Sustainability
Terminology

Term: Nature-based solutions

Definition:
Climate actions, synergistic with the natural habitat, devised to reverse, restore and protect biodiversity while addressing grave risks to the ecosystem are called nature-based solutions.

Source: UNDP

For more details:
https://climatepromise.undp.org/news-and-stories/climate-dictionary-everyday-guide-climate-change

Explanation:
Based on indigenous adaptions towards protecting the ecosystems, these sustainable and effective eco-solutions often offer dual benefits of preserving the environment as well as addressing immediate social challenges to livelihoods, arising out of climate risks.

An example of Nature-based solutions is cultivation of mangroves and wetlands in coastal regions to prevent flooding and effects of erosion on the marine life. Another example is the way creation of gardens, parks, and meadows help urban cities combat heat waves.

The Nature-based solutions contribute to climate change adaptation and build resilience across ecosystems and communities.

How to use in a sentence:
Estimates suggest that nature-based solutions can provide 37% of the mitigation needed until 2030 to achieve the targets of the Paris Agreement.

Term: ESG (Environmental, Social, and Governance)

Definition:
Commonly used in its acronym form, ESG entails evaluation criteria for corporates that assess the robustness of a company’s governance systems and efficiency in managing its environmental and social impacts/ risks. The Environmental factors refer to an organization’s environmental impact(s) and risk management practices, the Social factors refer to it’s relationships with stakeholders, and the Governance factors refer to how an organization is managed.

Source: CFA Institute

For more details:
https://www.cfainstitute.org/en/rpc-overview/esg-investing

Explanation:
The ESG reporting framework helps in improving the transparency and consistency of the ESG information that firms report via ESG disclosures. The reporting also helps investors in decision making based on their own interests w.r.t. E, S, or G factors.

Key examples of ESG reporting involve the quantification of a company’s emissions/ carbon footprint, its water consumption or customer privacy breaches.

How to use in a sentence:
ESG analysis has become an increasingly important part of the investment process.

Term: Transition Finance

Definition:
Transition finance refers to financial support or investments that enable decarbonization of high-emitting and hard-to-abate industries such as steel, cement, chemicals, aviation and shipping. Industries use various innovative financial tools such as transition bonds to raise capital for financing the transitions.

Source: CFA Institute

For more details:
https://rpc.cfainstitute.org/-/media/documents/ article/industry- research/transition-finance.pdf

Explanation:
The capital under Transition Finance drives actions with the goal of reaching net zero, it also aims at addressing potential social impacts associated with decarbonization, including unemployment and loss of tax revenue for local governments.

An example from Aviation sector: As the first airline to undertake greening of their fleet, Japan Airlines issued transition bonds worth $6.7 million issue in March 2022 and repeated the same, next year. The proceeds from both bonds are aimed at upgrading the airline’s f leet to fuel-efficient aircraft.

How to use in a sentence:
Transition finance facilitates the decarbonization efforts of high-emitting industries

Term: Circular Economy

Definition:
The circular economy is a novel approach to value creation. Instead of a linear "take-make-dispose" model, this cyclical system promotes efficient and repeated use of materials, significantly contributing to climate action. By optimizing product design for longevity and serviceability, and transforming waste into valuable resources, it revolutionizes resource management.

Source: United States Environmental Protection Agency, United Nations Industrial Development Organisation

For more details:
https://www.epa.gov/circulareconomy/what-circular-economy
https://www.unido.org/sites/default/files/2017-07/Circular_Economy_UNIDO_0.pdf

Explanation:
A circular economy is an important part of slowing climate change.

It uses a systems-focused approach and involves industrial processes and economic activities that are restorative/ regenerative by design, enabling resources used in such processes to maintain their highest value for as long as possible. It aims to eliminate waste through superior design of materials, products, and systems (including business models).

How to use in a sentence:
A circular economy aims to create a sustainable future.