A type of collateral that constitutes securities issued by green companies– that is, companies that have no carbon footprint (the total greenhouse gas emissions caused by a company, expressed as carbon dioxide equivalent) or other negative ecological side effects.
Green collateral is does not contribute to carbon footprint and environmental bads and as such green companies are subject to no constraints (in terms of carbon taxes and brown collateral haircuts, etc.), which are usually set to encourage businesses to move from brown technology to green and clean technology for a sustainable environment.
Businesses and investors are keen to retain green assets/ investments on their balance sheets (as a means to mitigate a default, reputational and fire sale risk.
