Task Force on Climate-Related Financial Disclosures Glossary


The terms and definitions contained within this Glossary are for the purposes of your TCFD Fund Reports only.

Active ownership

Investors actively using their voting rights and/or directly engaging with company management on ESG issues, as well as wider matters of business strategy, to ensure the company's interests are aligned with their own. Active ownership efforts can help to reduce risk and enhance long-term shareholder value.

Aladdin Climate

An application designed to analyse climate risk and opportunities at the security level, and measure the impact of policy changes, technology and energy supply on investments.


Anything having commercial or exchange value that is owned by a business, institution or individual.

Asset class

Category of assets, such as cash, company shares, fixed income securities and their sub-categories, as well as tangible assets such as real estate.

Asset-backed security (ABS)  

A security whose value and income payments are derived from and collateralised (or backed) by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid assets that are unable to be sold individually. 

Assets at high risk from future climatic conditions

This metric assesses whether a physical location (e.g. shopping mall) is subject to material physical climate risk (e.g. flooding) under future climatic conditions as defined by The Intergovernmental Panel on Climate Change (IPCC) scenarios for the year 2100. Materiality of impact is defined where the expected cost of physical damage exceeds 1% of the asset’s reinstatement value.


Measure, such as an index or sector, against which a portfolio’s performance is judged.

Benchmark (Comparative) 

The fund managers choose the benchmark, which may be an index or a sector, as a comparator for the fund’s performance, but they do not have to replicate its composition. The benchmark is not used for any other purpose, such as, for example, to serve as a reference when setting performance fees.

Benchmark (Constraint) 

The portfolio must replicate the securities contained in the benchmark and their weights. The benchmark can be an index or a sector. Depending on the fund’s mandate, the managers can replicate the positions directly or via derivatives, which are instruments whose value is derived from that of an underlying security or pool of securities.

Benchmark (Target)

A benchmark, such as an index or sector, which the fund managers aim to match or exceed. The managers have freedom in choosing the securities and strategy by which they do so.


A loan in the form of a security, usually issued by a government or company. It normally pays a fixed rate of interest (also known as a coupon) over a given time period, at the end of which the initial amount borrowed is repaid. 

Carbon footprint

Refers to financed carbon emissions divided by the fund's market value, expressed in tCO2e/£m invested. The larger the number, the more it is contributing to the effects of climate change. Carbon footprint can be used to compare across different funds. 

Carbon intensity

Refers to volume of carbon emissions per million pounds of sales (carbon efficiency of a corporate), expressed in tonnes CO2e / £M sales. 

Carbon net zero 

See ‘Net zero’

Climate adjusted value

This metric is the adjustment of the value of assets in the fund as a result of the climate scenario. A negative number denotes that under the scenario, there will be a devaluation for the fund’s underlying assets. This metric is equivalent to value at risk (VaR). Scenario model outputs are expressed as a range of outcomes, reflecting the inherent uncertainty of the underlying assumptions. We have provided the average model output of that range of results. 

Climate change

The overarching term used to describe the long-term shift in global climates associated with an increase in average global temperatures. These changes can include increased rainfall, increased desertification, more extreme temperature variations or higher frequency extreme weather events. 

Climate risks

Risks stemming from climate change that have the potential to affect companies, industries and whole economies. There are a range of business risks associated with climate change, including regulatory developments, growing natural resource scarcity and potential reputational damage. These are all risks that need increasingly to be proactively managed. 

Climate scenarios

The following scenarios are used to assess a fund’s transition alignment

  • Orderly transition  This scenario assumes climate policies are introduced early and become gradually more stringent, reaching global net zero CO2 emissions around 2050 and likely limiting global warming to below 1.5 degrees Celsius on pre-industrial averages. 

  • Disorderly transition  This scenario assumes climate policies are delayed or divergent, requiring sharper emissions reductions achieved at a higher cost and with increased physical risks in order to limit temperature rise to below 2 degrees Celsius on pre-industrial averages. 

