Climate Finance Terminology

Accreditation: The process through which entities are authorised to access climate funds such as the Green Climate Fund.

Adaptation Finance: Capital aimed at making communities or economies resilient to climate impacts.

Adaptation Fund: A fund under the UNFCCC that finances adaptation projects for vulnerable developing countries.

Advance Market Commitments (AMCs): Promises from businesses or government to buy a product or service at a set price in future, helping encourage nature-friendly goods.

Anthropogenic Climate Change: Climate change caused by humans.

Betterment Levies: Taxes placed on the increased value of land after public developments, including those that help nature, which can be reinvested.

Biodiversity: The variety of all life forms and ecosystems.

Blended finance: Combining public and private funds to mobilise greater investment in sustainable projects.

Blending: Mixing finance from multilateral climate funds with other sources to scale up climate projects.

Blue Bonds: Debt instruments to finance marine and ocean conservation projects.

Bridge Financing: Loans that help cover the funding gap for a conservation organisation before full funding is available.

Carbon Credits: Tradable certificates representing avoided or reduced emissions equivalent to one tonne of CO2.

Carbon Dioxide Equivalent (CO2e): A unit comparing emissions by their impact relative to carbon dioxide.

Carbon Finance: Financing mechanisms focusing on greenhouse gas emission reductions, including carbon markets.

Carbon Offsetting: Practice of compensating emissions by investing in equivalent carbon reduction projects.

Carbon Tax: A tax on fossil fuel use to incentivise emissions reductions and support climate action.

Certified Emission Reduction (CER): A tradable carbon credit issued through the Clean Development Mechanism under the Kyoto Protocol.

Clean Development Mechanism (CDM): A UNFCCC mechanism enabling developed countries to invest in emission reduction projects in developing countries.

Climate: In climate finance, refers to reducing greenhouse gas emissions and helping people and ecosystems adjust to the effects of climate change.

Climate Bonds Initiative (CBI): Promotes large-scale green bond markets and sets standards.

Climate Change: Long-term climate changes caused by natural or human factors.

Climate Change Adaptation: Actions to reduce negative climate impacts without causing harm elsewhere.

Climate Change Mitigation: Actions to cut greenhouse gas emissions in line with the Paris Agreement.

Climate Finance Instruments: Includes grants, concessional loans, equity, guarantees, bonds, and insurance.

Climate Finance Taxonomies: Systems classifying activities or investments based on climate or sustainability criteria.

Climate Finance Tracking Frameworks: Methodologies for monitoring flows of climate-related financing.

Climate Funds: Financial pools dedicated to supporting climate mitigation and adaptation projects.

Climate Insurance: Insurance products protecting against climate-related risks.

Climate Investment Funds (CIFs): Multilateral funds supporting developing countries in low-carbon and climate-resilient development.

Climate Policy Initiative (CPI): Research body focused on tracking and analysing climate finance flows.

Climate Public Expenditure and Institutional Review (CPEIR): A tool to analyse how climate change expenditure is integrated into government budgets.

Climate Resilience Bonds: Bonds financing measures to increase resilience of infrastructure or ecosystems.

Climate Risk Finance: Financial products aimed at managing climate-related physical or transition risks.

Climate Technology Fund (CTF): Part of Climate Investment Funds, it finances clean technology projects in developing countries.

Climate Venture Capital: Investment in early-stage startups focused on climate solutions.

Commercial Bonds: Ordinary bonds used to raise money, where the issuer decides how funds are used, possibly for nature projects.

Commercial Equity: Publicly traded shares in companies, where the money raised might be used for nature projects at the company’s choice.

Commercial Funds: Money collected from different investors, used for specific projects which can include nature projects.

Commercial Loans: Standard loans given to raise money; borrowers may use funds for nature projects if they wish.

Concessional Loan: Low-interest or below-market loans provided to support climate projects.

Conservation Easements: Voluntary limits placed on land use to protect it, which can also lead to tax benefits or be sold to someone else.

Conservation Notes: Lending products that provide cheap loans to conservation projects, with the aim of supporting long-term protection.

Corporate Funds: Investment funds created by companies to finance nature projects or nature-positive business models.

Credit Guarantees: Promises by a third party to repay a loan if the borrower cannot, often used to make lending for nature projects less risky.

