability reporting from a voluntary exercise into a legal obligation with the same rigour as financial reporting.”

— Mairead McGuinness, EU Commissioner for Financial Services, 2022

The Corporate Sustainability Reporting Directive is an EU legislative instrument (Directive 2022/2464) that modernizes and strengthens the rules concerning social and environmental information that companies must report. Published by the European Commission, the CSRD replaces the earlier NFRD and dramatically expands the number of companies subject to mandatory sustainability reporting. It requires assurance of reported information, mandates the use of European Sustainability Reporting Standards (ESRS), and introduces digital tagging of disclosures.

Note

The CSRD is a watershed regulation for ESG investing in Europe. It requires companies to apply the principle of double materiality — reporting on how sustainability issues affect the business and how the business affects people and the environment. For STOXX index users and ISS clients, the CSRD means a significant increase in the volume and comparability of corporate sustainability data available for analysis, screening, and index construction.

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D

Do No Significant Harm (DNSH)

▰▰ 7

Do No Significant Harm is a principle embedded in the EU Taxonomy Regulation (Regulation 2020/852) requiring that an economic activity, in order to qualify as environmentally sustainable, must not significantly harm any of the six environmental objectives defined by the Taxonomy: climate change mitigation, climate change adaptation, sustainable use of water and marine resources, transition to a circular economy, pollution prevention and control, and protection of biodiversity and ecosystems. Technical screening criteria specify the thresholds for what constitutes “significant harm” for each objective.

Note

DNSH acts as a safeguard within the EU Taxonomy — an activity cannot be labeled “green” simply because it contributes to one environmental goal while damaging another. For investors using STOXX ESG indices or ISS ESG data, DNSH compliance is a critical filter when assessing whether a company’s revenue truly qualifies as taxonomy-aligned. Failing DNSH on any single objective disqualifies the activity.

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Double Materiality

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“Double materiality recognises that a company is not an island. It both shapes and is shaped by the environmental and social systems it operates in.”

— Patrick de Cambourg, former chair of EFRAG Sustainability Reporting Board

Double materiality is a reporting concept formalized in the EU’s CSRD and operationalized through the ESRS. It requires companies to assess and disclose sustainability matters from two perspectives simultaneously: (1) “impact materiality” — how the company’s activities affect people and the environment (inside-out), and (2) “financial materiality” — how sustainability risks and opportunities affect the company’s financial position and performance (outside-in). A matter is reportable if it is material from either perspective.

Note

Double materiality distinguishes European ESG disclosure from frameworks like ISSB/SASB that focus primarily on financial materiality (enterprise value). For investors relying on ISS ESG ratings or STOXX sustainability indices, double materiality means that European companies will disclose a broader set of sustainability impacts — even those that may not yet have a clear financial consequence — providing a richer dataset for ESG analysis.

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E

Equator Principles

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“The Equator Principles established that banks have a responsibility to ensure the projects they finance do not cause undue environmental or social harm.”

— International Finance Corporation (IFC), on the adoption of EP in 2003

The Equator Principles are a risk management framework adopted by financial institutions to determine, assess, and manage environmental and social risk in project finance transactions. First adopted in 2003 and currently in their fourth iteration (EP4, effective July 2020), the Equator Principles apply to project finance, project-related corporate loans, bridge loans, and project-related refinance and acquisition finance across all industry sectors globally. They are based on the International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability and the World Bank Group Environmental, Health, and Safety Guidelines.

Note

The Equator Principles matter because they represent the financial industry’s primary self-regulatory framework for managing environmental and social risks in large infrastructure and industrial projects. Over 130 financial institutions in 38 countries have adopted them, covering the majority of international project finance. ISS ESG assesses banks and financial institutions on their adherence to the Equator Principles as part of governance and sustainability evaluations. For STOXX financial-sector ESG indices, adoption of the Equator Principles is a positive indicator of a bank’s environmental and social risk management maturity.

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ESRS (European Sustainability Reporting Standards)

▰▰ 15

The European Sustainability Reporting Standards are a set of mandatory disclosure standards developed by EFRAG (European Financial Reporting Advisory Group) and adopted by the European Commission as delegated acts under the CSRD. The first set (ESRS Set 1) covers cross-cutting standards (ESRS 1 and ESRS 2) and topical standards spanning Environmental (E1-E5), Social (S1-S4), and Governance (G1) themes. Companies must apply double materiality to determine which topical standards are relevant.

