Glossary

Agents: NFU Mutual’s network of Tied Agents provides specialist advice for relationship led customers with complex insurance needs, alongside a range of products for customers with less complex needs, as part of our General Insurance business. 

Anthropogenic greenhouse gas (GHG) emissions: Emissions of GHGs caused by human activities. 

Assets: Anything of value owned by a business that can be set against its liabilities. Assets are usually divided into four types: fixed assets (typically land, buildings and machines); current assets (cash, stock, investments, work in progress and payments owing); liquid assets (cash or funds held in a form that can be quickly converted into cash); and intangible assets (goodwill, trademarks, patents, etc). 

Assets under management (AUM): Funds that are managed by our fund managers on behalf of investors. AUM represents the total amount of money that investors have entrusted with our fund managers to invest across our investment products.

Biodiversity: The variability among living organisms from all sources including, inter alia, 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.  

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 GHG 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. The equivalent warming of non- CO₂ GHG emissions are measured as tonnes of CO₂e.  

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 carbon dioxide produced by the use of fossil fuels from the activity of humans. 

Corporate bond: A corporate bond is a debt instrument issued by a company to raise funds.  

Emissions: The collection of chemical gases released into the atmosphere by anthropogenic (caused by human) activity. 

Emissions Metrics for Investments: NFU Mutual discloses a range of metrics for its emissions because they have different advantages and limitations. 

1. 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. 
2. 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. 
3. 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.
4. 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. 
5. 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). 

Equities: Equities are stocks and shares issued by a company. 

ESG: Environmental (e.g. climate change, nature, waste), Social (e.g. labour standards) and Governance (e.g. board accountability, control and direction) 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. 

Farming Unions UK: Farming unions are member organisations/industry associations for farmers that champion UK farming and provide professional representation and services to its Farmer and Grower members. The farming unions in the UK include the National Farmers’ Union in England and Wales, NFU Scotland, Ulster Farmers Union and NFU Cymru.  

Financed Emissions: Financed emissions are the greenhouse gas (GHG) emissions linked to the investment and lending activities of financial institutions like investment managers, banks and insurers.  

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 as a result of the greenhouse effect caused by the increase in levels of greenhouse gases. 

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). 

Greenhouse Gas Protocol: A comprehensive, global, standardized framework to measure and manage greenhouse gas emissions from private and public sector operations, value chains and climate change reduction (mitigation) activities.  

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, set up by the IFRS, is responsible for developing standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focussed on the needs of investors and the financial markets. 

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). 

Low-carbon Economy: A low-carbon economy (sometimes referred to as a decarbonised economy) is based on energy sources that produce low GHG emissions. 

Market-based method for scope 2 emissions: A market-based method is a way of calculating emissions from purchased electricity. It reflects emissions from directly purchased electricity using supplier specific emissions factors such as renewable energy backed by Renewable Guarantees of Origin certificates. 

Members: NFU Mutual’s policyholders. 

Mutual: A mutual insurer is one where the policyholders are the sole owners of the company.   

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.  

Paris Agreement: The Paris Agreement was an agreement within the United Nations Framework Convention on Climate Change effective 4 November 2016. The objective is to limit the increase in average global temperatures to below 2°C, preferably to 1.5°C, compared to pre-industrial levels. 

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 applying positive and negative screening, practicing active ownership through stakeholder engagement to promote sustainable and responsible business, and adhering to industry standards and affiliations such as the Stewardship Code, PRI, and Investor Forum. The scope covers managing funds for general insurance, retail investment, pension customers, and the company's retirement benefit scheme, ensuring sustainable growth and alignment with client needs. Governance and stewardship structures support these practices, promoting transparency and accountability in investment processes.

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 framework, processes and procedures that govern how risks are identified, assessed, managed, monitored and reported. 

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: Direct emissions from sources that are owned or controlled by a company. 
• Scope 2: Emissions from purchased electricity used in occupied premises. 
• Scope 3: All other indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream. 

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.”  

Sovereign bond: A sovereign bond or government bond is a bond issued by a government to support spending.  

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. 

TCFD: Task Force on Climate-Related Financial Disclosures (TCFD). The Financial Stability Board established the TCFD to develop recommendations for more effective climate-related disclosures. 

tCO₂e: Tonnes of carbon dioxide equivalent (CO₂e). 

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. For a UK-based financial services company, the plan should align with guidance from Glasgow Financial Alliance for Net Zero and the UK Transition Plan Taskforce. 

Underwriting: The process of selecting which risks an insurance company can cover and deciding the premiums and terms of