Banks have already started to realise the benefits of using blockchain technology to issue bonds, as demonstrated by the case studies in this report Blockchain Gateway for Sustainability Linked Bonds. Immediate benefits for Green Bonds can be achieved by integrating IoT and AI to automatically report and to increase traceability of the performance of the green assets. For the wider bond market, blockchain presents cost savings opportunities of more than 10x, reducing the need for intermediaries and enabling smaller projects to issue bonds, which creates an opportunity for many smaller sustainable and green projects to be initiated.
The original goal of this report was to map the DLT Green Bond market; however, that landscape has only unfolded to a very limited extent. The report therefore takes a broader perspective by including unlabelled DLT bonds and debt products to offer an analysis of the current state of DLT adoption in the bond market. The report finds that the opportunity presented by blockchain for DLT Green Bonds falls into the three main areas of 1) structuring, issuance and distribution 2) transfer of ownership, payment and settlement; 3) reporting on Use of Proceeds and Proof of Impact. To date, the technology has only been applied to the first two areas, and only partially in the second area, in bonds. A fully digitised Green Bond belongs to the future.
In addition, the report highlights the countries which are the most ready for DLT Green Bond issuance. The assessments are based on the availability of regulations which clarify the status and treatment of digital assets and identifies states which have a focus on Green Bond standards and principles. Highlighted countries include Luxemburg, Germany, Switzerland, Singapore, Seychelles, Mauritius and the Philippines.
Efficiency gains are calculated both by companies studied and the analysis conducted for this report to more than 10X the non DLT bond process with the largest efficiency gains (as money saved) in Green Bond reporting, brokerage and sales as well as structuring, price setting and risk rating. The report concludes that in addition to efficiency gains, digitising Green Bonds with DLT opens up for transformational follow-on innovations. Two innovations with high impact potential are highlighted: the fragmentation of green asset ownership; and the aggregation of many smaller assets into a bond. These findings highlight the opportunity to unlock savings into green finance and enable more people to become green asset owners.