The Bank for International Settlements (BIS) Innovation Hub is reporting a positive case for the use of distributed ledger technology in streamlining the green bond issuance process, while making it easier to track projects' positive environmental impact.
Working in concert with the Hong Kong Monetary Authority, the BIS in August formed a consortium with six partner companies to explore the tokenisation of green bonds, enabling investment in small denominations, combined with real-time tracking of environmental outputs.
Dubbed Project Genesis, the initiative combined blockchain, smart contracts, internet-of-things, and digital assets to build prototype digital platforms that would allow retail investors to buy and sell tokenised green bonds and see the positive environmental impact that the financed projects achieve on an app.
The first prototype simulates the lifecycle of a typical bond on a permissioned distributed ledger platform, including origination, subscription, settlement and secondary trading. A second prototype tested the same procedures using a public blockchain infrastructure.
Bénédicte Nolens, head of the BIS Innovation Hub Hong Kong Centre, says: "Both prototypes show that DLT technology can be used to streamline green bond issuance across the lifecycle and ensure that retail investors have full transparency on the use of proceeds, in real time on an easy to download app. This digitised framework helps in reducing costs and time and should enable better financing terms overall."