Blue Finance Canada reference
Glossary
This glossary explains the terms most frequently used on Blue Finance Canada. It is intended for a general audience and focuses on concepts that help readers understand the relationship between finance and the ocean. It is not intended to be a comprehensive dictionary of finance, marine science, or environmental policy.
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A · B · C · D · E · F · G · H · I · K · L · M · N · O · P · R · S · T · U · W
A
Acidification, Ocean
Ocean acidification is the gradual decline in the pH of seawater as the ocean absorbs carbon dioxide from the atmosphere. Although seawater remains slightly alkaline, this chemical change makes it more difficult for many shell-forming organisms, including oysters, mussels, and some plankton, to build and maintain their shells and skeletons. Ocean acidification can alter marine ecosystems, fisheries, and aquaculture, making it an important environmental risk with financial consequences.
See also: Climate Change; Natural Capital; Physical Risk
Additionality
Additionality asks a simple question: would this environmental benefit have happened anyway? In blue finance, a project is considered additional if the funding directly enables improvements that would not otherwise have occurred. The concept helps distinguish investments that genuinely create positive environmental outcomes from those that merely finance activities that were already planned.
See also: Blue Finance; Impact Investing; Transition Finance
Asset Life
Asset life is the period over which an asset is expected to remain economically useful. A fishing vessel may operate for several decades, while a port, bridge, or seawall may be expected to last much longer. Understanding asset life is essential because environmental changes, regulatory developments, or shifting market conditions can affect whether an asset remains productive for its full expected lifespan.
See also: Collateral; Physical Risk; Stranded Asset
B
Basel III
Basel III is an international framework that sets minimum standards for bank capital, liquidity, and risk management. Developed after the global financial crisis of 2008, it aims to strengthen the resilience of the banking system. While Basel III does not specifically address ocean sustainability, it influences how banks measure risk and allocate capital, making it relevant to discussions about integrating environmental risks into financial decision-making.
See also: Capital Allocation; Liquidity
Benthic
The benthic zone is the seabed and the ecological community that lives on or within it. Benthic habitats include mud, sand, gravel, rocky reefs, and deep-sea sediments. Many commercial fisheries, offshore energy developments, and aquaculture operations interact directly with benthic environments, making them an important consideration in environmental assessments and marine planning.
See also: Biodiversity; Marine Protected Area (MPA)
Biodiversity
Biodiversity refers to the variety of life, including the diversity of species, genetic variation within species, and the ecosystems they form. Healthy biodiversity supports ecosystems that provide fisheries, coastal protection, tourism, and many other benefits. Ecological decline can affect economic performance, making biodiversity relevant to both environmental policy and financial risk assessment.
See also: Ecosystem Services; Natural Capital; Nature-related Financial Risk
Biodiversity Credit
A biodiversity credit is a market-based instrument intended to finance activities that protect, restore, or enhance biodiversity. Unlike carbon credits, which generally measure greenhouse gas reductions, biodiversity credits seek to reflect improvements in ecological outcomes. The market remains at an early stage, and standards continue to evolve regarding how biodiversity gains should be measured and verified.
See also: Carbon Credit; Nature-positive
Biofouling
Biofouling is the accumulation of marine organisms such as algae, barnacles, mussels, and other species on submerged structures, including ship hulls, offshore platforms, and aquaculture equipment. Biofouling increases fuel consumption, maintenance costs, and the risk of transporting invasive species between regions. Effective management has both economic and environmental benefits.
See also: Biodiversity; Environmental Monitoring
Biomass
Biomass refers to the total mass of living organisms within a particular area or population. In fisheries, biomass is commonly used to estimate the size and health of fish stocks. Sustainable harvesting depends on maintaining sufficient biomass to allow populations to replenish naturally.
