Glossary
Absolute Emissions (Total Emissions): The total amount of greenhouse gases emitted over a specific period
Agents: NFU Mutual’s primary General Insurance distribution channel is a network of Tied Agencies, run by Agents, providing specialist advice for relationship-led customers with complex insurance needs, alongside a range of products for customers with less complex requirements.
Anthropogenic greenhouse gas (GHG) emissions: Emissions of greenhouse gases caused by human activities.
Assets: An asset is a resource with economic value that a Company owns or controls with the expectation that it will provide benefit in the future. Assets are generally classified as:
- Current - short-term resources that can be converted into cash within a year
- Fixed - long-term resources like property, equipment or machinery
- Financial - investments like equities and bonds
- Intangible - non-physical assets like patents, trademarks or goodwill
Assets under management (AUM): Assets Under Management (AUM) describes the market value of all assets managed by NFU Mutual. This includes institutional funds such as our General and Life Insurance Funds, the retail funds we offer to customers and our staff pension schemes. Our AUM is diversified across various assets classes including cash, equities, corporate bonds, sovereign bonds and property.
Association of British Insurers (ABI): Fixed: Long-term resources like property, equipment, or machinery.
Biodiversity: The variability among living organisms from all sources including terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part. This includes diversity within species, between species and of ecosystems.
Cambridge University’s Institute for Sustainability Leadership (CISL): Intangible: Non-physical assets like patents, trademarks, or goodwill.
Carbon capture and storage (CCS): A process in which a relatively pure stream of carbon dioxide from industrial and energy-related sources is separated (captured), conditioned, compressed and transported to a storage location for long-term isolation from the atmosphere.
Carbon dioxide equivalent (CO₂e): Carbon dioxide (CO₂) is the most significant contributor to global anthropogenic greenhouse gas emissions, which also include other gases like methane and nitrous oxide. CO₂e is the universal unit of measurement to indicate the global warming potential (GWP) of each GHG, expressed in terms of the GWP of one unit of carbon dioxide. It is used to evaluate different GHGs against a common basis.
Carbon emissions intensity: Carbon emissions intensity is the amount of emissions released per unit of another variable, such as CO₂e per £m. This enables a comparison of the emissions efficiency to be made between different sized operations. Carbon intensity is calculated by dividing carbon emissions by an appropriate usage metric such as revenues, square footage of buildings, number of employees etc. Common intensity metrics include:
Property carbon intensity: greenhouse gas emissions attributed to real estate investments per metre square of attributed floor space
Company carbon intensity: GHG emissions per revenue/sales that enables comparison between companies by adjusting for company size
For metrics for investments see ‘Emissions metrics for Investments’.
Carbon offsetting: The process of financing schemes designed to either avoid, reduce or remove CO₂ in the atmosphere to compensate for carbon emissions that have occurred elsewhere.
Climate change: The overarching term given to the change in Earth’s climate systems as a result of complex planetary processes. It is attributed largely to the increased levels of atmospheric greenhouse gases produced by the use of fossil fuels from the activity of humans.
Conference of Parties (COP): United Nations summits, where countries meet to discuss and agree actions. There are COPs for climate change and biological diversity.
Control Approach (Operational Control Financial Control): Approach to defining the scope of emissions that a firm is accountable for. Using this approach, a firm accounts for 100% emissions from operations where it has control. Control is either defined in financial or operational terms.
Corporate bond: A corporate bond is a debt instrument issued by a company to raise funds.
Early Warning Indicators (EWIs): Metrics that indicate potential problems or deviations from a defined risk tolerance level before the level is breached. They are used to identify potential problems early, so that action can be taken where necessary.
Emissions: The collection of chemical gases released into the atmosphere by anthropogenic (caused by human) activity.
Emissions Footprint (carbon footprint): The greenhouse gas emissions a firm has accountability for. This will include emissions it generates directly and also emissions generated by others as a result of the firm’s activities.
Emissions inventory (carbon inventory / GHG inventory): A quantified list of a firm’s emissions and sources. It will list relevant emissions sources, data, emissions factors and methodologies used to calculate emissions and quantified results
Emissions Metrics for Investments: NFU Mutual discloses a range of metrics for its emissions because they have different advantages and limitations.
- Total Carbon Emissions: This is a metric that provides the sum of all greenhouse gas emissions. It is a simple measure from a greenhouse gas accounting perspective. Emissions are expressed as tonnes CO₂e.