Note

ESRS standardizes sustainability reporting across the EU in a way that earlier voluntary frameworks could not. For ISS and STOXX, ESRS disclosures will become a primary source of structured ESG data for European companies, improving comparability and reducing reliance on estimated data points. Index providers can leverage ESRS-mandated datapoints — such as Scope 1/2/3 emissions, workforce metrics, and governance structures — for rules-based index construction.

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EU Taxonomy

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“The EU Taxonomy is a common language for sustainable finance. Without a shared definition of ‘green,’ every claim is just marketing.”

— European Commission, Technical Expert Group on Sustainable Finance, final report (2020)

The EU Taxonomy (Regulation 2020/852) is a classification system established by the European Union to define which economic activities qualify as environmentally sustainable. It sets performance thresholds — known as technical screening criteria — for activities to be considered as making a “substantial contribution” to at least one of six environmental objectives while doing no significant harm (DNSH) to the remaining five and meeting minimum social safeguards (good governance). Financial market participants and large companies must disclose the proportion of their activities that are taxonomy-eligible and taxonomy-aligned.

Note

The EU Taxonomy is foundational to sustainable finance in Europe. STOXX uses taxonomy alignment data to construct green revenue and climate transition indices. ISS ESG provides taxonomy alignment assessments that investors use to meet regulatory disclosure obligations under SFDR. Understanding the difference between “taxonomy-eligible” (the activity is covered by the Taxonomy) and “taxonomy-aligned” (the activity meets all criteria) is essential for interpreting these data points correctly.

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European ESG Template (EET)

▰ 4

The European ESG Template is a standardized data exchange template developed by FinDatEx (Financial Data Exchange Templates), an industry initiative supported by major European financial trade associations. The EET enables fund manufacturers to transmit ESG-related data — including EU Taxonomy alignment percentages, SFDR PAI indicators, DNSH assessments, and exclusion-based screening results — to distributors and financial advisors in a consistent, machine-readable format. It is designed to facilitate compliance with MiFID II sustainability preferences requirements.

Note

EET is the plumbing that makes ESG regulation work in practice for the European fund industry. Without a standardized template, every asset manager would transmit sustainability data in a different format, making it nearly impossible for advisors to match client sustainability preferences to fund characteristics. ISS ESG provides data solutions that feed into EET fields, and STOXX indices are among those whose characteristics are reported via the template.

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G

GHG Protocol

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“The GHG Protocol gave the world a common accounting language for greenhouse gas emissions, making it possible to compare corporate carbon footprints across borders and industries.”

— World Resources Institute (WRI), on the 20th anniversary of the Corporate Standard

The Greenhouse Gas Protocol is the most widely used international accounting framework for quantifying and managing greenhouse gas emissions. Developed jointly by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol provides standards and guidance for companies, cities, and governments. Its Corporate Standard defines three “scopes” of emissions: Scope 1 (direct emissions from owned or controlled sources), Scope 2 (indirect emissions from purchased energy), and Scope 3 (all other indirect emissions across the value chain).

Note

The GHG Protocol’s scope classification is the universal language of carbon accounting. Virtually every climate-related index, rating, and regulation — including STOXX climate indices, ISS ESG carbon risk ratings, TCFD disclosures, and the EU Taxonomy — relies on GHG Protocol definitions. When ISS ESG reports a company’s carbon intensity or STOXX constructs a Paris-aligned benchmark, the underlying emissions data follows GHG Protocol methodology.

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Global Reporting Initiative (GRI)

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“GRI pioneered the idea that companies owe the public an account of their social and environmental performance, not just their financial results.”

— Allen White, co-founder of the Global Reporting Initiative

The Global Reporting Initiative is an independent international organization that provides the world’s most widely adopted standards for sustainability reporting. Founded in 1997, GRI publishes the GRI Standards — a modular set of interlinked standards that organizations use to report on their economic, environmental, and social impacts. The GRI Standards are organized into Universal Standards (GRI 1-3), Sector Standards, and Topic Standards covering areas from emissions (GRI 305) to human rights (GRI 411). GRI applies a multi-stakeholder materiality approach.

