BIS Innovation Hub and Hong Kong Monetary Authority conclude first green finance project
- BIS and HKMA conclude a project to build prototype digital platforms that aim to enable green bond issuance with higher transparency and greater access to retail investors.
- Project Genesis allows retail investors to buy and sell tokenised green bonds and see the positive environmental impact that the financed projects achieve on an app.
- The two prototypes show that technologies, including distributed ledger technology (DLT), can be used to streamline the green bond issuance process, while making it easier to track projects' positive environmental impact.
The Bank for International Settlements (BIS) Innovation Hub announced today the successful conclusion of Project Genesis, two prototype digital platforms that aim to enable investment in green bonds with higher transparency and greater access to retail investors.
The platforms combine blockchain, smart contracts, internet-of-things, and digital assets. They allow issuers and other stakeholders to explore innovative approaches to green bond distribution and transparency. Retail investors will be able to continuously track coupon payments and the positive environmental impact that the financed projects achieve in terms of reduced carbon dioxide emissions.
The Innovation Hub is publishing technical reports detailing the two prototype platforms:
- The first prototype simulates the lifecycle of a typical bond on a permissioned distributed ledger platform, including origination, subscription, settlement and secondary trading. The prototype was able to considerably streamline these processes.
- A second prototype tested the same procedures using a public blockchain infrastructure. It also streamlines the investor onboarding and facilitates the direct payment and settlement between the issuer and investor.
Both prototypes show that DLT technology can be used to streamline green bond issuance across the lifecycle and ensure that retail investors have full transparency on the use of proceeds, in real time on an easy to download app. This digitised framework helps in reducing costs and time and should enable better financing terms overall.
The HKMA is pleased to have collaborated with BIS Innovation Hub on this project. The project has demonstrated the possibility of leveraging technology such as DLT to enhance the efficiency and transparency in the bond life cycle, facilitating further uptake of green and sustainable finance. We hope the findings could promote further development in this area.
Project Genesis is guided by a multi-disciplinary panel of experts in environmental, social and governance (ESG) issues, green finance, bond markets, law and regulation. A collection of articles by members of the panel is being published alongside the technical reports.