- Total Carbon Footprint: This is a metric that NFU Mutual uses as an intensity metric for its investment funds, carbon footprint per million pounds invested. This metric is useful as it allows for comparisons regardless of fund size, however the value can be sensitive to changes in the market value of the fund. It is expressed as tonnes CO₂e/£M invested.
- Total Carbon Intensity: This metric provides a measure for how efficient an investment fund is in terms of emissions per unit of output which has been measured here in sales. This provides an overall intensity of the fund by adjusting for company size. Expressed in tonnes CO₂e/£M invested.
- Weighted Average Carbon Intensity (WACI): This metric provides an investment fund’s exposure to carbon intensive companies measured by emissions relative to company sales. The metric is calculated through a simple calculation and allows for comparisons across funds of different sizes. However, as the metric does not capture any measure of investor responsibility the value can be sensitive to outliers. Expressed in corporate constituent tonnes CO₂e/£M invested.
- Implied Temperature Rise (ITR): This is a forward-looking metric which is designed to provide an intuitive guide to how well an investment fund is aligned to the objectives of the Paris Agreement of limiting temperature increase to no more than 1.5°C by 2100. It is based on the concept that there is a carbon budget that sets a maximum limit on the volume of emissions the world and individual companies can emit, whilst still being able to achieve the goals of the Paris Agreement. Reported in degrees Celsius (°C).
Energy Performance Certificate (EPC): An Energy Performance Certificate ( EPC) is an indicator of how energy efficient a property is. The EPC rating ranges from A (most energy efficient) to G (least energy efficient) Under the Minimum Energy Efficiency Standards EPCs are legally required for selling or renting property in the UK.
Equities: Equities are stocks and shares issued by a company.
Equity Share Approach: Approach to defining the scope of emissions that a firm is accountable for. Using this approach, a firm accounts for emissions proportionate to its share of equity in an operation.
Environment, Social and Governance (ESG): Environmental (e.g. climate change, nature and biodiversity, waste), Social (e.g. community support, diversity and inclusion) and Governance (e.g. board accountability, responsible investment, responsible supply chain, tax strategy) are the three factors commonly used to measure the sustainability and social impact of a firm. This term is commonly used to denote the material non-financial factors that are an important contributor to company performance. At NFU Mutual we often use the term Responsible Business as an alternative to ESG.
Farming Unions UK: Farming unions are representation organisations for Farmers and Growers that champion agriculture and horticulture. They also provide representation and professional services to their members. The farming unions in the UK include the National Farmers’ Union in England, NFU Cymru, NFU Scotland and the Ulster Farmers Union
Financed Emissions: Financed emissions are the greenhouse gas (GHG) emissions linked to the investment, lending and underwriting activities of financial institutions like investment managers, banks and insurers.
Financial Conduct Authority (FCA)
The NFU Mutual group of firms are regulated by two financial services regulators to conduct financial services business - the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The FCA regulates financial services firms and markets in the United Kingdom and it’s four priorities are to support growth, fight crime, help consumers and be a smarter regulator.
Full time equivalent (FTE): Metric that represents the number of employees working for an organisation, if all employees were contracted to work full time hours. It is calculated by converting the number of total contracted hours worked by all employees into the number of equivalent full time employees required to work total contracted hours.
Gilts: A gilt or gilt-edged security is a UK government bond.
Glasgow Financial Alliance for Net Zero (GFANZ): The world’s largest coalition of financial institutions committed to transitioning the global economy to net-zero, launched in April 2021. GFANZ lists 2 key purposes: to expand the number of Net Zero-committed financial institutions and to establish a forum for addressing sector-wide challenges, helping to ensure high levels of ambition are met with credible action.
Global warming: The overarching term given to the rise in global temperatures that is caused by the increase in levels of greenhouse gases in the atmosphere.
Greenhouse Gas Protocol / GHG Protocol Corporate Accounting and Reporting Standard: A comprehensive, global, standardised framework to measure and manage greenhouse gas emissions from private and public sector operations, value chains and climate change reduction (mitigation) activities.
Greenhouse gases (GHG): A gas that contributes to the greenhouse effect by absorbing infrared radiation. There are seven gases covered by the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard – carbon dioxide (CO₂), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). Each gas contributes a different amount to global warming known as its global warming potential (GWP).