Note

GRI has been the dominant sustainability reporting framework for over two decades. Many ESG data providers, including ISS ESG, ingest GRI-aligned reports as a primary data source. GRI has also influenced the development of the ESRS, with extensive interoperability between the two frameworks. For investors, a company reporting under GRI typically provides a broader view of its sustainability impacts than one using a purely financially-material framework.

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Good Governance

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In the context of the EU Taxonomy, “good governance” refers to the minimum social safeguards that a company must meet for any of its economic activities to qualify as taxonomy-aligned. Article 18 of the Taxonomy Regulation requires that investee companies follow procedures to ensure alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the ILO Core Labour Standards and the International Bill of Human Rights. The assessment covers human rights, corruption and bribery, taxation, and fair competition.

Note

Good governance is the social floor beneath the EU Taxonomy’s environmental ceiling. Even if an activity passes the substantial contribution test and DNSH criteria, it fails taxonomy alignment if the company does not meet minimum social safeguards. ISS ESG norms-based research and controversy screening directly inform good governance assessments, making ISS data a key input for taxonomy alignment evaluations used by STOXX indices and fund managers.

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I

ILO Conventions

▰▰ 16

The International Labour Organization (ILO) Conventions are legally binding international treaties adopted by the International Labour Conference that set minimum standards for labour rights and working conditions. The ILO has adopted 190 conventions since its founding in 1919. The eight “fundamental” or “core” conventions cover four categories: freedom of association and collective bargaining (C087, C098), elimination of forced labour (C029, C105), abolition of child labour (C138, C182), and elimination of discrimination in employment (C100, C111). In 2022, a fifth category — occupational safety and health (C155, C187) — was elevated to fundamental status. These core conventions form the basis of the ILO Declaration on Fundamental Principles and Rights at Work.

Note

ILO Conventions are foundational to the social dimension of ESG analysis. ISS ESG norms-based research evaluates companies against ILO core labour standards, and violations trigger flags that can lead to exclusion from STOXX ESG indices. The ILO’s fundamental conventions are explicitly referenced in the EU Taxonomy’s minimum social safeguards, the UN Global Compact’s labour principles, and the OECD Guidelines for Multinational Enterprises. For investors, ILO Convention compliance is a baseline expectation for responsible corporate behaviour on labour rights.

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International Sustainability Standards Board (ISSB)

▰ 4

The International Sustainability Standards Board is a standard-setting body established in 2021 by the IFRS Foundation at COP26 in Glasgow. The ISSB develops and issues IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2) designed to provide a global baseline of sustainability-related financial disclosures for capital markets. IFRS S1 covers general sustainability-related financial disclosures, while IFRS S2 addresses climate-related disclosures specifically. The ISSB consolidated the CDSB (Climate Disclosure Standards Board) and the VRF (Value Reporting Foundation, which housed SASB) into its operations.

Note

The ISSB represents the push toward a single global baseline for sustainability disclosure oriented around enterprise value. It contrasts with the EU’s double materiality approach under ESRS. For ISS and STOXX, ISSB standards create a globally consistent layer of climate and sustainability data that can be used alongside regional requirements. As jurisdictions adopt ISSB standards, the availability of comparable ESG data for index construction and screening will increase significantly.

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M

NFRD (Non-Financial Reporting Directive)

▰ 1

The Non-Financial Reporting Directive (Directive 2014/95/EU) was an EU directive that required large public-interest entities with more than 500 employees to disclose information on environmental matters, social matters, human rights, anti-corruption, and board diversity. Adopted in 2014, the NFRD applied to approximately 11,700 companies across the EU. It allowed significant flexibility in reporting format and framework choice, which led to inconsistent and often incomparable disclosures.

Note

The NFRD was the EU’s first mandatory sustainability reporting requirement, but its flexibility was both a strength and a weakness. The lack of standardized reporting templates made it difficult for ESG data providers like ISS to extract consistent, comparable data. The CSRD was introduced specifically to address these shortcomings, expanding scope to roughly 50,000 companies and mandating the use of ESRS. Understanding the NFRD provides context for why the CSRD represents such a significant regulatory leap.

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O

OECD Guidelines for Multinational Enterprises

▰▰ 7

The OECD Guidelines for Multinational Enterprises on Responsible Business Conduct are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. Originally adopted in 1976 and most recently updated in 2023, the Guidelines cover a broad range of responsible business conduct topics including human rights, employment and industrial relations, environment, combating bribery, consumer interests, science and technology, competition, and taxation. They are the most comprehensive set of government-backed recommendations on responsible business conduct and include a unique implementation mechanism through National Contact Points (NCPs) that handle complaints (“specific instances”) against companies.

