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Green Finance 2021: Background


bond - 3. A long-term, interest-bearing debt instrument issued by a corporation or governmental entity, usu. to provide for a particular financial need; esp., such an instrument in which the debt is secured by a lien on the issuer's property. Black's Law Dictionary (11th ed. 2019).

debt financing - the process of raising capital by selling debt instruments (fixed-income securities, such as bonds, bills, or notes) to investors. In return for lending the money, the investors become creditors and receive a promise that the principal and interest on the debt will be repaid.

Environmental, Social, Governance (ESG) criteria - a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

equity financing - the process of raising capital through the sale of shares.

finance 1. That aspect of business concerned with the management of money, credit, banking, and investments 2. The science or study of the management of money, etc. Black's Law Dictionary (11th ed. 2019).

green - 8. bconcerned with or supporting environmentalism. ctending to preserve environmental quality (as by being recyclable, biodegradable, or nonpolluting). Merriam Webster.

greenwashing - the process of conveying a false impression or providing misleading information about how a company's products are more environmentally sound.

present value - the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or debt obligations. Investopedia > Corporate Finance & Accounting > Financial Statements > Present Value

quantitative easing - a form of unconventional monetary policy in which a central bank purchases longer-term securities from the open market in order to increase the money supply and encourage lending and investment. Buying these securities adds new money to the economy, and also serves to lower interest rates by bidding up fixed-income securities.

risk-free rate of return - the theoretical rate of return of an investment with zero risk. The real risk-free rate can be calculated by subtracting the current inflation rate from the yield of the Treasury bond matching your investment duration.

shareholder - Someone who owns or holds a share or shares in a company, esp. a corporation. — Also termed shareowner; (in a corporation) stockholder. Black's Law Dictionary (11th ed. 2019).

stakeholder - 3. A person who has an interest or concern (not necessarily financial) in the success or failure of an organization, system, plan, or strategy, or who is affected by a course of action. Black's Law Dictionary (11th ed. 2019).

valuation - a quantitative process of determining the fair value of an asset or a firm. There are several methods and techniques for arriving at a valuation—each of which may produce a different value. Valuations can be quickly impacted by corporate earnings or economic events that force analysts to retool their valuation models.

Thanks to Rebekah Maxwell for significant contribution to this Green Finance resource guide.