IFRS S1, IFRS S2: Standards released by the International Sustainability Standards Board (ISSB) aimed at creating a standardised global framework for sustainability disclosures.
IFRS S1 - sets out the ‘General Requirements for Disclosure of Sustainability-related Financial Information’
IFRS S2 – sets out the information a firm is required to disclose about its climate-related risks and opportunities
The Taskforce for Climate-related Financial Disclosures (TCFD) framework will be replaced by ISSB standards over time.
International Financial Reporting Standards (IFRS): The IFRS is a not-for-profit, public interest organisation established to develop globally accepted accounting and sustainability disclosure standards.
International Sustainability Standards Board (ISSB): The ISSB was set up by the International Financial Reportig Standards (IFRS), to develop global standards that result in a high-quality, comprehensive global baseline of sustainability disclosures focussed on the needs of investors and the financial markets.
Kyoto Protocol: First international agreement to reduce the emission of gases that contribute to global warming. It was adopted in 1997 and in force from 2005. It identifies six greenhouse gases - carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), sulphur hexafluoride (SF6)
Liquidity: Liquidity refers to how easily an investment instrument can be bought or sold without impacting its market price.
Location-based method for scope 2 emissions: A location-based method is a way of calculating emissions from purchased electricity. It reflects the average emissions intensity of grids on which energy consumption occurs (using mostly grid-average emission factor data).
Long-term incentive plan (LTIP): A component of senior management remuneration. The LTIP is three year variable pay plan, granted at the start of every year for a period of three years, acting as part of a strategy to attract, reward and motivate senior employees. Since 2023, climate change factors have been included into executive remuneration schemes as part of the Group’s long-term incentive plan (LTIP).
Low-carbon Economy: A low-carbon economy (sometimes referred to as a decarbonised economy) powered by on energy sources that produce low GHG emissions, such as solar and wind energy.
Management information (MI): Information used to inform decision making. Key performance indicators (KPIs), early warning indicators (EWIs), risk acceptance tolerances and emissions metrics are all examples of management information.
Market-based method for scope 2 emissions: A market-based method is a way of calculating emissions from purchased electricity. It reflects emissions from electricity that companies have purposefully chosen to purchase i.e electricity from renewable sources has lower emissions
Members: As a mutual insurance company, NFU Mutual is owned by our members, who are also our customers
Mutual: A mutual is a company that is solely owned by its members i.e. there are no shareholders
Net Zero: Achieving a balance between the anthropogenic carbon emitted into the atmosphere, and the carbon removed from it. This means the amount of carbon emitted from anthropological (human) activity is no more than the amount removed through activities such as carbon offsetting.
Network for Greening the Financial System (NGFS): A group of Central Banks and Supervisors willing, on a voluntary basis, to share best practices and contribute to the development of environment and climate risk management in the financial sector and to mobilise mainstream finance to support the transition toward a sustainable economy.
Operational Boundary: Methodology used to determine the scope of emissions a firm is accountable for. Emissions can be direct or indirect and are categorised as either scopes 1, 2 and 3
Own Risk and Solvency Assessment (ORSA): A collection of processes that help business decision making by assessing the forward looking risks, opportunities and capital requirements associated with the delivery of business objectives. It forms an integral part of NFU Mutual’s Control Environment and is founded on the key components strategy and business planning, risk management and capital management.
Paris Agreement: The Paris Agreement was signed by 196 countries in 2016 with the objective of limiting the increase in average global temperatures to below 2°C, preferably to 1.5°C, compared to pre-industrial levels.
Paris Aligned: Goals and targets aligned to reducing emissions at the rate required to deliver the Paris Agreement ambition of limiting global temperature rises
Partnership for Carbon Accounting Financials (PCAF): An industry-led initiative first established in 2015. Its aim is to help financial institutions assess and disclose the greenhouse gas (GHG) emissions from their loans and investments through GHG accounting. In 2022 PCAF also published the first global industry methodologies for measuring emissions from underwriting portfolios.
Principles for Responsible Investment (PRI): The Principles for Responsible Investment (PRI) is the world's leading proponent of repsonsible invetsment. It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its network of investor signatories in incorporating these factors into their investment and ownership decisions.
