Dave Sandor

Opinion | How blockchain and smart tech can help green bonds and climate finance take off

The use of blockchain technology, the internet of things and smart devices can provide a streamlined, easy implemented solution to the regulation and monitoring of green bonds and their proceeds

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Technology solutions can provide asset owners, lenders, ratings agencies, insurers and other stakeholders with verifiable, real-time, asset-level information on underlying asset performance. Photo: Shutterstock

Dave Sandor

Published: 10:00pm, 5 Dec 2021

While finance has long played a part in encouraging greener business practices, demand for investments addressing climate risks is growing exponentially. COP26 wrapped up in Glasgow earlier this month, where the Paris Agreement was reviewed and countries’ commitments updated. This recent UN climate summit will have an even more profound and urgent impact on corporate finance.

Global issuance of green bonds surged to US$362.06 billion in the first nine months of this year, with a record US$500 billion expected to be printed by the end of the year. Designed to fund projects that are positive for the environment, green bonds have gained popularity as companies view them as a way to be more sustainable and to also show that to the market.

The instruments have been viewed favourably by governments, with the European Union selling green bonds under its pandemic recovery fund plan in October and China’s green bond market headed for its busiest year ever amid a national push for net-zero emissions.

However, as global policy and regulatory focus on climate change continues to increase, there exists growing demand from both the public and private sectors for transparency, granularity and verifiability of the data that underlies and supports green finance.

After all, such products only have meaningful impact in achieving the 2015 Paris goals if the underlying data is measurable, verifiable and ultimately able to be relied upon by third parties.

03:07

Climate deal to ‘phase down’ coal reached at COP26 as nations seek to avert climate disaster

While green bonds have the potential to become powerful financial tools in creating positive climate action, there are areas for optimisation and improvement in the traditional green bond model.