Investment

Making sense of investing language

21 Jun 2023 7 min read

We try to avoid jargon when we’re talking about your super and how we manage it, but sometimes we just have to use words or phrases that you might not be familiar with. That’s why we’ve put together this list of definitions, so if you’re ever wondering what we’re talking about, here it is in simple terms.

What does it mean?

Active ownership Taking actions to influence or attempt to influence the governance, practices, policies and management of companies the Fund has investments in.
Advocacy Action taken by the Fund or its appointed representatives and/or groups on the Fund’s behalf, seeking to influence or change laws, regulations, standards or guidelines, aiming to protect or increase the long-term economic value of assets or a market.
Asset class An asset class is a particular group of assets that have similar characteristics, such as shares, property, fixed interest and cash. You can read more here.
Ballot Voting in writing on a particular issue.
Carbon credits A carbon credit refers to a tradable permit or certificate that represents the reduction, avoidance or removal of one metric ton of carbon dioxide (CO2) or its equivalent greenhouse gases (GHGs) from the atmosphere.
Carbon intensity Tonnes (t) of carbon dioxide (CO2) equivalent per million dollars (AUD) invested.
Carbon-neutral We define carbon neutral as a state of net-zero carbon emissions for scope 1 and scope 2 emissions of the NGS Super Diversified (MySuper) investment option. While the term carbon neutral references only carbon, the measure for carbon NGS Super uses is CO2e which stands for "carbon dioxide and equivalents" which is a measure that includes all greenhouse gases but brings them back to a common unit of measure. So while NGS Super are measuring carbon, by using CO2e as the unit of measure we are considering the effect of all greenhouse gases.
Carbon-positive investments Carbon-positive investments are investments made in projects, companies or initiatives that actively contribute to reducing atmospheric carbon dioxide (CO2) levels and mitigating climate change impacts via carbon sequestration. These investments focus on activities that result in a carbon-positive status. Examples of carbon-positive investments include Carbon Capture and Storage (CCS), Afforestation and Reforestation.
Carbon sequestration Carbon sequestration is the process by which carbon dioxide (CO2) is captured from the atmosphere or industrial sources of carbon emissions and stored in natural or human-made reservoirs, preventing it from being released into the atmosphere and contributing to global warming.
Class actions When a number of shareholders who have a claim for loss against a company combine all their claims into one so the matter can be dealt with in a timely and cost-effective manner.
Daily unit pricing All the individual assets in every asset class are priced on a daily basis.You can read more here.
Decarbonisation The process of reducing carbon dioxide emissions.
Developed markets Countries that are most developed in terms of their economy and capital markets. These countries are defined as having: high income, an openness to foreign ownership, ease of capital movement, and efficiency of market institutions. Australia and the US are examples of developed markets.
Diversification Diversification means NOT putting all your eggs in one basket — in other words, investing across different asset classes and then choosing different sectors or investment managers within those asset classes. Diversification is designed to lower your investment risk by spreading it across different investments.
Emissions Greenhouse gases which are emitted into the atmosphere from various sources.
Engagement The process of engaging with a company or other body to effect change.
Ethical investing Focused on actively screening out investments involved in industries that have negative social consequences, such as gambling, alcohol, etc.
General resolution A resolution passed by a simple bare majority, eg more than 50% of the vote cast by shareholders (also known as an ordinary resolution).
Glide path analysis Analysis completed to assess the levers available to the Fund to decarbonise the portfolio while also assessing potential tracking error.
Global warming Long-term heating of the Earth’s climate system observed since the pre-industrial period (between 1850 and 1900) due to human activities, primarily via the burning of fossil fuels which increases heat trapping greenhouse gas levels in the Earth’s atmosphere.
Governance How a company is run or governed — in the context of ESG, it is concerned with the alignment of the board or management of the company to the views of the shareholders. Governance issues can include but are not limited to board skills and composition, audit/accounting practices and remuneration.
Gross Domestic Product (GDP) The total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
Investment manager A corporation that provides investment management and other services in relation to the assets of the Fund.
Low-carbon or low-emission investments Low-carbon or low-emission investments are investments that promote solutions for the transition to the low-carbon economy.
Physical risks The risks associated with climate change like extreme heat, drought, water access as well as risks like bushfires, severe storm events and flooding (where companies are exposed to physical risks, their value may be affected, positively or negatively).
Proxy voting A ballot cast by a shareholder without that shareholder having to be physically present at the meeting to have their vote validly recorded.
Responsible investing A way of investing capital that seeks to generate both financial and sustainable investment returns while reducing ESG risks.
Scenario analysis A tool to understand the implications of climate change to prompt strategic thinking about climate risks and opportunities.
Scope 1 Direct emissions from a company or business because of their operations — examples include emissions from company vehicles and company facilities.
Scope 2 Indirect emissions from the generation of purchased energy from a utility provider.
Scope 3 All indirect emissions not included in scope 2 but that occur in the value chain of the reporting company. They are broken down into 15 categories and considered either upstream or downstream emissions. Examples of upstream emissions are emissions generated from business travel, waste generated in operations, purchased goods and services to name a few. Examples of downstream emissions are emissions generated from processing of sold products, use of sold products, end of life treatment of sold products etc.
Secular trends These are evolving trends in the market that take place over a longer time horizon, rather than being seasonal or cyclical.
Special resolution A resolution passed by a majority of not less than two-thirds of shareholder votes .
Stranded asset An asset that in our view cannot transition to the low-carbon economy.
Strategic asset allocation (SAA) This is the long-term allocation of assets across the portfolio, balanced across asset classes and growth vs defensive assets, to provide the best long-term returns. The SAA is indicative of the expected asset allocation during stable market environments; during more volatile times, responses to changes in the investing environment will be in the dynamic asset allocation (DAA) range. You can find the SAA and DAA for all our investment options here.
Tracking error The divergence of a portfolio’s return from the benchmark.
Transition risks The risks that may eventuate as we transition to the low-carbon economy. Examples include changes to land or water use policies, costs of energy, introduction of carbon pricing policies, technological change and evolving consumer behaviour or preferences. When companies are exposed to transition risks, their value may be affected, positively or negatively.

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