See also: Carrying Capacity; Environmental Monitoring
Blended Finance
Blended finance combines public, philanthropic, or development funding with private investment to support projects that might otherwise struggle to attract commercial capital. By reducing risk or improving returns for private investors, blended finance can help finance conservation, coastal infrastructure, and other projects with environmental or social benefits.
See also: Blue Finance; Transition Finance
Blue Bond
A blue bond is a bond whose proceeds are dedicated to projects that benefit oceans, coasts, or freshwater systems. Like green bonds, blue bonds are generally use-of-proceeds instruments, meaning the money raised is earmarked for specific eligible projects rather than general corporate purposes. Blue bonds have financed activities such as marine conservation, sustainable fisheries, wastewater treatment, and coastal resilience.
See also: Blue Finance; Green Bond; Use-of-Proceeds Bond
Blue Carbon
Blue carbon refers to the carbon captured and stored by coastal and marine ecosystems such as mangroves, salt marshes, and seagrass meadows. These habitats can store significant amounts of carbon while also supporting biodiversity, improving water quality, and protecting coastlines. Conserving and restoring blue carbon ecosystems has become an important focus of both climate policy and blue finance.
See also: Decarbonization; Nature-based Solution
Blue Economy
The blue economy encompasses the industries, communities, and activities that depend on oceans, coasts, and other aquatic environments. It includes sectors such as fisheries, aquaculture, shipping, ports, offshore energy, coastal tourism, and marine technology. Blue Finance Canada uses the term to emphasize that economic prosperity and healthy marine ecosystems are interconnected rather than competing objectives.
See also: Blue Finance; Ocean Stewardship
Blue Finance
Blue finance refers to the financial decisions, instruments, and institutions that influence the health of oceans and freshwater systems. It asks how capital can be allocated in ways that recognize both environmental realities and long-term financial outcomes. Rather than treating the condition of the ocean as an external concern, blue finance seeks to make it part of lending, investing, insurance, valuation, and risk management decisions. At its core, blue finance recognizes that financial systems and natural systems are deeply connected.
See also: Blue Economy; Capital Allocation; Natural Capital; Transition Finance
Blue Register
The Blue Register is Blue Finance Canada’s periodic assessment of the maturity of blue finance in Canada. It tracks how Canadian financial institutions, governments, markets, and policies are incorporating the health of oceans and freshwater systems into financial decision-making. Rather than measuring environmental conditions directly, the Blue Register measures the evolution of the financial system itself and the extent to which it recognizes ocean-related risks, opportunities, and responsibilities.
See also: Blue Finance; Capital Allocation
C
Capital Allocation
Capital allocation is the process of deciding where money is invested, lent, or otherwise committed. Every loan, investment, or insurance decision directs resources toward some activities and away from others. Blue finance is concerned with whether those decisions properly account for the condition of the ocean and the long-term sustainability of the industries that depend upon it.
See also: Blue Finance; Cost of Capital; Underwriting
Capital Stack
The capital stack describes the different layers of financing used to fund a business or project. It commonly includes equity, various forms of debt, and, in some cases, hybrid financing. Each layer carries different levels of risk, return, and priority if financial difficulties arise. Understanding the capital stack helps explain how projects are financed and how risks are shared among investors and lenders.
See also: Debt Finance; Equity Finance; Project Finance
Carbon Credit
A carbon credit represents a verified reduction or removal of greenhouse gas emissions that can be bought and sold. One credit typically represents one tonne of carbon dioxide equivalent. Carbon credits are used in both compliance and voluntary carbon markets, although standards vary considerably regarding how emissions reductions are measured and verified.
See also: Blue Carbon; Decarbonization
Carbon Market
A carbon market allows organizations to buy and sell carbon credits or emissions allowances. The objective is to place an economic value on greenhouse gas emissions and encourage lower-emission activities. Carbon markets are relevant to marine industries because shipping, offshore energy, and coastal businesses are affected by evolving climate policy.
