The Role of Blockchain Transforming Green Investments

The Role of Blockchain Transforming Green Investments

Olena Petrashchuk

Managing Partner and a consultant in Green Finance and DeFi at 4ire Labs

Olena Petrashchuk, a Managing Partner at 4ire Labs and a consultant in Green Finance and DeFi (Decentlized Finance). I am managing an engineering company with the delivery centers in Kyiv, Stockholm, providing the custom development services in FinTech/ DeFi in Sweden, Denmark, and the USA.

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The Role of Blockchain Transforming Green Investments

25.11.2019 12:15 pm

Green investments are to be considered the good ones. The activity of investors involved in green projects is overwhelming. The new platform “Green Asset Wallet” powered by Blockchain launched to give the confidence to regular investors while financing in environmental solutions.

Just a few years ago an ethical approach was considered as an additional factor for investments. But since 2013 the supply of green bonds increased by making them an even more attractive way to invest and reached  $150bn in 2017 according to the World Bank.

“It was quite a struggle to get action and impact, but in the past couple of years, a lot has happened in the financial sector. Today, many are keen to make green investments mainstream and with a positive impact. A lot of financial actors want to do more,” states Cecilia Repinski.

Cecilia Repinski is an Executive Director of nonprofit Centre Stockholm Green Digital Finance tasked to accelerate Climate Finance and Investments through Fintech solutions.

She claims that it is important to mobilize private funds for green change and achieve climate change Sustainable Development Goals adopted by the United Nations. Although the process already started, it is moving too slow. Also, she ensures that new approaches are to be found to move the capital forward towards the green vector.

Supply shortage

Green tech investing is a viable option associated not only with money but an impact on climate change problems and preservation of the environment: conservation of natural resources, air pollution reduction, plastic pollution solutions, etc.

 “People are excited to invest in sustainable instruments. There is a huge demand. Pension funds and institutional investors are lining up to invest in those projects – green bonds are selling out in no time,” Repinski says.

There are several advantages for the investors as well as for the company raising funds f.ex  the same return as traditional investments. The bad news that the dynamic of the green bonds market is far from delivering on its full potential. So the market needs a solution to bridge sustainable investors with green investment opportunities.

Launch of Green Asset Wallet

While the green bond market is attracting a new wave of  interest as a source of debt capital, it has some growth “infrastructure” challenges. As well as the investments are measured by their impact and financial return metrics, they have to be validated to optimize business processes between issuers and investors by sharing data in an efficient, secure, and transparent manner.

For that reason, ‘Stockholm Green Digital Finance’ launched GAW platform (Green Asset Wallet) as a pilot project back in 2017. Platform aims to unite investors, issuers, and validators. As well as implement digital tools to guarantee trust and make sure no greenwashing is taking place.

“These types of investments are more administratively costly as investors want both financial and impact reports returned to them. We want to use tech to solve these challenges and help unlock more green debt opportunities and scale the supply,” Repinski says.

GAW is developed to deliver transparency and confidence to the green debt market investors that green money goes to the financing of environmentally friendly projects and deliver promised environmental benefits. Many projects that were financed through green bonds today are accessing the benefits. The technology allows to cut expenses, increase efficiency and guarantees full transparency.

Blockchain and transparency explained

 ‘Green Asset Wallet’ was built  on Chromia (blockchain platform). As you know the Chromia is written on Rell new language designed particularly for Chromia, which will be used for dapp programming. Thus Rell is very database-centric.

That way the platform offers a trusted database that holds documents and impact reports. Once the impact report is uploaded to the platform by the validator it can be seen by all investors.  This report can’t be changed manually without anyone can see it.

4ire Labs team won the tender among the best European companies and was chosen as a trusted technical partner to lead the project. Having the extensive relevant work experience in Sweden and Denmark 4ire labs took part in integrating Chromia Blockchain in Sweden. 4ire Labs were trying to make a  record for issuers to provide clear and transparent information to investors. All undertaking commitments should be transparently shown to investors whether they are changed or aren’t delivered. Investors can fully rely on Green Asset Wallet. And, once entered, information can never be erased.

While transparency is always a cornerstone in relations with investors, this platform is making a real effort to help new issuers getting started. Once a new issue had a successful impact-project, it makes possible for green community to see and trust the platform on a regular basis. This way, multiple successful use cases across the globe, in turn, raise awareness among investors.

Trust beyond investors

The application of blockchain technology is a small part of a big system behind the ‘Green Asset Wallet’. Validators and impact report also play an inevitable role in transforming green investments through a digitalization. But by adding the blockchain technology ‘Green Asset Wallet’ aims to design a solution that creates trust and respect - and we believe that makes business relationships stronger and longer-lasting.

As an example, issuers from Denmark are considered as credible investors. When they have granted green bond status, investors don’t have to double-check the documentation. But if you are a green bond newbie in Africa, the validation procedure takes  time and be a prerequisite to access global investment funds. The Green Asset Wallet allows to significantly simplify and expedite the otherwise complex arrangements.

This new build trust between Green Wallet partners is important if the green bonds are to be successful worldwide.

Even if the issuers in Malaysia is well known on their local market, they might undergo a series of audits for foreign investors.

Green Asset Wallet is also unlocking green finance opportunities for developing countries like Africa that were left behind. Innovations in green finance offer the potential to emerging and developing countries to lower investment and operating costs and improve capacity to achieve sustainable opportunities for investors.

Green Asset Wallet is already supported by German government, SEB Bank, Öhman and the climate center Cicero and other institutions. The platform will be available and run the first projects this year in December.

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