Insights

Glossary

Clear definitions of the sustainability, climate, and ESG terms that matter most — from CBAM and CSRD to SBTi and PCAF. Written by Semtrio's advisory team.

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Net Zero

Net zero refers to a state in which an organization's greenhouse gas emissions are reduced as far as possible along a science-consistent 1.5°C pathway, with any remaining residual emissions balanced by an equivalent volume of permanent, verified carbon removal — such that the organization makes no net addition of greenhouse gases to the atmosphere.

Net Zero Commitment (Financial Institution)

A net zero commitment by a financial institution is a pledge to align its financing, investment and lending portfolios with net zero greenhouse gas emissions by mid-century, typically made through an alliance such as GFANZ.

Non-Financial Reporting Directive (NFRD)

The Non-Financial Reporting Directive was the European Union's first mandatory sustainability disclosure law, applying from the 2018 financial year until it was superseded by the Corporate Sustainability Reporting Directive.

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Operational Control

Operational control is a greenhouse gas accounting boundary approach under which an organisation reports 100% of the emissions from operations it controls — those where it has full authority to introduce and implement operating policies — and none from operations it does not.

Organizational Boundary

An organizational boundary defines which entities' emissions an organisation includes in its greenhouse gas inventory, set using either the equity share approach or one of two control approaches.

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Paris Agreement

The Paris Agreement is a legally binding international treaty on climate change, adopted in 2015, under which nearly all countries commit to hold the rise in global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit it to 1.5°C.

Partnership for Carbon Accounting Financials (PCAF)

PCAF (Partnership for Carbon Accounting Financials) is a global industry-led initiative that provides a standardized methodology for financial institutions to measure and disclose the greenhouse gas emissions associated with their loans and investments — enabling banks, asset managers, and insurers to quantify their financed emissions as Scope 3 Category 15 and set credible decarbonization targets.

Permanence

Permanence is a carbon-credit quality criterion referring to how durably a project keeps carbon out of the atmosphere, and the risk that stored carbon is later re-released.

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