See also: Carbon Credit; Net Zero
Carrying Capacity
Carrying capacity is the maximum level of activity or population that an ecosystem can support without suffering long-term degradation. In aquaculture, for example, carrying capacity helps determine how much production a coastal area can sustain while maintaining water quality and ecosystem health. Exceeding carrying capacity can reduce both environmental resilience and economic performance.
See also: Ecosystem Services; Natural Capital
Climate Change
Climate change refers to long-term changes in temperatures, weather patterns, ocean conditions, and other parts of the Earth’s climate system, driven today primarily by human greenhouse gas emissions. For ocean-dependent industries, climate change can alter sea levels, storms, water temperatures, ocean chemistry, species distributions, and operating conditions. These changes may affect revenues, costs, insurance, asset values, and access to capital.
See also: Decarbonization; Marine Heatwave; Physical Risk
Collateral
Collateral is property or another asset pledged by a borrower to secure a loan. If the borrower cannot repay, the lender may seize or sell the collateral to recover some or all of the amount owed. In ocean-dependent industries, environmental change, regulation, or declining resource conditions may reduce the value or useful life of collateral, affecting both lending decisions and financial risk.
See also: Asset Life; Loan-to-Value Ratio (LTV); Physical Risk
Cost of Capital
The cost of capital is the return that investors and lenders require before providing money to a business or project. Activities that are perceived to be riskier generally face a higher cost of capital because investors expect greater compensation for accepting that risk. As environmental conditions and sustainability considerations become more financially significant, they can influence the cost of capital for industries that depend on healthy marine ecosystems.
See also: Capital Allocation; Risk Premium; Transition Risk
D
Debt Finance
Debt finance is the use of borrowed money to fund a business, project, or investment. Unlike equity investors, lenders expect repayment of the principal along with interest, regardless of how profitable the borrower becomes. In ocean industries, debt is commonly used to finance vessels, ports, aquaculture facilities, and offshore infrastructure. A lender’s willingness to provide financing depends on the quality of the collateral, expected cash flows, and the risks facing the underlying asset.
See also: Capital Stack; Collateral; Project Finance
Decarbonization
Decarbonization refers to reducing greenhouse gas emissions from economic activity. This can be achieved by improving energy efficiency, switching to lower-carbon fuels, adopting new technologies, or changing business practices. For ocean industries, decarbonization is reshaping investment decisions in shipping, ports, offshore energy, and marine transportation as governments, customers, and investors seek lower-emission operations.
See also: Net Zero; Transition Finance; Transition Risk
Dependency
A dependency is a natural system, resource, or ecological process that an organization relies upon to operate successfully. For example, fisheries depend on healthy fish populations, ports depend on navigable waterways, and aquaculture depends on suitable water quality. Recognizing dependencies helps explain how changes in ocean conditions can become financially material.
See also: Natural Capital; Nature-related Financial Risk; Ecosystem Services
Disclosure
Disclosure is the process of providing information that allows investors, lenders, insurers, and other stakeholders to understand an organization’s financial position, risks, and opportunities. Environmental disclosures include climate-related and nature-related risks alongside traditional financial reporting. Good disclosure does not eliminate risk, but it helps markets price that risk more accurately.
See also: Materiality; Taskforce on Nature-related Financial Disclosures (TNFD); Greenwashing
Double Materiality
Double materiality is the idea that organizations should consider two perspectives when assessing sustainability issues. The first asks how environmental or social factors affect the organization’s financial performance. The second asks how the organization’s activities affect society and the environment. While traditional financial reporting focuses primarily on the first question, double materiality recognizes that both perspectives can be important for decision-making.
See also: Materiality; Nature-related Financial Risk
Due Diligence
Due diligence is the process of investigating a potential investment, loan, or business transaction before making a decision. It may include reviewing financial information, legal issues, operational performance, environmental risks, and regulatory compliance. In blue finance, due diligence considers whether ocean conditions or environmental change could affect the long-term success of a project or business.
