Glossary

For the purposes of this guide, the meanings of the key terms used are as follows:

Term	Description
Bank guarantee	Is a guarantee issued by an approved bank pursuant to an agreement between the bank and an operator whereby the bank agrees to provide funds to the relevant regulator named in the agreement from collateral provided by the operator if the operator does not fulfil the environmental obligations stipulated in the agreement.
Cash deposit	is money deposited by an operator with a third party (e.g. in a bank account) and legally secured so that it can only be used for the intended purposes. For the purposes of this practical guide this includes ‘escrow accounts’.
Charge on asset	is a mortgage/charge over a specific asset in favour of a regulator which enables the charge holder to exercise their power of sale over the asset if an operator defaults on its obligations.
Collateral	refers, for the purposes of this guide, to funds or assets pledged as security by the operator (or a company associated with them, such as a parent company) in respect of a guarantee by a financial institution, to be forfeited in the event of the operator’s default under the guarantee.
Cost profile	is the pattern of closure, restoration and aftercare costs over time for mines and landfills. A cost profile can also be known as a financial profile.
Environmental impairment liability insurance	is insurance specially tailored to environmental liabilities including liabilities under the Environmental Liability Directive.
Environmental liabilities	are costs relating to environmental obligations.
Environmental obligations	are obligations on operators relating to environmental protection, such as closure, restoration and aftercare following cessation of an activity or clean-up and restoration in the event of an incident/accident.
Financial institution guarantee	is a guarantee provided by a financial institution (e.g. a bank or surety) to pay if an operator defaults on its obligations. This includes ‘bank guarantees’, ‘letters of credit’, ‘surety bonds’ and ‘performance bonds’.
Financial provision	is the establishment of a source of funding for liabilities under environmental law or an environmental permit, licence or other authorisation. The terms ‘financial guarantee’ and ‘financial security’ can also be used. For the purposes of this document these three terms can be read interchangeably.
Foreseen liabilities	are environmental liabilities that are known to arise. They include development, closure, restoration, remediation, decommissioning and aftercare of installations, activities or sites, or the costs of repatriation.
Incident/accident	is a change from normal operating conditions with actual or potential negative consequences.
Insolvency	refers to a situation where the operator enters into legal proceedings because it does not have adequate financial viability to meet its liabilities.
Letter of credit	is a guarantee issued by an approved bank pursuant to an agreement between the bank and an operator whereby the bank agrees to provide funds to the relevant regulator named in the agreement from collateral provided by the operator if the operator does not fulfil the environmental obligations stipulated in the agreement.
Mutual fund/pool	is a group financial provision arrangement under which the group pays the obligations of an operator who is a member of the mutual/fund or pool if the operator defaults on its obligations.
Parent company guarantee	is a guarantee by the parent of the operator to pay or fulfil the operator’s obligations if the operator defaults.
Performance bond	is an indemnity agreement for a specified amount issued by an approved bank, other financial institution or surety. The provider of the bond agrees to pay the relevant regulator up to the amount of the bond, as specified in the bond, if the operator defaults on its environmental obligations.
Self-provision	is financial provision by the operator itself. This includes ‘provisioning in accounts’ and ‘self-insurance’.
Surety bond	is a bond issued by a surety (usually an insurance company) pursuant to an agreement between the surety, an operator or its parent company, and the relevant regulator in which the surety agrees to carry out the obligations specified in the agreement up to the specified amount if the operator defaults on those obligations. Surety bonds may be payment bonds, in which case the surety agrees to pay the regulator up to the amount specified by the bond, or performance bonds, in which case the surety agrees to perform the activities on which the operator has defaulted up to the monetary limit of the bond. The surety charges the operator a premium for the bond, thus basing the ability to obtain one on the operator’s financial strength rather than collateral provided by it to the surety.
Unforeseen liabilities	are environmental liabilities arising from incidents/accidents.