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Climate Banking Terms

There are a number of acronyms and terms you might encounter when getting to grips with fossil finance and green banking. Here are some of the most common terms you might come across:

B Corp

A certification for businesses that meet high standards of social and environmental performance, public transparency, and legal accountability to balance profit and purpose. These companies are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.

ESBR

Energy Supply Banking Ratio – The ratio of low carbon-energy to high-carbon energy which a bank finances. This metric was derived by BNEF (Bloomberg Energy Finance). It can either be expressed as a number or a percentage.

GABV

An independent network of banks, credit unions, microfinance institutions, and other financial entities committed to advancing positive change in the banking sector by promoting transparent, sustainable, and social banking practices.

PCAF

An initiative aimed at standardizing carbon accounting for the financial sector, enabling institutions to assess and disclose the greenhouse gas emissions associated with their loans and investments.

TCFD

The Task Force for Climate-related Financial Disclosures provides information to investors about what companies are doing to mitigate the risks of climate change.

ESG

Environmental, Social and Governance –  set of standards that aim to examine a company's sustainability and societal impact. These standards are increasingly integrated into investment decisions, as they can provide insights into a company's long-term viability and resilience.

SRI

Socially Responsible Investing – Investment that considers environmental, social, and corporate governance criteria. Strategies towards SRI tend to involve screening, engagement, and impact investing, aligning investments with societal benefits and personal values.

GRI

Global Reporting Initiative – An independent international organization that helps businesses and governments to understand and communicate their impacts on issues such as climate change, encouraging them to take responsibility for their own actions affecting the environment.

SASB

Sustainability Accounting Standards Board –  A non-profit organization developing sustainability accounting standards, helping public companies disclose sustainability information to their investors.

CCS

Carbon Capture and Sequestration – Innovative technologies that capture carbon dioxide emissions produced through fossil fuels use, storing the carbon underground rather than releasing it into the atmosphere as CO2.

SBTi

Science-Based Targets initiative – a leading validator of company’s net zero and interim decarbonization targets. An SBTi-validated target is the gold standard in climate target-setting. SBTi Dashboard shows companies that have committed to setting a science-based target or had their target validated.

IR

Integrated Report – An increasingly common way for financial institutions to report on their financial performance. These reports contain financial and sustainability data combined, rather than separating them into two distinct reports.

GPE

Green Policy Evaluator – An efficiency-enhancing tool developed by Bank.Green that uses chatbots to evaluate written documents.

Annual Report

Most banks will have an annual report, and this is a yearly document for shareholders to document the firm's activities and finances in the previous financial year. Usually, it will include financial statements like balance sheets, income statements and cash flow statements.

BNEF

Bloomberg New Energy Finance is a research organization helping energy professionals through publishing financing information on low-carbon energy. It is a part of the Bloomberg company. Included in its suite of services are the analysis and modelling of the carbon markets.

CCCA

Collective Commitment to Climate Action – An initiative by signatories of the UN Principles for Responsible Banking to align portfolios with climate goals of transitioning to a Net Zero economy by 2050.

CDP

This was originally The Carbon Disclosure Project until permanently shortening its name to CDP. The organization is a not-for-profit charity which runs a global disclosure system for bodies to manage their environmental impacts. It has a comprehensive dataset around environmental reporting due to its annual climate change questionnaire, where institutions are invited to disclose their governance around climate, climate risks and greenhouse gas emissions.

Green Bonds

Fixed-income financial instruments specifically allocated towards raising funds for climate and environmental projects.

Financed Emissions

The greenhouse gas emissions that are indirectly generated through investments or loans made by financial institutions.

Impact Finance

Investments made with the intention to generate positive social or environmental impacts as well as financial returns.

EU Taxonomy

This is a classification system which makes part of the EU's overall efforts in reaching the European Green Deal's objectives. It acts as a science-based tool which allows firms and investors to make sustainable investment decisions.

Fossil Fuel to Renewable Energy Ratio

This a ratio designed by Bloomberg and represents the amount of investment in fossil fuel projects in relation to investment in low-carbon energy projects. In 2021, the ratio (RE/FF)stood at 1:1, and Bloomberg predicts that we need a 4:1 ratio by 2030 to remain at below 1.5 degree celsius levels. This means that for every 1 dollar invested into fossil fuels, 4 dollars would need to go towards renewable energy supply.

Toxic Bond

Any bond issued by a fossil fuel company with plans to expand its coal, oil or gas operations.

Green Lending Products

Financial instruments created to fund environmentally friendly projects. These include (but are not limited to) preferential interest rates for green mortgages, energy efficiency measures, and purchases of electric vehicles.

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