Knowledge · Glossary
Sustainable Finance, defined.
Plain-language definitions of every SLL, SPT, KPI and framework acronym you'll meet — written for bankers and borrowers, not academics.
- Sustainability-Linked Loan (SLL)
- General-purpose loan whose pricing is tied to sustainability KPIs.Governed by the LMA/APLMA/LSTA Sustainability-Linked Loan Principles. Two-way margin ratchet, annual independent verification.
- Sustainability Performance Target (SPT)
- Ambitious, benchmarked target tied to an SLL KPI.Must be material, quantifiable, benchmarked against a science-based or sectoral reference, and externally verifiable.
- KPI (in SLLs)
- The metric on which an SPT is measured.Common KPIs include absolute Scope 1+2 tCO₂e, energy intensity, waste diversion rate or a sector-specific measure.
- Sustainability-Linked Loan Principles (SLLP)
- The LMA/APLMA/LSTA voluntary market standard for SLLs.Five components: KPI selection, SPT calibration, loan characteristics, reporting and verification.
- Second Party Opinion (SPO)
- Independent review of SPT credibility at origination.
- Green Loan
- Loan with proceeds ring-fenced for eligible green projects.Structured around the four components of the Green Loan Principles.
- Green Loan Principles (GLP)
- LMA/APLMA/LSTA voluntary framework for Green Loans.
- EU Taxonomy
- EU classification system for environmentally sustainable activities.Six environmental objectives, technical screening criteria and DNSH tests.
- Transition Finance
- Capital for the credible decarbonisation of hard-to-abate sectors.
- Financed Emissions
- The Scope 3 category 15 emissions of a financial institution.Attributed via financing / enterprise value using the PCAF Standard.
- PCAF
- Partnership for Carbon Accounting Financials — the global standard for financed emissions.
- SBTi
- Science Based Targets initiative — validates 1.5°C-aligned corporate targets.
- Scope 1 Emissions
- Direct emissions from owned or controlled sources.
- Scope 2 Emissions
- Indirect emissions from purchased electricity, steam, heating and cooling.
- Scope 3 Emissions
- All other indirect value-chain emissions across 15 categories.
- Location-based (Scope 2)
- Grid-average method for Scope 2 accounting.
- Market-based (Scope 2)
- Contract-based Scope 2 method reflecting PPAs, green tariffs and GOs.
- TCFD
- Task Force on Climate-related Financial Disclosures.
- ESRS E1 (Climate)
- The ESRS climate standard — GHG inventory, targets and transition plan.
- Double Materiality
- The CSRD principle of assessing both financial and impact materiality.
- GHG Protocol
- The world's most widely used GHG accounting framework.
- ISO 14064
- International standard for corporate GHG inventories, aligned with GHG Protocol.
- ISO 14083
- International standard for GHG emissions from transport chains.
- Marginal Abatement Cost Curve
- Ranked view of decarbonisation levers by € / tCO₂e avoided.
- Transition Plan
- Time-bound plan of actions, capex and governance to reach net zero.
- Physical Risk
- Climate-related financial risk from acute or chronic physical events.
- Transition Risk
- Climate-related financial risk from the low-carbon transition.
- CBAM
- EU Carbon Border Adjustment Mechanism.A levy on the embedded carbon of imported goods in high-carbon sectors, fully in force from 2026.
- EUDR
- EU Deforestation Regulation — due diligence on seven commodities.
- Net Zero
- Gross emissions cut ~90% and residuals neutralised via removals.
- IPMVP
- Standard for measuring and verifying energy savings.