A type of collateral that constitutes securities issued by brown companies– that is, companies that have a noticeable carbon footprint (the total greenhouse gas emissions caused by a company, expressed as carbon dioxide equivalent).

Brown collateral are considered a contributor to carbon footprint and as such constraints (in terms of carbon taxes and brown collateral haircuts, etc.) are set to encourage businesses to move from brown technology to green and clean technology for a sustainable environment. Green collateral is used, and encouraged to be deployed, instead.

Due to brown collateral constrains, businesses and investors are keener than before to remove brown collateral from their balance sheets (as a means to mitigate a default, reputational and fire sale risk.