Blockchain and green bonds: a great combo

Belén Villar Client Solutions

Green investments are entering a new era driven by advanced automation and absolute transparency. The benefits of using blockchain technology in the emission of bonds, including green bonds, are becoming increasingly attractive to banks and investors.

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 climate catastrophe and the need for large investments to avert it, the green bond market has grown to a cumulative 1 trillion dollars by 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 real-time data visibility:

Thanks to automated flows with DLT platforms, it streamlines and simplifies this data exchange and simultaneously provides all parties with a “golden record”, standardizing all elements of the issuance 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 issuance 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. The same platform that guarantees the immutability of the agreements and that the agreed terms are complied with, while opening the possibility for investors to choose among a myriad of options to configure their product.

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