Northern Trust (Nasdaq: NTRS) announced today it has completed the first stage toward an industry-wide voluntary carbon credit ecosystem that would allow institutional buyers to digitally access carbon credits from leading project developers.
The announcement follows Northern Trust’s successful milestone of completing fully automated transactions on the initial minimum viable product (MVP) digital carbon credit platform it has developed with carbon avoidance and removal project developers including Go Balance Limited, ReGen III (TSXV: GIII) and a direct air capture company in addition to institutional buyers.
The ecosystem utilizes private ledger digital blockchain technology to connect institutional buyers with carbon credit suppliers who are focused on solutions to reduce greenhouse gases including carbon dioxide. The fully digital platform allows purchasers to transact tokenized carbon credits directly with project developers and retire these against their carbon footprint.
Pete Cherecwich, president of Asset Servicing at Northern Trust, said: “This new development from Northern Trust’s Digital Assets and Financial Markets team represents a significant milestone toward delivering a market-leading platform able to support a diverse range of digital assets. Allowing institutional clients to access carbon credits and doing our part to help these firms along their carbon offsetting journey is important for the future.”
Justin Chapman, global head of Digital Assets and Financial Markets, at Northern Trust, said: “The use of digital technology to manage the lifecycle of carbon credits gives both the buyer and project developers confidence and transparency through the lifecycle of their voluntary carbon credit transactions.”
Ciaran Kelly, chief executive officer at Go Balance Limited, said: “Northern Trust’s approach to digitizing the voluntary carbon credit market has the potential to enable project developers such as Go Balance Limited to enhance our focus on initiatives to avoid deforestation by streamlining time consuming administration tasks. The solution will make it easier for all participants to track, manage and transact the registry of carbon credits, whilst also delivering full transparency to the end-to-end lifecycle of a voluntary carbon credit.”
Project developers transact with buyers of voluntary carbon credits via an online platform. Legal agreements are generated using smart contracts via the Avvoka legal contract tool with the agreement outputs creating the basis of the transaction, driving full straight-through transfer and settlement of the digital credits for fiat currency on the specified settlement date.
Northern Trust has been working with a number of diverse project developers on its MVP including: Go Balance Limited, a REDD+ project developer that supports the Trocano Araretama REDD+ Project in the Municipality of Borba in Brazil; ReGen III, a clean-tech firm recycling used motor oil into high-grade group III synthetic lubricants, which is developing a Texas recycling facility that aims to prevent the release of 900,000 metric tonnes of CO2e per year from entering the atmosphere; and a direct air capture company.
Transactions were initiated with these project developers on the MVP in a fully automated way by the following purchasers: MyCarbon, a UK based Carbon Consultancy firm; White Star Capital, a global multi-stage technology investment firm; and Northern Trust.
Further development of the platform, including the first official live transaction, is planned in late 2023.
The project is part of Northern Trust’s Digital Assets and Financial Markets group which combines the teams responsible for supporting the fast-growing digital asset markets and those dedicated to providing market access and insights across the traditional securities services markets.
Northern Trust Asset Servicing has been a leading innovator in the digital transformation of securities servicing, including pioneering the use of blockchain technology in private equity fund administration in 2017, supporting the tokenization and fractionalization of bonds in 2020 and partnering in the launch of institutional-grade crypto asset custodian Zodia Custody in 2021.