As the urgency for solutions to climate change grows, so too does the need for traceable and transparent data for monitoring and measuring its impact. Blockchain technology may offer this solution.
Blockchain can help a bank or brokerage digitally monitor the proceeds of green investments in a transparent manner, so investors can verify not just the growth but the environmental impact of their investments. Blockchains security, immutability and irreproducibility all provide investors greater confidence in the bank or brokerage delivering this information and recommending or managing these green assets.
New Green Financial Products
The innovation of blockchain tech introduces the possibility of green crypto, green NFTs and a host of other green digital assets. Many Bitcoin miners, for example, are using renewable energy to power the so-called Proof-of-Work method known to drain environmental resources; others are switching to the more sustainable and less environmentally impactful Proof-of-Stake method. Packaging digital assets like these that are put together purely with verifiable environmental sustainable practices could fuel the green economy with greater injections of funds.
Other ways blockchain can facilitate the advent of new green financial products is to package the returns of environmental financial products with those of other instruments and debt applied to financing environmentally friendly assets, and to do so entirely digitally. In other words, in the returns generated from a traditional asset or instrument, combine green assets with the typical dividends and distributions. This will simultaneously build up investment in green finance while allowing a greater pool of investors to dip their toes in the water of green investing and, thereby, further diversify their own portfolios.
By monitoring, verifying and reporting on assets all digitally and offering environmentally friendly financial products combined with other tokenized instruments, it allows for diversified returns and proof of environmental impact in one.
Temporal Matching of Energy
No longer are purchasing renewable energy certificates sufficient to satiate regulators and green investors looking for proof of climate sustainability in a businesses processes and practices. Blockchain tech can meticulously time-match how much renewable energy a distributor generates with the energy the consumer uses. This can provide greater transparency and confirmation that companies avowing to achieve carbon neutrality are actually achieving it, or the rate at which they’re working toward it.
Automating ESG-linked Green Financing
The blockchain also offers total transparency and decentralization to ESG-linked financial instruments, and ESG-linked financing will also become increasingly digitized in the blockchain as time goes on. Now, these products, like ESG-linked bonds and loans, can deliver returns automatically to the holder rather than siphoning them to an intermediary first.
Distributed ledger technology allows companies to provide indisputable proof to investors, vendors and regulators of their commitment and progress toward meeting voluntary carbon neutrality goals or complying with mandated Paris Agreement guidelines. These will come in the form of online meta-registries, both regional and global, where all transactions both cross-border and in-country involving renewable energy certificates, carbon credits and other green finance elements are recorded, tracked and managed in one place accessible from all places, including across worldwide registry systems and independent carbon markets.