Investments glossary

Abstain

When we vote at a company Annual General Meeting, we can vote ‘in favour’, ‘against’ or we can ‘abstain’. Where we fully support a company, we will vote in favour. Where we disapprove of a company’s behaviour, we will vote against. Where we do not feel fully supportive or comfortable with a company’s behaviour, but also feel that voting ‘against’ is too strong at this stage, we will ‘abstain’. This means we’re voting neither for nor against. This approach leaves us with opportunities to go further in the future. Please also see ‘Annual General Meeting’ and ‘Voting’.

Active ownership (also known as 'Stewardship')

Monitoring, understanding and looking to influence the behaviour of the companies. Stewardship involves using tools such as engagement, voting and advocacy as ways to shape corporate behaviour.

Railpen uses the term ‘Sustainable Ownership’ to describe its approach to Active Ownership. See our Sustainable Ownership page.

Advocacy (or public policy)

Activities undertaken to influence policymakers and regulators. This includes meetings and roundtables, along with responding to government requests for evidence, either individually or through a membership body.

Annual General Meeting (AGM)

A meeting held once a year by a company with its shareholders, where important information is discussed and where shareholders are invited to vote on issues like how much directors should be paid, or whether the directors should be (re-) elected. Most listed or public companies must hold an AGM. Please also see ‘Abstain’ and ‘Voting’.

Annual management charge (AMC)

A fee pension providers charge for managing your pension or investment fund. This charge is based on the value of a person’s fund. Annual management charges are automatically taken from the assets of the pension fund on a regular basis. 

Annuity

A pension annuity is a product that pays you a regular income for the rest of your life, no matter how long you live.

Asset classes

A group of securities that are similar in fundamental ways. Securities are financial instruments that hold value and can be traded between parties.

Historically, there have been 3 main classes:

• Equities (stocks)
• Fixed income (primarily bonds)
• Cash equivalents

Most investment professionals now include real estate, commodities, futures (contract agreements to buy/sell a commodity asset at a set future date for a set price) and other financial derivatives (alternative investments).

Investments in different asset classes react differently to news, e.g. a news story could be positive for stocks, negative for bonds, positive for cash equivalents and indifferent to alternative investments.

Assets

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.

Biodiversity

Biodiversity refers to the variability among living organisms from all sources. We can think of it as the different kinds of plants and animals needed to make a balanced environment. 

Bonds

A fixed income investment where you lend your money to the government or a company that needs to raise money. The idea is that after a fixed period of time, you get your initial loan amount back.

You also hope to receive a regular interest payment, usually known as coupons, on top of your initial payment. Bonds aren’t risk-free and unless you buy a guaranteed bond, there is a chance you won’t get back what you originally paid.

Bondholders are ahead of shareholders in getting their money back if a company goes into liquidation, although this might not always be the case if you’re investing through a fund.

Climate change

Climate refers to long-term shifts in temperatures and weather patterns. Such shifts can be natural, due to changes in the sun’s activity or large volcanic eruptions. However, climate scientists have shown that, since the 1800s, human activities have been the main driver of climate change, primarily due to the burning of fossil fuels like coal, oil and gas. 

Debt (or credit)

If an investor buys a debt instrument, they loan capital to a firm. This entitles them to interest from the debtor company over a fixed term until the loan is repaid. Debt can be listed, i.e. bought and sold on an exchange or private (private debt). This means it is a loan to a private company that is not listed on an exchange.

Decarbonisation

An organisation’s approach to reducing its production of greenhouse gas emissions.

Divestment (or disinvestment)

A divestment is the act of ‘divesting’ oneself (i.e. getting rid) of assets. Examples of corporate divestments include selling intellectual property rights, mergers and acquisitions, and liquidation court orders. It can involve getting rid of stocks, bonds or investment funds that are unethical. It usually refers to the sale of controlling shares.

Disinvestment

The process of an investor selling all a company’s debt or equity instruments, if already invested.

Diversification

The act of investing money in a way that reduces risk, to increase gains and reduce losses.

Engagement

Communicating with a person or organisation with the aim of raising an issue or achieving change.

Equity (share)

Shares in the ownership of publically owned businesses. Their value goes up and down based on the investors’ perceptions of the company’s performance. This asset class has historically provided the highest return but is the most volatile.

ESG (Environmental, Social and Governance)

ESG is the collective term for referring to environmental, social and governance issues. Examples of these include:

• Climate change
• Health and safety
• Shareholder rights

ESG integration

Incorporating environmental, social and governance (ESG) considerations into investment decisions regarding, and analysing, the companies we invest in.

ESG investment (also referred to Sustainable Investment or Responsible Investment)

An approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance factors, and the long-term health and stability of the market as a whole. It recognises that the generation of long-term sustainable returns is dependent on stable, well-functioning and well-governed social, environmental and economic systems.

Railpen uses the term ‘Sustainable Ownership’ to describe its approach to ESG investment. See our Sustainable Ownership page.

Ethical investment

The act of investing money in something that is considered aligned with some ethical code, such as religious values or what is considered morally good or correct, in addition to an expectation of a financial return. This could be related to environmental, social and governance issues.

We consider governance and sustainability issues at companies we invest in because we believe it helps us protect and enhance the financial value of your savings. However, we are conscious that some of our members have their own individual ethical concerns that influence the food they eat, the clothes they wear and other choices in their lives.

Exclusion

Not allowing the purchase of any of a company’s debt or equity instrument and its inclusion in an investment portfolio.