The Bank for International Settlements (BIS) Innovation Hub is advocating for the integration of distributed ledger technology (DLT) to enhance the efficiency of the green bond issuance process. This technology not only simplifies the issuance but also facilitates better tracking of the positive environmental impacts associated with funding projects.
In collaboration with the Hong Kong Monetary Authority, BIS established a consortium in August consisting of six partner entities to investigate the tokenization of green bonds. This initiative aims to allow investments in smaller denominations while providing real-time monitoring of environmental outcomes.
Named Project Genesis, the endeavor utilizes blockchain, smart contracts, the Internet of Things, and digital assets to develop prototype platforms that empower retail investors to buy and sell tokenized green bonds. Additionally, these platforms will enable users to monitor the environmental benefits generated by the financed projects through a dedicated app.
The first prototype models the lifecycle of a typical bond on a permissioned distributed ledger platform—covering stages such as origination, subscription, settlement, and secondary trading. A second prototype examined the same processes using a public blockchain infrastructure.
Bénédicte Nolens, head of the BIS Innovation Hub Hong Kong Centre, remarked, “Both prototypes demonstrate that DLT can streamline the entire green bond issuance process and provide retail investors with real-time transparency regarding the utilization of proceeds. This digitized framework not only minimizes costs and time but is likely to lead to more favorable financing terms overall.”