Benefits of tokenizing green funds :
- Full control of investors
- Compliance enforcement
- Increased liquidity
- Access for retail investors via the secondary market
- 24/7/365 near real-time settlement
Digital securities exist as tokens on a distributed ledger and do not require intermediaries. Therefore trades can be settled 24/7 in near real-time. Furthermore, by improving accessibility and the possibility of trading the asset on a secondary market, more and different types of investors can invest in securities that before could not enter the market.
Digital securities also enable fractional ownership of assets, further lowering the entry barrier for investors and creating liquidity in less liquid markets like private equity and real estate.
Because of the distributed nature of a DLT, no single party can alter the data, creating a secure single version of the truth, which all participants can access and rely on, including advisers, auditors, and regulators.
Digital securities automatically record administrative tasks of purchasing and selling securities, including corporate actions like the payout of dividends. As a result, digital securities have lower operational costs.
The lifecycle of Algorand-based tokenized bonds
Digital Green Bonds
Digital bonds are decentralized tokens issued and managed on a blockchain infrastructure platform. By using blockchain, and the underlying distributed ledger technology, issuers can provide access to an immutable record of all transactions of the green bonds.
The tokenization of green bonds enables the participation of institutional and private investors in green projects. In addition, the decentralized nature of blockchain technology eliminates the need for a third-party intermediary to validate and approve transactions, making near real-time automated settlements a reality and opening up the possibility of buying and selling green bonds on the secondary market.
Issuing bonds involves many stakeholders. Tokenizing security bonds standardize and automate the issuance, administration, management, and settlement with the goal to reduce costs and improve efficiency.
The credibility of green bonds
One of the significant concerns of green investment is ‘greenwashing,’ referring to projects that pretend to be green but have little impact on sustainability. With the Green Bond Principles (GBP) guidelines for green investing vehicles, there is much more clarity about what green is and how to measure environmental impact.
Tokenized green bonds are audited by third-party green validators. The green bonds are regulatory compliant, transparent, and fully auditable. GBP green bonds will increase the credibility of climate-smart investments that are in line with the Paris Agreement goals of low greenhouse gas emissions and climate-resilient financial flows.
The European green bond standard (EUGBS) is a voluntary standard to help scale up and raise the environmental ambitions of the green bond market. International: Green Bond Principles (GBP), Social Bonds Principles (SBP), Sustainability Bonds Guidelines (SBG), Climate Bonds Taxonomy, and Climate Bonds Standards.