See also: Materiality; Underwriting
E
Ecosystem
An ecosystem is a community of living organisms interacting with each other and with their physical environment. Oceans contain countless ecosystems ranging from coral reefs and kelp forests to estuaries and the deep sea. Healthy ecosystems provide services that support fisheries, tourism, coastal protection, and many other economic activities.
See also: Biodiversity; Ecosystem Services
Ecosystem Services
Ecosystem services are the benefits that people receive from healthy natural systems. Marine ecosystems provide food, carbon storage, coastal protection, recreation, water filtration, and habitat for countless species. Many of these benefits have economic value even though they are not fully reflected in market prices. Blue finance seeks to recognize these services when making financial decisions.
See also: Natural Capital; Biodiversity
Environmental DNA (eDNA)
Environmental DNA, commonly called eDNA, refers to genetic material that organisms leave behind in water, soil, or air. Scientists can analyze these traces to identify which species are present without directly capturing or observing them. eDNA is a valuable tool for monitoring biodiversity, detecting invasive species, and assessing ecosystem health.
See also: Biodiversity; Environmental Monitoring
Environmental Liability
An environmental liability is a legal or financial obligation arising from environmental damage, contamination, or regulatory requirements. Examples include cleanup costs, habitat restoration, pollution penalties, or compensation for environmental harm. Environmental liabilities can significantly affect the value of businesses and projects, particularly in industries with long-lived physical assets.
See also: Due Diligence; Physical Risk
Environmental Monitoring
Environmental monitoring is the systematic, repeated collection of information about environmental conditions. It may include measurements of water quality, fish populations, habitat condition, biodiversity, or ocean chemistry. Reliable monitoring helps governments, businesses, and communities understand environmental change and evaluate whether management actions are achieving their intended outcomes.
See also: Environmental DNA (eDNA); Biodiversity
Equity Finance
Equity finance involves raising capital by selling an ownership interest in a business or project. Unlike lenders, equity investors share in both the risks and potential rewards of the enterprise. Because they are paid only after creditors have been repaid, equity investors generally expect higher long-term returns in exchange for accepting greater risk.
See also: Capital Stack; Debt Finance
ESG
ESG stands for Environmental, Social, and Governance. The term refers to a broad range of factors that investors and companies may consider alongside traditional financial information. While ESG helped bring sustainability into mainstream finance, Blue Finance Canada generally focuses more specifically on how ocean conditions influence financial outcomes rather than treating environmental issues as one category within a broader ESG framework.
See also: Materiality; Blue Finance
Exclusive Economic Zone (EEZ)
An Exclusive Economic Zone, or EEZ, is the area extending up to 200 nautical miles from a coastal state’s shoreline in which that country has sovereign rights to explore, use, and manage marine resources. Within its EEZ, Canada has jurisdiction over activities such as fisheries, offshore energy development, and seabed resources, subject to international law.
See also: Marine Spatial Planning; Ocean Governance
F
Fiduciary Duty
Fiduciary duty is the legal obligation to act in the best interests of another person or organization. Directors, trustees, and investment managers owe fiduciary duties to those they represent. As environmental risks become relevant to financial performance, fiduciary duty may require decision-makers to consider climate-related and nature-related risks alongside more traditional financial factors.
See also: Materiality; Nature-related Financial Risk
G
Green Bond
A green bond is a bond whose proceeds are dedicated to projects with environmental benefits, such as renewable energy, energy efficiency, or pollution reduction. Blue bonds are generally considered a specialized form of green bond focused on oceans, coasts, and freshwater systems. Both are typically structured as use-of-proceeds bonds, meaning investors know how the funds are intended to be used.
See also: Blue Bond; Use-of-Proceeds Bond
Greenwashing
Greenwashing refers to overstating or misrepresenting the environmental benefits of a product, investment, or organization. It can occur through misleading marketing, vague sustainability claims, or selective disclosure of positive information while omitting material negative impacts. Credible standards, transparent reporting, and independent verification help reduce the risk of greenwashing.
