Stockholm Green Digital Finance has been awarded a grant from the EU's main climate innovation initiative, Climate-KIC.
The winning project proposal, submitted during Climate KIC Ideation Day in Aarhus, Denmark on 22 August 2017, is titled Scaling Green Investment – Verifying and Monitoring Green Bonds Proceeds Through Blockchain Technology. The resulting 10,000 EUR grant will go towards the development of a unique blockchain-based solution developed in partnership with asset management experts and fintech innovators.
Delivering on the SDGs
Trillions of dollars of investment are needed in order to reach the United Nations’ Sustainable Development Goals and the objectives of the Paris Agreement according to The World Bank and the past few years has witnessed tremendous willingness among policymakers and the finance sector to choose green assets.
However, green investment needs significant scaling to support the transition to sustainable societies, especially green growth in emerging and developing economies.
“Companies that do not disclose relevant environmental information pose a barrier for green investments to take off at scale. Additionally, investors are increasingly concerned over being able to understand and demonstrate the positive impact of their investments. Our aim is to help grow the green bond market by lowering the threshold for issuers and enabling investors to verify positive impact – as well as stimulating growth of other green investment products,” says Cecilia Repinski, Executive Director, Stockholm Green Digital Finance.
Trustworthy investment products
Sweden's financial supervisory authority Finansinspektionen has stated that access to relevant information to calculate environmental risks is a prerequisite for financial markets to contribute to sustainability yet the G20 Green Finance Study Group found that when companies or projects disclose environmental information, there is a lack of consistent and reliable labelling of green assets.
Green assets such as bonds represent one of the few trustworthy investment products that abide by certain principles and require third-party verification for green use of proceeds and the demand for access to them is on the rise.
“The application of blockchain technology and big data will offer companies and investors a cost-effective way to validate sustainability claims regarding fair trade, green foreign direct investment, property rights, or the use of green bond proceeds – especially in less transparent markets. Many investors are interested in moving their capital into sustainable projects and companies, but need to identify reliable products that deliver real impact,” says Cecilia.
Partnering with financial and tech experts
With the Climate KIC award grant, Stockholm Green Digital Finance will partner with asset management experts Öhman Group and fintech innovators hiveonline, which is tasked with initiating the application build and will demonstrate the technology at the Annual Meeting of the International Monetary Fund to demonstrate the opportunities surrounding blockchain technology in the green finance space.
The project will focus on green bonds, but the technology is intended to assist other types of green investment.
“We see a major need for green bond investors to ensure that green money goes to the financing of environmentally friendly projects and deliver promised environmental benefits. The new technology will create the reliability of environmental certification many investors lack to dare to take the step of investing green,” says Erika Wranegård, Fund Manager, Öhman Group.
Further funds needed for full build
Stockholm Green Digital Finance is currently fundraising for the full application build, which will take an estimated 10-12 months to complete. The result will be a fully open-source green cryptocurrency application for institutional investors and other capital market actors to ramp up green investments.
"Blockchain will stimulate the green investment market through cost-effective technology that enables investors to directly verify and monitor their green investments. Technology will help scale the green investment market – partly by reducing the cost of issuers and increasing supply and partly by enabling investors to engage in more difficult markets where the needs are greatest for delivering on global sustainability targets,” says Cecilia.
"A blockchain-based solution such as that proposed by Stockholm Green Digital Finance and partners will provide a way to verify and ultimately scale green investment. I, for one, cannot wait to see this evolve into a fully functioning platform that supports our work in reaching sustainability targets.This leadership on green fintech from Stockholm is part of a wider shift in European markets linking digital innovation with sustainability,” says Nick Robins, Co-Director of the UN Environment’s Inquiry into the Design of a Sustainable Financial System.