Crowdfunding: Raising money from many small investors, often online, for nature-based projects or startups.

Debt-for-Nature Swaps (DNS): Deals that reduce government debt in exchange for investing in conservation or restoration projects.

Direct Access: Mechanism allowing countries or entities to access climate finance directly from funds without intermediaries.

Double Materiality: Recognition that climate impacts financial performance and that business impacts climate.

Early-Stage Investment: Private investments in young companies that often have nature-friendly business ideas.

Ecological Fiscal Transfers (EFTs): Payments from governments to reward departments that protect nature or provide ecosystem services.

El Niño: Occasional Pacific Ocean warming that disrupts global weather.

Emission Reduction Purchase Agreement (ERPA): Contract between buyers and sellers of carbon credits.

Emission Trading Systems (ETS): Market-based approaches where emission allowances are traded to incentivise reductions.

Enhanced Direct Access (EDA): A GCF mechanism giving countries more control over funding decisions with devolved authority.

Environmental and Social Safeguards: Policies to ensure climate projects do not harm people or ecosystems.

Environmental Credits: Certificates showing a positive environmental result, like improved biodiversity or cleaner water, that can be bought or sold.

Environmental Subsidies: Government payments that support behaviours or activities that are better for the environment.

Environmental Taxes: Taxes designed to discourage activities that harm nature, such as carbon, water, or land use taxes.

EU Taxonomy for Sustainable Activities: Classification system defining activities considered environmentally sustainable for investment.

European Union (EU): Major regional actor with climate finance policies including the EU Taxonomy and Carbon Border Adjustment Mechanism.

Externality Taxes: Taxes designed to discourage activities that harm nature, such as carbon, water, or land use taxes (definition same as for “environmental taxes).

Fast Start Finance: Early climate finance commitments from developed countries, intended to support developing countries.

Financial Instruments: Various tools like grants, loans, guarantees, equity, bonds used in climate finance.

Financial Stability Board (FSB): Oversees global financial systems, including establishing the TCFD.

Focal Point: Designated national authority responsible for climate finance coordination.

Fossil Fuels: Fuels from ancient plant or animal remains (e.g., coal, oil, natural gas).

Global Environment Facility (GEF): Multilateral fund supporting environmental and climate projects globally.

Global warming potential: A measure of heat trapped by a greenhouse gas compared to carbon dioxide.

Grant: Non-repayable funds provided for climate initiatives.

Green Bonds: Bonds financing environmentally beneficial projects like renewable energy or energy efficiency.

Green Climate Fund (GCF): UN-backed fund mobilising finance for climate mitigation and adaptation in developing countries.

Green Climate Fund Secretariat: Administers the Green Climate Fund’s operations.

Green Loans: Loans provided for projects with environmental benefits, often with preferential terms.

Green Securitisation: Combining and selling financial products, then using the proceeds to support nature-related projects.

Greenhouse Effect: The process by which greenhouse gases trap heat in the atmosphere.

Greenhouse Gas Protocol: Global standards for measuring greenhouse gas emissions, divided into Scopes 1, 2, and 3.

Greenhouse Gases (GHGs): Gases like carbon dioxide, methane, and nitrous oxide that strongly affect climate.

Greenwashing: Misleading claims about the environmental benefits of investments or products.

Impact Bonds: Bonds used to fund projects that help nature, sometimes using special finance to make them less risky for private investors.

Impact Equity: Investments in businesses that focus on making a positive difference to society or the environment, often accepting lower profits.

Impact Funds: Investment funds set up to achieve environmental or social goals, sometimes accepting special risks or lower returns.

Impact Loans: Loans to support nature projects, sometimes offered at lower rates or with easier terms, but can be harder to qualify for.

Impact Potential: The expected positive impact of a climate finance project.

Incentive Mechanisms: Financial or practical rewards for companies or communities that act in ways that benefit nature, like bonuses for green actions.

Insurance Development Forum: Collaborative platform advancing climate risk insurance to enhance resilience.

Integrated Assessment Models (IAMs): Models to assess if climate targets (such as limiting warming to 1.5–2°C) are feasible.

Internal Nature Pricing (INP): Companies or investors set an internal fee or value on their impact on nature, similar to how some use a carbon price.

International Capital Market Association (ICMA): Develops and maintains green, social, and sustainability bond standards.