See also: Disclosure; Additionality
H
Habitat
A habitat is the natural environment in which a species lives and obtains the conditions it needs to survive and reproduce. Different species depend on different habitats, such as kelp forests, eelgrass meadows, estuaries, rocky reefs, or deep-sea sediments. The condition of marine habitats influences biodiversity, fisheries productivity, and the long-term capacity of ocean ecosystems.
See also: Biodiversity; Ecosystem; Marine Protected Area (MPA)
Habitat Restoration
Habitat restoration is the process of repairing or rebuilding ecosystems that have been degraded or damaged. Restoration may involve replanting eelgrass, restoring tidal wetlands, removing barriers to fish passage, or improving water quality. While restoration can improve ecological function, it does not recreate an ecosystem exactly as it existed before disturbance.
See also: Nature-based Solution; Biodiversity
I
Impact Investing
Impact investing refers to investments intended to generate both financial returns and measurable social or environmental outcomes. Unlike traditional philanthropy, impact investing expects capital to be repaid and typically seeks competitive financial performance alongside positive outcomes. In blue finance, impact investments may support activities such as sustainable aquaculture, habitat restoration, or coastal resilience projects.
See also: Additionality; Blue Finance
Indigenous Protected and Conserved Area (IPCA)
An Indigenous Protected and Conserved Area (IPCA) is an area where Indigenous governments lead conservation based on their own laws, knowledge, and governance systems. While IPCAs contribute to biodiversity conservation, they are distinguished by Indigenous leadership rather than simply by environmental objectives. They have become an important part of Canada’s evolving approach to conservation and reconciliation.
See also: Indigenous Stewardship; Marine Protected Area (MPA)
Indigenous Stewardship
Indigenous stewardship reflects the responsibility and authority exercised by Indigenous Peoples in caring for their traditional lands, waters, and resources. It is grounded in the laws, knowledge systems, and governance of individual Nations rather than a single universal approach. Across Canada, Indigenous stewardship informs marine planning, conservation, fisheries management, and economic development. Blue finance recognizes that durable investment decisions depend on meaningful partnerships with Indigenous governments and communities.
See also: Indigenous Protected and Conserved Area (IPCA); Ocean Governance
K
Kelp Forest
Kelp forests are underwater ecosystems formed by large brown seaweeds growing in cool, nutrient-rich coastal waters. They provide habitat for numerous marine species, help protect coastlines from wave energy, and support commercial fisheries. Healthy kelp forests also contribute to biodiversity and are recognized for the range of ecosystem services they provide.
See also: Biodiversity; Ecosystem Services
Keystone Species
A keystone species has a disproportionately large influence on the structure and function of an ecosystem relative to its abundance. The loss of a keystone species can trigger widespread ecological change. Along Canada’s Pacific coast, sea otters are a well-known example because their predation on sea urchins helps maintain healthy kelp forests.
See also: Biodiversity; Ecosystem
L
Liquidity
Liquidity describes how easily an asset can be converted into cash without significantly affecting its value. It can also refer to a business’s ability to meet its short-term financial obligations as they come due. Strong liquidity provides flexibility during periods of uncertainty, while poor liquidity can force businesses to sell assets or borrow under unfavourable conditions.
See also: Working Capital; Debt Finance
Loan-to-Value Ratio (LTV)
The loan-to-value ratio compares the amount of a loan with the value of the asset securing it. A lender providing an $800,000 loan against a property worth $1 million has an LTV of 80 percent. Lower loan-to-value ratios generally provide lenders with a greater cushion if asset values decline. In blue finance, changing environmental conditions may affect the long-term value of collateral and therefore the level of protection an LTV ratio provides.