Prudential Regulation Authority: The Prudential Regulation Authority (PRA) is part of the Bank of England and one of the two financial services regulators in the UK, alongside the Financial Conduct Authority (FCA). It regulates banks, building societies and insurance firms, such as NFU Mutual, to make sure these firms operate safely and reduce their chances of getting into financial difficulty. Its aim is to ensure that the financial services and products that we all rely on are provided in a way that does not put customers, their money or the economy at risk.
Responsible Investment: Responsible Investing encompasses integrating environmental, social, and governance (ESG) considerations into all aspects of investment analysis and decision-making at NFU Mutual. This includes practicing active ownership through stakeholder engagement to promote sustainable and responsible business, and adhering to industry standards and affiliations such as the Stewardship Code, the Principles for Responsible Investment, and the Investor Forum. Governance and stewardship structures support these practices, promoting transparency and accountability in investment processes.
Risk Acceptance Tolerances (RATs): Metrics that set out the maximum level of exposure to a risk that we are willing to accept. Performance against these metrics is used to guide decision making and actions required to remain within the risk acceptance tolerance.
Risk Appetite: Risk Appetites are measurable criteria set by the NFU Mutual Board that state the amount of risk we are prepared to take in pursuit of our long-term objectives.
Risk Management: The process of identifying, assessing, managing and monitoring the risk that our organisation can be exposed to.
Risk Management Framework: The structured approach to identifying, assessing, managing and monitoring the risks affecting our operations and objectives. The Risk Management Framework components help us proactively manage risks, protect assets, minimise financial impact and ensure regulatory compliance. The Risk Management Framework fosters continuous improvement, resilience and informed decision by aligning risk management with the organisation’s strategic goals.
Science Based Targets Initiative (SBTi): Global initiative that defines methodologies for setting emisisons-related targets aligned to the scale of reduction necessary to limit global temperature rises to below 2 degrees
Scope 1, 2 and 3 Emissions: Established by the Greenhouse Gas Protocol, this is a framework for defining the emissions footprint of an entity, that enables emissions to be identified, categorised, measured and reported on in a consistent way:
Scope 1: These are emissions directly generated by a firm from its owned or controlled sources
Scope 2: Emissions from energy purchased from third parties, such as electricity
Scope 3: All other indirect emissions (not included in Scope 2). These are emissions generated externally to a firm, however they arise as a direct result of the firm's activities
Sovereign bond: A sovereign bond or government bond is a bond issued by a government to support spending.
Stewardship: The UK Stewardship Code 2020 defines stewardship as “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.”
Streamlined Energy and Carbon Reporting (SECR): These are UK Government regulations, introduced in 2019, that require businesses in scope in the UK to disclose their energy use and greenhouse gas emissions.
Supply chain: The suppliers and third parties who provide products and services to NFU Mutual.
Sustainability Disclosure Requirements (SDR) Regulation: The UK Government’s requirements for corporate disclosures on the sustainability-related risks and opportunities that companies face.
Taskforce for Climate-related Financial Disclosures (TCFD): Body set up by the Financial Stability Board (FSB) to define a disclosure framework setting out the climate-related information firms should disclose to enable stakeholders, such as investors, lenders and insurance underwriters to make an informed assessment of a firm.
tCO₂e: Tonnes of carbon dioxide equivalent (CO₂e). This is a standardised measure of emissions from any greenhouse gas.
Transition Plan (Net Zero Transition Plan): A plan that sets out how an organisation aims to transition to a way of working that aligns with a low-carbon economy. It includes not only its climate commitments, but the roadmap (and associated risks) to achieving them.
Transition Plan Taskforce (TPT): A UK initiative to develop a gold standard for private sector climate transition plans. The TPT was set up by the UK Government in April 2022 with a two year remit, to bring together industry, academia and regulators to develop good practice and metrics for transition plans, and coordinate international disclosure standards.
The TPT has now been disbanded and the International Sustainability Standards Board has assumed responsibility for the materials produced.
UK Sustainability Disclosure Requirements (SDR): Regulation introduced by the FCA setting out climate-related disclosure requirements. Requirements relate to entity level climate reporting and product level climate reporting for retail investment products, plus an overarching anti-greenwashing rule applicable to all regulated firms
UK Sustainability Reporting Standards (SRS): Future framework, based on ISSB disclosure standards, that will set out the requirements for corporate disclosures on the sustainability-related risks and opportunities that a company faces
Underwriting: The process of selecting which risks an insurance company can cover and deciding the premiums and basis of coverage.