Note

The OECD Guidelines are a foundational normative framework in ESG investing. ISS ESG norms-based research explicitly assesses company conduct against the OECD Guidelines, and violations can trigger exclusion or underweighting in STOXX ESG indices. The Guidelines are one of the four normative references in the EU Taxonomy’s minimum social safeguards (Article 18), alongside the UNGPs, the ILO Core Labour Standards, and the International Bill of Human Rights. For investors, OECD Guidelines compliance provides a comprehensive baseline for evaluating responsible corporate conduct across all ESG dimensions.

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Paris Agreement

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“The Paris Agreement is a bridge between today’s policies and climate-neutrality before the end of the century.”

— Christiana Figueres, Executive Secretary of the UNFCCC, on the adoption of the Paris Agreement (2015)

The Paris Agreement is a legally binding international treaty on climate change adopted by 196 parties at COP21 in Paris on 12 December 2015. Its overarching goal is to hold the increase in the global average temperature to well below 2 degrees C above pre-industrial levels and to pursue efforts to limit the increase to 1.5 degrees C. Countries submit nationally determined contributions (NDCs) outlining their climate targets, and a global stocktake process reviews collective progress every five years.

Note

The Paris Agreement is the single most referenced climate target in financial regulation and index methodology. STOXX constructs Paris-aligned benchmarks (PABs) and climate transition benchmarks (CTBs) under the EU Benchmark Regulation, both of which derive their decarbonization trajectories from Paris temperature goals. ISS ESG climate solutions provide company-level Paris alignment assessments. An investor’s portfolio “alignment with Paris” has become a central metric in climate-aware investing.

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PRI (Principles for Responsible Investment)

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“The business case for responsible investment is clear. Markets that operate with integrity, transparency, and respect for human rights will always be more robust.”

— Kofi Annan, UN Secretary-General, at the PRI launch (2006)

The Principles for Responsible Investment is a UN-supported international network of investors founded in 2006. Signatories commit to six principles: incorporating ESG issues into investment analysis and decision-making, being active owners, seeking appropriate ESG disclosure from investee entities, promoting the principles within the investment industry, working collaboratively to enhance effectiveness, and reporting on activities and progress. PRI operates a mandatory annual reporting and assessment framework for signatories.

Note

PRI is the largest global coalition of institutional investors committed to ESG integration, with over 5,000 signatories managing more than USD 120 trillion in assets. ISS ESG data and STOXX ESG indices are widely used by PRI signatories to fulfill their commitments under Principles 1 (ESG integration) and 2 (active ownership). PRI reporting requirements have also driven demand for more granular ESG data from providers like ISS.

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S

SASB (Sustainability Accounting Standards Board)

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“SASB standards answer a simple question: for each industry, which sustainability issues are most likely to affect enterprise value?”

— Jean Rogers, founder of SASB

The Sustainability Accounting Standards Board developed industry-specific sustainability disclosure standards designed to help companies disclose financially material sustainability information to investors. Founded in 2011 and consolidated into the IFRS Foundation’s ISSB in 2022, SASB produced standards for 77 industries across 11 sectors, identifying the subset of ESG issues most likely to affect enterprise value in each industry. SASB standards focus on financial materiality and are designed for reporting in SEC filings and other investor communications.

Note

SASB’s industry-specific approach is its distinguishing feature — rather than a one-size-fits-all checklist, it identifies the 3-8 ESG topics most financially relevant to each industry. ISS ESG research often maps to SASB-identified material topics, and STOXX ESG index methodologies may weight factors aligned with SASB’s industry materiality maps. Now folded into the ISSB, SASB standards continue to be referenced as the industry-level layer beneath the broader IFRS S1 and S2 standards.

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Science Based Targets Initiative (SBTi)

▰▰ 9

The Science Based Targets initiative is a partnership between CDP, the UN Global Compact, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). SBTi defines and promotes best practices in emissions reductions and net-zero targets in line with climate science. It provides a target-setting framework, validation services, and sector-specific guidance. Companies submit targets covering Scope 1, 2, and (where material) Scope 3 emissions for independent validation against criteria aligned with limiting warming to 1.5 degrees C.