See also: Collateral; Physical Risk
M
Marine Heatwave
A marine heatwave is a prolonged period of unusually warm ocean temperatures in a particular region. Marine heatwaves can disrupt ecosystems, alter the distribution of fish and other species, increase the risk of harmful algal blooms, and contribute to coral bleaching where coral reefs are present. For industries such as fisheries, aquaculture, and tourism, marine heatwaves can create significant operational and financial risks.
See also: Acidification, Ocean; Physical Risk; Climate Change
Marine Protected Area (MPA)
A Marine Protected Area is a defined marine region where human activities are managed to conserve biodiversity, habitats, or other ecological values. Protection levels vary considerably. Some MPAs prohibit most extractive activities, while others permit carefully managed fishing, tourism, or other uses. Marine Protected Areas are one tool among many for conserving marine ecosystems and supporting their long-term resilience.
See also: Habitat; Indigenous Protected and Conserved Area (IPCA)
Marine Spatial Planning
Marine spatial planning is the process of organizing how different activities use ocean space. It seeks to reduce conflicts among shipping, fishing, aquaculture, offshore energy, conservation, recreation, and Indigenous rights by considering ecological, economic, and cultural objectives together. Effective marine spatial planning helps provide greater certainty for both environmental management and long-term investment.
See also: Exclusive Economic Zone (EEZ); Ocean Governance
Materiality
Materiality refers to whether information is important enough to influence a reasonable financial or investment decision. Traditionally, materiality focused on information that could affect an organization’s financial performance. As environmental risks become more financially significant, questions about climate, biodiversity, and ocean conditions may meet that threshold. Materiality helps determine which risks deserve attention from boards, investors, lenders, and regulators.
See also: Disclosure; Double Materiality; Nature-related Financial Risk
Mitigation Hierarchy
The mitigation hierarchy is a framework used to reduce environmental impacts by following four steps in order: avoid, minimize, restore, and, where residual impacts remain, offset. The hierarchy emphasizes that preventing damage is generally preferable to attempting to compensate for it later. It is widely used in environmental assessments and biodiversity management.
See also: Biodiversity; Habitat Restoration
N
Natural Capital
Natural capital refers to the stock of natural assets that provide ongoing benefits to people and the economy. These assets include oceans, forests, wetlands, soils, rivers, and the living species they support. Like other forms of capital, natural capital generates value, but only if it remains healthy. Fisheries, coastal tourism, shipping, and many other ocean industries ultimately depend upon the condition of this natural capital. Blue finance encourages financial decision-makers to recognize that dependence when allocating capital.
See also: Biodiversity; Ecosystem Services; Nature-related Financial Risk
Nature-based Solution
A nature-based solution uses natural or restored ecosystems to address social, environmental, or economic challenges. Examples include restoring salt marshes to reduce coastal flooding, protecting mangroves that buffer storm surges, or rebuilding oyster reefs that improve water quality. Nature-based solutions can provide several benefits at once, making them relevant to infrastructure planning and long-term investment.
See also: Habitat Restoration; Blue Carbon
Nature-positive
Nature-positive describes the goal of halting and reversing the decline of nature so that ecosystems become healthier and better able to function. Although there is no universally accepted measurement framework, the concept is common in business, finance, and public policy. It encourages organizations to think beyond reducing harm toward actively improving ecological outcomes.
See also: Biodiversity; Nature-related Financial Risk
Net Zero
Net zero refers to balancing the amount of greenhouse gases released into the atmosphere with the amount removed or permanently offset, resulting in no net increase in atmospheric emissions. Achieving net zero generally requires significant reductions in emissions before relying on removals or offsets. Many governments and businesses have adopted net-zero targets as part of their long-term climate strategies.
See also: Decarbonization; Transition Finance
O
Ocean Governance
Ocean governance refers to the laws, institutions, agreements, and decision-making processes that determine how oceans are managed and used. It includes international treaties, federal and provincial regulation, Indigenous governance, fisheries management, and marine spatial planning. Effective ocean governance seeks to balance environmental protection with economic activity while recognizing the rights and interests of those who depend upon the ocean.