  • Hot house world This scenario assumes only currently implemented policies are preserved, current commitments are not met and emissions continue to rise, with high physical risks and severe social and economic disruption and failure to limit temperature rise. Climate Value at Risk (CVaR). This measure assesses the potential financial impacts of future climate-related risks and opportunities in different climate scenarios and in a blended aggregate scenario. The output provides an indication of the resilience of a strategy as a result of climate change and the transition to a low carbon economy. CO2e stands for carbon dioxide (CO2) equivalent. here are a number of greenhouse gases which warm the earth at different intensity levels such as water vapour, carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrochlorofluorocarbons (HCFCs), ozone (O3), hydrofluorocarbons (HFCs),and perfluorocarbons (PFCs). Rather than providing metrics for each gas they are converted into CO2e for reporting.


Company Shares

Shares are units of company ownership. They offer investors participation in the company’s potential profits, but also the risk of losing all their investment if the company goes bankrupt. 


The interest paid by the government or company that has raised a loan by selling bonds. It is usually a fixed amount, calculated as a percentage of the total loan and paid out at regular intervals. 

Data coverage 

The percentage of market value for which we have both emissions and financial data.

Disorderly transition 

See ‘Climate scenarios’

Enterprise Value Including Cash (EVIC)

EVIC is the sum of market capitalisation plus total debt. Market capitalisation is driven by fundamentals (earnings) and market valuations as measured by Price Earnings (P/E ratios).


A legal entity is a company or organisation that has rights and obligations under the law that it is governed by.

Environmental, Social and Governance (ESG)

ESG is a framework that helps stakeholders understand how an organisation is managing risks and opportunities related to environmental, social, and governance criteria.


Shares of ownership in a company. They offer investors participation in the company’s potential profits, but also the risk of losing all their investment if the company goes bankrupt.

Financed Carbon Emissions (FCE)

Represent the total financed greenhouse gas (GHG) emissions associated with the fund. The larger the number, the more it is contributing to the effects of climate change. The FCE is directly related to the size of the fund and therefore it is difficult to use to compare across funds. 

Financial Conduct Authority (FCA)

The FCA is the body responsible for supervising the conduct of all financial services firms and for the prudential regulation of those financial services firms not supervised by the Prudential Regulation Authority (PRA), such as asset managers and independent financial advisers. 

Government bonds 

Loans issued in the form of fixed income securities by governments. They normally pay a fixed rate of interest over a given time period, at the end of which the initial investment is repaid. 

Government Bond Consumption

These emissions are associated with the goods and services consumed within a country and includes emissions from imported goods and services.

Government Bond Production

These emissions are associated with what a country produces and then uses domestically or exports to other countries.

Green House Gas (GHG)

A greenhouse gas (GHG ) is a gas that absorbs and emits radiant energy at thermal infrared wavelengths, causing the greenhouse effect. The primary greenhouse gases in Earth's atmosphere are water vapor (H2O), carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and ozone (O3).

High impact sector   

High impact sectors, such as utilities, construction, real estate, and transportation, are industrial sectors that exert significant influence on global carbon emissions. These sectors are determined based on global industrial sector codes, without taking into account individual company performance. We utilise the Target Setting Protocol (TSP) definition to classify sectors into the high impact categories. For instance, a renewables company and an oil extraction firm would both be categorised as high impact sectors

Hot house world scenario 

See ‘Climate scenarios’

Impact investing 

Impact investing means investing with two specific goals: to generate both a financial return and a measurable positive impact on society or the environment. M&G has several strategies which include impact investment, including the Climate Solutions Fund, the Positive Impact Fund, the Impact Financing Fund, and Catalyst.

Implied temperature rise

Implied temperature rise estimates the global temperature increase contribution from a fund’s current greenhouse gas emissions trajectory. It is a simplified tool to assess alignment of business strategies with climate goals like the Paris Agreement target. The Aladdin Climate model used to generate this metric mainly accounts for Scope 1 and 2 emissions. However, it overlooks emissions occurring outside direct operations (Scope 3) and any avoided emissions that could have a positive environmental impact (Scope 4). These exclusions can lead to an over- or underestimation of a fund’s implied temperature rise.