Note

SBTi has become the gold standard for validating whether a company’s climate commitments are credible. ISS ESG climate data includes whether companies have SBTi-validated targets, and STOXX climate indices may screen for or overweight companies with approved science-based targets. Having an SBTi-validated target signals to investors that a company’s decarbonization trajectory is consistent with Paris Agreement goals, not merely aspirational.

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SDGs (Sustainable Development Goals)

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“The Sustainable Development Goals are a to-do list for people and planet, and a blueprint for success.”

— Ban Ki-moon, UN Secretary-General, on the adoption of the 2030 Agenda (2015)

The Sustainable Development Goals are a collection of 17 interlinked global goals adopted by all United Nations member states in 2015 as part of the 2030 Agenda for Sustainable Development. The SDGs address global challenges including poverty (SDG 1), hunger (SDG 2), health (SDG 3), education (SDG 4), gender equality (SDG 5), clean water (SDG 6), clean energy (SDG 7), decent work (SDG 8), industry and innovation (SDG 9), reduced inequalities (SDG 10), sustainable cities (SDG 11), responsible consumption (SDG 12), climate action (SDG 13), life below water (SDG 14), life on land (SDG 15), peace and justice (SDG 16), and partnerships (SDG 17). They are supported by 169 targets and over 230 indicators.

Note

SDGs provide a universal language for linking investment activities to real-world outcomes. ISS ESG offers SDG impact ratings and SDG Solutions assessments that map company products and services to SDG contributions and obstructions. STOXX constructs SDG-aligned indices that include or overweight companies demonstrating positive SDG contributions. For impact-oriented investors, SDG mapping provides a tangible way to articulate the societal purpose of a portfolio.

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SRD II (Shareholder Rights Directive II)

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The Shareholder Rights Directive II (Directive 2017/828/EU) is an EU directive that amends the original Shareholder Rights Directive (2007/36/EC) to encourage long-term shareholder engagement and improve transparency in the investment chain. Key provisions include requirements for institutional investors and asset managers to develop and publicly disclose engagement policies, say-on-pay votes on directors’ remuneration policies, related-party transaction oversight, and transparency requirements for proxy advisors. Member states transposed SRD II into national law by June 2019.

Note

SRD II is directly relevant to ISS’s proxy advisory business. As a proxy advisor, ISS must disclose its methodology, conflicts of interest, and how it applies codes of conduct — all requirements under SRD II. For STOXX governance indices and ISS Governance QualityScore, SRD II’s emphasis on say-on-pay and board accountability provides a regulatory foundation for the governance metrics that feed into ESG scoring and index construction.

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Stewardship Code

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“Stewardship is the responsible allocation, management, and oversight of capital to create long-term value for clients and beneficiaries.”

— UK Financial Reporting Council, UK Stewardship Code 2020

A stewardship code is a set of principles or guidelines issued by a national regulator or industry body that sets expectations for how institutional investors engage with the companies they invest in. The UK Stewardship Code (published by the Financial Reporting Council, most recently revised in 2020) is the most influential example, establishing 12 principles covering purpose, governance, conflicts of interest, promoting well-functioning markets, review and assurance, client and beneficiary needs, ESG integration, monitoring, engagement, collaboration, escalation, and exercising rights and responsibilities. Other jurisdictions — including Japan, the Netherlands, and South Africa — have issued their own stewardship codes.

Note

Stewardship codes complement regulatory requirements like SRD II by encouraging investors to be active, informed owners rather than passive holders. ISS’s stewardship and proxy voting services help institutional investors meet stewardship code expectations, particularly around voting and engagement. STOXX governance indices reward companies that respond positively to stewardship engagement, such as improved board independence or enhanced ESG disclosures.

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T

▰▰▰ 44

Quote

“The financial crisis showed what happens when risks are not properly disclosed. Climate change is the next risk that markets are mispricing.”

— Mark Carney, Governor of the Bank of England, co-chair of the TCFD

The Task Force on Climate-related Financial Disclosures was established in 2015 by the Financial Stability Board (FSB) under the leadership of Michael Bloomberg and Mark Carney. TCFD published its final recommendations in June 2017, organized around four pillars: Governance (how the organization governs climate-related risks and opportunities), Strategy (the actual and potential impacts of climate risks and opportunities), Risk Management (how the organization identifies, assesses, and manages climate risks), and Metrics and Targets (the metrics and targets used to assess and manage relevant climate risks). The TCFD was formally disbanded in October 2023, with monitoring responsibilities transferred to the ISSB.