See also: Marine Spatial Planning; Indigenous Stewardship
Ocean Literacy
Ocean literacy is an understanding of how the ocean influences people and how people influence the ocean. An ocean-literate person recognizes the ocean’s role in regulating climate, supporting biodiversity, sustaining economies, and influencing daily life. Blue Finance Canada aims to strengthen ocean literacy within the financial community by helping decision-makers understand how ocean conditions affect investment, lending, insurance, and long-term economic stability.
See also: Blue Economy; Ocean Stewardship
Ocean Stewardship
Ocean stewardship is the responsible use, management, and care of marine ecosystems for the benefit of both present and future generations. Stewardship extends beyond conservation. It recognizes that governments, Indigenous Peoples, businesses, communities, and individuals all influence the long-term health of the ocean through the decisions they make. Blue finance can be understood as one form of ocean stewardship because it asks how financial decisions influence environmental outcomes.
See also: Blue Finance; Natural Capital
P
Paris Agreement
The Paris Agreement is the international climate treaty adopted in 2015 under the United Nations Framework Convention on Climate Change. Its central objective is to limit the increase in global average temperature while strengthening countries’ ability to adapt to climate change. The agreement has become an important driver of climate policy, corporate transition planning, and sustainable finance around the world.
See also: Net Zero; Transition Finance
Physical Risk
Physical risk refers to financial risks arising from changes in the physical environment. In ocean industries, these risks may include sea-level rise, stronger storms, marine heatwaves, ocean acidification, coastal erosion, or changing fish distributions. Physical risks can affect revenues, operating costs, insurance availability, asset values, and the long-term viability of investments.
See also: Nature-related Financial Risk; Transition Risk
Precautionary Principle
The precautionary principle holds that where there is a risk of serious or irreversible harm, a lack of complete scientific certainty should not be used as a reason to delay reasonable measures to prevent damage. In marine management, the principle encourages decision-makers to act cautiously when evidence is incomplete but the potential consequences are significant. It does not eliminate the need for evidence or analysis; rather, it recognizes that waiting for perfect certainty may increase both environmental and economic risks.
See also: Materiality; Biodiversity; Ocean Governance
Principal-Agent Problem
The principal-agent problem arises when one person or organization makes decisions on behalf of another but has different incentives or priorities. Examples include corporate managers acting on behalf of shareholders or investment managers acting for clients. Good governance seeks to align incentives so that decision-makers act in the long-term interests of those they represent.
See also: Fiduciary Duty; Ocean Governance
Project Finance
Project finance is a method of funding large infrastructure or development projects in which lenders primarily rely on the project’s own future cash flows for repayment rather than on the broader financial strength of the project sponsors. It is commonly used for ports, offshore energy facilities, major transportation infrastructure, and other capital-intensive developments.
See also: Debt Finance; Capital Stack
R
Resilience
Resilience is the ability of a system to absorb disturbances, adapt to changing conditions, and continue functioning. Healthy ecosystems recover from storms, heatwaves, or other stresses, while resilient businesses are better able to withstand economic shocks and environmental change. Building resilience is an important objective in both environmental management and financial planning.
See also: Ecosystem Services; Physical Risk; Nature-based Solution
Restoration
Restoration is the process of assisting the recovery of degraded ecosystems so they regain ecological function and resilience. Restoration may improve biodiversity, water quality, fisheries habitat, or coastal protection, although restoration cannot fully recreate original ecological conditions. Successful restoration requires long-term commitment and ongoing monitoring.
See also: Habitat Restoration; Nature-based Solution
S
Scenario Analysis
Scenario analysis is a planning tool that explores how different future conditions could affect a business, investment, or financial system. Rather than predicting a single outcome, it considers multiple plausible futures, such as different climate pathways, policy responses, or economic conditions. Financial institutions use scenario analysis to understand how environmental change could influence long-term risks and opportunities.