International Finance Corporation (IFC): Part of the World Bank group, focusing on private sector climate investment.

Investment Criteria: Standards guiding which projects receive financing.

Jurisdictional Approaches: Funding models where different sectors (public, private, charity) combine resources to reduce risks for nature projects.

Lifecycle Emissions: Emissions from all stages of a product or fuel’s lifespan.

Loss and Damage Finance: Funds to address irreversible climate impacts beyond adaptation.

Low-Carbon Transition Finance: Funding supporting decarbonisation and cleaner technology adoption.

Multilateral Development Banks (MDBs): Institutions like the World Bank, IMF, and regional banks that finance climate projects globally.

National Designated Authority (NDA): Government entity representing a country in negotiations with climate finance institutions.

Natural Asset Companies (NACs): Companies created to turn the value of natural resources into investments, often through shares.

Organisation for Economic Co-operation and Development (OECD): Provides research, taxonomy guidance, and transition finance recommendations.

Parts Per Million (ppm): Measurement of concentration; units per million units of mass.

Payments for Ecosystem Services (PES): Voluntary payments given to landowners or others for protecting or improving the environment.

Performance Bonds: Bonds that link repayments to achievement of emission or sustainability targets.

Philanthropic Finance: Donations given to support nature projects, often tracked to see what outcomes are achieved.

Planetary Boundaries: Safe environmental limits for human activities.

Pollution Prevention and Control: Activities that prevent or reduce pollution, including non-greenhouse gas emissions.

Private Equity: Shares in private companies, possibly those with business models that help nature.

Private Sector Advisory Groups: Committees advising climate funds on private sector engagement.

Project Preparation Facility: Support mechanism helping developing countries prepare projects for funding.

Protection And Restoration: Activities to conserve or restore biodiversity and healthy ecosystems.

Public Grants: Government money given for activities like conservation, usually as a one-off payment.

Readiness Programme: Support to countries to strengthen institutional capacity for climate finance access.

Representative Concentration Pathways (RCPs): Four scenarios for climate futures to 2100 based on different actions.

Risk Insurance: Insurance that covers environmental risks or rewards actions that help nature, sometimes including special payout types.

Scope 1 Emissions: Direct greenhouse gas emissions from owned or controlled sources.

Scope 2 Emissions: Indirect emissions from purchased energy.

Scope 3 Emissions: Indirect emissions along the value chain, both upstream and downstream.

Social Bonds: Bonds funding projects with positive social outcomes such as affordable housing or healthcare.

Submission of Climate Finance Proposal: Formal submission process to access finance from funds.

Sustainability-linked bonds (SLBs): Bonds where interest rates change depending on how well organisations meet environmental or social goals. Missing targets increases costs; performing better lowers them.

Sustainability-linked loans (SLLs): Loans where the interest rate depends on the borrower meeting environmental or social targets; better performance may lower costs.

Sustainable Stock Exchanges Initiative: Promotes improved disclosure and sustainable investment practices among listed companies.

Sustainable Use And Protection Of Water And Marine Resources: Actions that protect or restore water and marine ecosystems.

Task Force on Climate-related Financial Disclosures (TCFD): Provides voluntary standards for companies to disclose climate-related financial risks and opportunities.

Thematic Bonds: Bonds that raise money specifically for environmental or social projects, often called green, social, or sustainability bonds.

Thematic Funds: Funds that gather money to support both nature and financial returns, usually needing agreement on goals.

Thematic Loans: Loans made specifically to fund environmental or social projects; sometimes called green, social or sustainability loans.

Transition Credits: Credits supporting projects that facilitate shift from high to lower carbon activities.

Transition To A Circular Economy: Economic activities focused on waste prevention, re-use and recycling.

UNFCCC Conference of the Parties (COP): Annual meetings where countries negotiate climate agreements and finance commitments.

UNFCCC Standing Committee on Finance: Oversees financial mechanisms under the Convention.

United Nations Framework Convention on Climate Change (UNFCCC): The main international climate treaty, signed in 1992, providing the foundation for global climate action.

Venture Capital: Private investments in young companies that often have nature-friendly business ideas (definition same as ‘Early-Stage Investment’.

Voluntary Carbon Market: Market where entities buy and sell carbon credits on a voluntary basis.