Note

TCFD transformed climate disclosure from a niche ESG exercise into a mainstream financial risk communication. Its four-pillar framework is embedded in regulations worldwide, including the EU’s CSRD, the UK’s mandatory climate disclosure rules, and the ISSB’s IFRS S2 standard. ISS ESG climate assessments are structured around TCFD pillars, and STOXX climate indices rely on TCFD-aligned data — particularly scenario analysis and forward-looking metrics — to construct benchmarks. Even though the TCFD itself has concluded its work, its framework remains the de facto architecture for climate disclosure.

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▰ 2

The Taskforce on Nature-related Financial Disclosures is a global, market-led initiative that published its final recommendations in September 2023. Modeled on the TCFD, the TNFD provides a risk management and disclosure framework for organizations to report and act on evolving nature-related dependencies, impacts, risks, and opportunities. The framework uses the same four-pillar structure as TCFD (Governance, Strategy, Risk and Impact Management, Metrics and Targets) and introduces the LEAP approach (Locate, Evaluate, Assess, Prepare) as a practical methodology for nature-related risk assessment.

Note

TNFD extends the climate disclosure paradigm to the broader biodiversity and nature crisis. As regulators and investors recognize that nature loss poses systemic financial risks alongside climate change, TNFD-aligned data is becoming increasingly important. ISS ESG is developing nature-related data capabilities, and STOXX has begun exploring biodiversity-related index concepts. For investors, TNFD provides a structured way to assess portfolio exposure to risks such as deforestation, water scarcity, and ecosystem degradation.

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U

UN Global Compact

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Quote

“I propose that you, the business leaders gathered in Davos, and we, the United Nations, initiate a global compact of shared values and principles to give a human face to the global market.”

— Kofi Annan, UN Secretary-General, at the World Economic Forum (1999)

The United Nations Global Compact is a voluntary initiative launched in 2000 in which companies commit to aligning their strategies and operations with ten universal principles covering human rights, labour, environment, and anti-corruption. The ten principles are derived from the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the UN Convention Against Corruption. Participants must submit an annual Communication on Progress (CoP) demonstrating how they implement the principles.

Note

UN Global Compact compliance is one of the most widely used norms-based screens in ESG investing. ISS ESG norms-based research explicitly assesses whether companies violate UNGC principles, and this assessment feeds into STOXX ESG indices as an exclusion or underweighting criterion. A UNGC violation flag from ISS ESG can trigger automatic exclusion from sustainability indices and is also relevant to the EU Taxonomy’s minimum social safeguards (good governance) requirement.

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UN Guiding Principles on Business and Human Rights

▰▰ 12

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“The corporate responsibility to respect human rights exists independently of states’ abilities or willingness to fulfil their own human rights obligations.”

— John Ruggie, author of the UN Guiding Principles, Just Business (2013)

The United Nations Guiding Principles on Business and Human Rights (UNGPs), endorsed by the UN Human Rights Council in 2011, are a set of 31 principles implementing the “Protect, Respect and Remedy” framework developed by Professor John Ruggie. The three pillars are: (1) the state duty to protect against human rights abuses by third parties, including business; (2) the corporate responsibility to respect human rights, including through human rights due diligence; and (3) the need for greater access to effective remedy for victims of business-related human rights abuse. The UNGPs are not legally binding but are the authoritative global standard for preventing and addressing business-related human rights harm.

Note

The UNGPs are foundational to social risk assessment in ESG investing. ISS ESG evaluates companies against UNGP expectations as part of its norms-based research and controversy assessments. Under the EU Taxonomy, adherence to UNGPs is explicitly referenced as a minimum social safeguard. STOXX ESG indices that apply norms-based exclusions typically screen for UNGP violations. For investors, UNGP-aligned due diligence by portfolio companies reduces exposure to litigation, regulatory action, and reputational damage from human rights failures.

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Maintenance

This glossary reflects the regulatory and standards landscape as of Q1 2026. ESG frameworks evolve rapidly — verify currency against official sources before relying on any definition for compliance or reporting purposes. Contributions and corrections are welcome.

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