Green investments are entering a new era driven by advanced automation and absolute transparency. More and more banks and investors are starting to be interested in the benefits of using blockchain technology in bond issues, including green bonds.
The emergence of this and other forms of ethical financial instruments has been a significant development in the financial markets over the last decade. As the world faces the reality of a climate catastrophe and the need for large investments to avoid it, the green bond market has grown to reach a combined $1 trillion in 2020. However, to reach the investment levels needed to transition the world to a low-carbon economy, it still must undergo massive scale-up and lower the barrier to entry for large and small investors.
In this sense, blockchain provides a completely new and effective way to address the challenges posed by the rapidly growing green bond market. And you may ask, what does this improvement consist of?
- Ensuring the visibility of data in real time: Thanks to automated flows with DLT platforms, this exchange is streamlined and simplified and simultaneously provides all parties with a “gold record,” standardizing all the elements of the issue process (environmental, social and governance data) to increase efficiency.
- Guarantee reliable provenance of green data: As in other industries, the multiple applications of new technologies such as blockchain allow them to be integrated into the process to enhance the functionality of the instruments, making it easier for investors to understand and evaluate the environmental impact of these bonds.
- Build trust among investors and stakeholders: Smart securities are able to receive information from external sources and automatically modify themselves in response, such as updating coupon rates based on key sustainability indicators. This provides greater transparency, efficiency and security in the market.
BBVA pioneered the issuing of green bonds with blockchain. Thanks to the use of BBVA’s proprietary DLT technology, the process was carried out in a total digital manner. The arrangement, negotiation and issue were all undertaken from the platform itself. This made it possible to guarantee the immutability of the agreements and enforce them, while opening up the possibility for investors to choose between a multitude of options when configuring their product.
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