Infrastructure equity 

Infrastructure equities are shares in publicly listed companies that provide services to society and the economy. This could be electricity companies, gas and water distribution, broadcasting companies and transportation companies.

Investment Association (IA) 

The UK trade body that represents fund managers. It works with investment managers, liaising with government on matters of taxation and regulation, and also aims to help investors understand the industry and the investment options available to them.

Intergovernmental Panel on Climate Change (IPCC)

The IPCC was created to provide policymakers with regular scientific assessments on climate change, its implications and potential future risks, as well as to put forward adaptation and mitigation options. 

Low carbon economy 

A low carbon economy is an economy that causes low levels of greenhouse gas emissions. ‘Carbon’ refers to carbon dioxide, the greenhouse gas that contributes the most to climate change. The low carbon economy can be seen as a step towards meeting Net Zero, where greenhouse gas emissions are offset by emissions of an equivalent amount. 

Marsh Model           

For private assets, we engaged a risk advisory firm March to assess our real estate and infrastructure portfolios’ exposure to physical climate risk. Marsh uses XDI, a climate risk analysis platform, which quantifies the cost of extreme weather and climate change impacts to physical assets, taking into account asset specific information.

M&G Group Limited (MGG)  

M&G Group Limited (MGG), is a private limited company incorporated in England and Wales with registered number 00633480 whose registered office is 10 Fenchurch Avenue, London EC3M 5AG, UK. MGG is the holding company of the Group’s asset management business, M&G Investments.

M&G Investment Management Ltd (MAGIM) 

MAGIM is a private limited company incorporated in England and Wales with registered number 00936683 whose registered office is 10 Fenchurch Avenue, London EC3M 5AG, United Kingdom.


MSCI is an acronym for Morgan Stanley Capital International. It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds. 

Net asset value (NAV) 

The current value of the fund’s assets minus its liabilities.

Net zero 

A state where any greenhouse gas emissions are offset by emissions reductions of an equivalent amount.

Net Zero Asset Managers Initiative (NZAMI) 

M&G joined Net Zero Asset Managers in global climate change commitment on 11 December 2020 – across the globe in becoming a founding signatory of the Net Zero Asset Managers Initiative. As part of this leading group of global asset managers, M&G commits to support the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C.

Net Zero Asset Owners Alliance (NZAOA) 

The UN-convened Net Zero Asset Owners Alliance is an international group of over 70 institutional investors, representing over $10 trillion assets under management (as at May 2022), delivering on a commitment to transition their investment portfolios to net zero greenhouse gas emissions by 2050.

Net Zero Investment Framework (NZIF) 

The NZIF, published in March 2021 by the Institutional Investors Group on Climate Change, provides a common set of recommended actions, metrics and methodologies through which investors can maximise their contribution to achieving global net zero global emissions by 2050 or sooner.

Open-ended investment company (OEIC) 

A type of managed fund whose value is directly linked to the value of the fund’s underlying investments. The fund creates or cancels shares depending on whether investors want to redeem or purchase them.

Orderly transition 

See ‘Climate scenarios’

Paris Agreement

The Paris Agreement resulted from the Paris Climate Conference (COP 21) in December 2015 and brought together all COP member nations in an agreement to undertake ambitious efforts to tackle climate change and limit the rise of global temperatures (from pre-industrial levels) to below 2°C, and ideally below 1.5°C.

Partnership for Carbon Accounting Financials (PCAF)  

PCAF is a global partnership of financial institutions that work together to develop and implement a harmonized approach to assess and disclose the GHG emissions associated with their loans and investments.

Physical risks 

Risks resulting from climate change, such as extreme weather events and degradation to environmental systems such as biodiversity and water.


