Integrated ESG Nexus
Despite an increasing global push for sustainability, less than 0.3 per cent of all bond financing is green, with insufficient efforts leading to a US$2.6 trillion annual funding deficit towards achieving the goals of the Paris Agreement.
This gap stems from the absence of an efficient common data infrastructure as a nexus between the financial industry and ESG efforts, with often-fragmented data exacerbated by the lack of transparency in impact reporting and usage of proceeds.
Access to Capital and Distribution Networks
There are mismatches between green project goals and investors’ diverse SDG goals. In addition, green projects are often smaller in nature, limiting upside in investment and hence seen as less attractive to investors
Different ESG frameworks and metrics exist, making it difficult for investors to make comparisons. Investors are also wary of financing projects that do not strictly fit the criteria of a green bond (greenwashing).
Data Transparency and Impact Reporting
Lack of availability and transparency in certification and verification makes investors lack confidence over authenticity and timeliness of impact reporting.
Usage of Proceeds
Investors are wary that the investments they make into a green project might not be channelled to the right cause or use in accordance with principles and standards.
An Integrated ESG Nexus for the financial industry
Agriculture Farm Financing
- Loan/Bond parameters & green elements are programmed into security token
- Gains from automation enable smaller and
minimum lot sizes for inclusion
’50 Shades of Green’
- Subscription eligibilities and ESG investment mandates are enforced using smart contracts
- Smart contracts provides efficient DvP settlements
Usage of Proceeds
- Funds can only be sent to green certified suppliers, enforced by smart contracts. This can be across multiple layers of suppliers
- Usage of proceeds are managed and transparent on blockchain
Sustainability-linked Corporate Actions
- Interest payouts & redemption of principal are automatic
- Smart contracts support Sustainability-linked bond/loan payments based on KPIs
Qualitative & Quantitative
- Connectivity with data sources, eg IoT, satellite images etc. Transparent impact reporting prevents greenwashing
- ESG information can be tagged onto token and made publicly available