The Vogue Business climate finance glossary

Why do financial companies and institutions care? Issues like climate change and nature loss pose significant risks, impacting company values and the global economy. Investing with ESG in mind can help manage these risks and unlock opportunities, with ESG assets projected to reach over $40 trillion by 2030.

However, gathering reliable ESG information can be challenging. Companies often self-report, and the data isn’t always standardised or up to date. Researchers are using geospatial data, like satellite imagery and AI, to independently assess environmental impacts. The goal is for this to improve ESG ratings and provide clearer, more consistent insights for investors. This approach could help us overcome current data limitations to build a more sustainable financial future.

By Amani Maalouf, a senior researcher in spatial finance at the University of Oxford

Financed emissions

Financed emissions are the greenhouse gas emissions linked to a bank or investor’s lending and investment portfolio, rather than their own operations. For example, a bank that funds a coal mine or invests in fossil fuels is indirectly responsible for the carbon those activities produce.

Measuring financed emissions helps reveal the real climate impact of financial institutions, not just their office energy use. It’s a cornerstone of climate accountability in finance and is becoming essential under net-zero pledges. Increasingly, companies are being encouraged to consider their financed emissions through banking, pensions and investments.

By Narmin Nahidi, assistant professor of finance at the University of Exeter

Green bonds

Green bonds are loans issued to fund environmentally beneficial projects, such as energy-efficient buildings or clean transportation. Investors choose them to support climate solutions while earning returns.

Green bonds are a major tool to finance the shift to a low-carbon economy by directing finance towards climate solutions. As climate costs rise, green bonds could help close the funding gap while ensuring transparency and accountability.

Green bonds are required to ensure funds are spent as promised. For instance, imagine a city wants to upgrade its public transportation by adding electric buses to reduce pollution. Instead of raising taxes or slashing other budgets, the city can issue green bonds to raise the necessary capital. Investors buy the bonds, the city gets the funding, and the environment benefits from cleaner air and fewer emissions.

The growing participation of government issuers has improved the transparency and reliability of these investments. The green bond market has grown rapidly in recent years. According to the Bank for International Settlement, the green bond market reached $2.9 trillion in 2024 — nearly sixfold that of 2018. At the same time, annual issuance (the total value of green bonds issued in a year) hit $700 billion, highlighting the increasing role of green finance in tackling climate change.