Planet+ is our range of funds with a sustainability focus. There are three types of funds within Planet+: ESG+, Sustainable and Impact.

Prudential Assurance Company (PAC) 

The Prudential Assurance Company Limited (PAC) is a private limited company incorporated in England and Wales with registered number 00015454 whose registered office is 10 Fenchurch Avenue, London EC3M 5AG, United Kingdom.


Our PruFund proposition provides our retail customers with access to smoothed savings contracts with a wide choice of investment profiles. 

Real Estates Equity

Shares held within the fund which belong to companies which invest in real estate.


The chance that an investment’s return will be different to what is expected. Risk includes the possibility of losing some or all of the original investment.

Risk management 

The term used to describe the activities the fund manager undertakes to limit the risk of a loss in a fund. 

Scenario analysis   

The financial impact of climate change on our assets is assessed based on a range of scenarios that have been assessed using a climate scenario model. Climate scenario models are complex computational tools that simulate interactions between various climatic systems integrating historical data, current observations, and assumptions about future socio-economic behaviour and regulatory landscape to generate plausible scenarios of future climate conditions. They are helpful in understanding potential impacts of climate change, but bear inherent uncertainties due to the long-term nature of their projections. Given the inherent uncertainty and long-time horizons, the model outputs presented here should be considered with caution as they are estimates of projections, not forecasts. Climate models are dependent on numerous assumptions which contain inherent uncertainties, and as such actual future conditions may differ substantially from these projections. Whilst scenario analysis is in its infancy, the outputs are the most relevant models we have at our disposal to assess impacts across long-term horizons.

Scope 1 emissions  

Are the direct emissions associated with the business operations e.g. a utility company’s emissions from combusting fuel.

Scope 2 emissions  

Are the indirect emissions associated with the business’ heating/power requirements e.g. a software company’s emissions from buying electricity.

Scope 3 emissions  

Emissions from: purchased goods and services; business travel; employee commuting; waste disposal; use of sold products; transportation and distribution (up and downstream); investments; leased assets; and franchises.

Scope 4 emissions  

Are avoided emissions from the use of a product that occur outside of that product’s life cycle or value chain

Science Based Targets initiative (SBTi)

The SBTi defines and promotes best practice in science-based target setting. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. Science-based targets show organisations how much and how quickly they need to reduce their greenhouse gas (GHG) emissions to prevent the worst effects of climate change.


A group of funds with similar investment objectives and/or types of investment, as classified by bodies such as the Investment Association (IA) or Morningstar™. Sector definitions are mostly based on the main assets a fund should invest in, and may also have a geographic focus. Sectors can be the basis for comparing the different characteristics of similar funds, such as their performance or charging structure.


The act of being a responsible and engaged investor, pursuing an active investment policy through portfolio management decisions, maintaining a constructive dialogue with management and voting on resolutions at general meetings. Stewardship aims to ensure long-term protection and enhancement of the value of investments.


The ability for an organisation to maintain a balance of resources and relationships, with the objective of meeting the needs of current generations without compromising the ability of future generations to meet their own needs. 

Target Setting Protocol (TSP) 

The Net-Zero Asset Owner Alliance’s Target-Setting Protocol is a framework used for setting, reporting and delivery of net zero targets.

Task Force for Climate-related Financial Disclosures (TCFD)

The TCFD was created by the Financial Stability Board to develop consistent climate-related financial risk disclosures. The FCA require all premium listed companies to disclose, on a comply or explain basis, against the recommendations of the TCFD.


Refers to tonnes of carbon dioxide (CO2) equivalent. There are a number of greenhouse gases which warm the earth with different intensity levels. Rather than providing metrics for each gas they are converted into tCO2e for reporting.


Transition risk 

Business-related risks resulting from policy and technological shifts towards a low carbon economy.

Weighted Average Carbon Intensity  

Is the fund's exposure to carbon-intensive issuers, expressed in tCO2e/£m sales. The larger the number, the more carbon intensive the investments currently are. WACI allows comparison across different funds.