See also: Physical Risk; Transition Risk
Scope 1, Scope 2, and Scope 3 Emissions
Greenhouse gas emissions are commonly grouped into three categories. Scope 1 covers emissions produced directly by an organization’s own operations. Scope 2 covers emissions associated with purchased electricity, heating, or cooling. Scope 3 includes emissions occurring throughout the wider value chain, such as those associated with suppliers, transportation, and the use of products by customers. For many industries, Scope 3 emissions represent the largest share of their overall climate impact.
See also: Decarbonization; Net Zero
Stewardship
Stewardship is the responsible management of resources entrusted to one’s care. In finance, stewardship refers to investors or lenders actively encouraging companies to improve long-term performance and governance. In environmental contexts, stewardship emphasizes maintaining healthy ecosystems for future generations. Blue finance brings these two ideas together by encouraging financial stewardship that supports responsible environmental stewardship.
See also: Fiduciary Duty; Ocean Stewardship
Stranded Asset
A stranded asset is an asset that loses value earlier than expected because of changing market conditions, regulation, technology, or environmental change. Examples might include coastal infrastructure exposed to rising sea levels or fossil fuel assets made less valuable by changes in energy markets. Understanding stranded asset risk is an important part of long-term investment analysis.
See also: Asset Life; Physical Risk; Transition Risk
Sustainability-linked Bond
A sustainability-linked bond is a bond whose financial characteristics are tied to the issuer achieving specified sustainability targets. Unlike a green or blue bond, the proceeds are not restricted to particular projects. Instead, the cost of borrowing may change depending on whether agreed performance targets are met.
See also: Blue Bond; Green Bond
Sustainability-linked Loan
A sustainability-linked loan is a loan whose pricing is connected to the borrower’s achievement of agreed sustainability performance targets. If those targets are met, the borrower may receive more favourable financing terms. The structure encourages improvements in overall business performance rather than directing funds toward specific projects.
See also: Sustainability-linked Bond; Transition Finance
T
Taxonomy
In sustainable finance, a taxonomy is a classification system that identifies which economic activities meet defined environmental or sustainability objectives. Taxonomies aim to improve consistency, transparency, and comparability by providing common definitions for what qualifies as environmentally sustainable activity.
See also: Disclosure; Greenwashing
Transition Finance
Transition finance refers to financing that helps businesses or industries move toward lower environmental impacts while continuing to operate. Rather than focusing only on activities that are already sustainable, transition finance recognizes that many sectors require substantial investment to reduce emissions, improve environmental performance, or adapt to changing conditions.
See also: Blue Finance; Decarbonization
Transition Risk
Transition risk is the possibility of financial loss arising from changes associated with the shift toward a lower-carbon or more environmentally sustainable economy. These risks may result from new regulations, technological innovation, changing consumer preferences, litigation, or evolving investor expectations.
See also: Physical Risk; Stranded Asset
U
Underwriting
Underwriting is the process of evaluating and accepting financial risk. Banks underwrite loans, insurers underwrite insurance policies, and investment banks underwrite securities offerings. Effective underwriting seeks to understand the likelihood of loss and determine appropriate pricing or lending terms. Blue finance encourages underwriting practices that recognize material environmental risks alongside more traditional financial considerations.
See also: Due Diligence; Materiality
Use-of-Proceeds Bond
A use-of-proceeds bond is a bond whose proceeds are dedicated to specified eligible projects. Investors know in advance how the money raised will be used, although repayment remains the responsibility of the issuer. Green bonds and blue bonds are the best-known examples of use-of-proceeds financing.
See also: Blue Bond; Green Bond
W
Working Capital
Working capital is the difference between a business’s current assets and current liabilities. It represents the financial resources available to support day-to-day operations, such as paying suppliers, employees, and other short-term obligations. Businesses with inadequate working capital may face liquidity pressures even if they are profitable over the longer term.
See also: Liquidity; Debt Finance