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Monday, January 30, 2023

Digital technology and its role in accelerating the pace of green bond issuance

The latest report by the Climate Bond Initiative (CBI) revealed that bonds worth around US$ 1.1 trillion were expected to be issued in 2021. green bond, Whole world. In Latin America alone, green bonds worth US$48.6 billion were issued in the first half of last year, compared to US$16.3 billion in 2020.

For Libertex Country Manager Adriana Cuellar, this trend will reflect an increase in investments that constitute sustainable finance. “We live in an increasingly escalating climate crisis. Companies are starting to take responsibility and work on managing their environmental impact and carbon footprint. This now translates into not only marketing or CSR actions, but also a more sustainable And there is also the strategic perspective, which includes the financial sector.“, he argues.

Experts point out that the development of the green bond market in Peru is still in its infancy and has great potential for green investing; Similarly, the use of emerging digital technologies can improve efficiency, decision-making, and increase the capacity of organizations.

Green Bonds and Digital Technology

Cuellar suggests that the integration of digital technologies and sustainability creates a huge strategic opportunity in the financial sector and other industries. “Issuance of a Green Bond must pass the criteria of the audit and must be aligned with the ‘Green Bond Principles’; And currently, a tool has been found in technology and digitization that will help accelerate its release, and that is the use of ‘blockchain'”tells.

In the report “Blockchain: Gateway for Sustainability Linked Bonds” by HSBC and Sustainable Digital Finance, it has been revealed that blockchain technology will allow savings of up to 10 times the cost of issuing bonds, making it easier for projects and companies of all sizes to issue these bonds. will be allowed. Creating opportunities for a broad portfolio of green and sustainable projects.

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Blockchain and Green Bond Business

A ‘blockchain’ is a chain of blocks in which transaction information is encoded in a network, allowing the transfer of data (or value) with a secure encoding through cryptography. Therefore, any transfer of value (money or assets) will not be verified through an intermediary, but through a consensus allowing information to be stored transparently at all times.

,The use of this technology could have an impact on the structuring, distribution, transfer, payment and settlement of Green Bonds by simplifying complex processes – verification and record-keeping. Similarly, blockchain makes it possible to secure information, trace records of movement, synthesize transactions, reduce costs—through the use of smart contracts—and increase transparency.Kueller says.

Furthermore, the mentioned report states that if ‘Blockchain’ is integrated with other technologies – such as the Internet of Things (IoT)-, Big Data, Machine Learning or Natural Language Processing (NLP), it can ensure This set of technologies will allow monitoring – in real time – the development of each invested project, validating the use of resources and the impact generated by them, given that the transparency and credibility of Green Bonds are high.

This scenario may sound avant-garde, but it is not too far from the present, as global financial institutions such as the World Bank have managed to issue green and traditional bonds using 100% of this technology.

According to LACADI (Latin American Initiative for the Disclosure of Climate Assets), there are still barriers in Peru to include climate change as a variable in investment decisions. ,If digital technologies are combined with the transition to green investing, they become part of a key strategy in the financial sector. Investing alongside socio-environmental norms will be necessary to mitigate the consequences of climate change as well as other negative social impacts—which we are already experiencing; Apart from being a way to achieve better profitability”, concluded Cuellar.

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