Expert Talk with Marianne Hahr (Head of Sustainable Digital Finance Alliance)
As a first in a series of talks with experts on the topic of sustainability from different angels, I have had a talk with Marianne Hahr, the director of Sustainable Digital Finance Alliance and an expert in the topics of both sustainability, blockchain, bitcoin and how these are set to revolutionize our societies. Marianne is a pioneer in her field, and earlier she has also been leading the Opportunity work initiated by DNV GL; Monday Morning and UNCG, among other. The Opportunity work has been a key source of inspiration to my work, fueling among other to set up this platform to share insight on the solutions.
I`ve had a talk with Marianne to hear about blockhain`s possibilities and challenges in a context of sustainability:
What are some of the largest opportunities blockchain can bring in terms of progress on sustainability?
Capital is available to deliver on the SDGs and the Paris agreement, but it is not deployed to support these promises of a sustainable future in any significant way. Blockchain is a governance technology and therefore holds promise to transform how finance is governed for sustainability. We have only seen first round of ideas for how this can happen and the new couple of years will see much more innovations is this space. Let me just share two ways in which blockchain has a potential to unlock more financing for sustainability:
- Firstly, blockchain can enable existing green and sustainable financing instruments, such as green bonds, to scale by a potential to address many of the current barriers. These include, but are not limited to, costs of designing and structuring green bonds, difficulties of validating the use of green proceeds, costs of intermediaries and time required for reconciliation. The sustainable bond market, although popular with consumers and growing rapidly from the first issuance in 2015, still accounts for less than 2% of the market, and challenges of cost and validation prevent many projects from issuing bonds. The process used by most banks and issuers is still cumbersome. Blockchain is a governance technology and therefore well positioned to restructure bond processes and other financial instruments bringing multiple stakeholders together. It is a distributed ledger technology using cryptography to record and store transaction data in a tamper proof decentralised network. Participants in the network can have access to all transaction data in real time. Hence, blockchain digitalises trust between the participants in a project and increase the credibility of the project via transparency and the validity of project data.
- Secondly, blockchain is a technology that enables decentralisation and democratisation of the financial system which has potential to redesign financing instruments to unlock more sustainable capital. It can be a true game-changer. Asset classes such as real estate which have historically only been open to High Net Individuals and institutional investors can be democratised via deployment of the blockchain. Tokenisation can slice larger assets up into smaller investible parts offered to the crowd. It opens up for people to harvest greater returns than on savings accounts. It also opens up for a new way to finance sustainable buildings and other types of infrastructure. Policy and legal frameworks to enable more of these innovations to emerge will soon be coming along. Germany has announced that a blockchain strategy will be launched mid 2019, the first fully compliant STO, Security Token Offering in Germany was just issued and Luxemburg has launched a blockchain law.
In developing markets blockchain can make community assets visible and investible opening up for a transition from reliance of aid to actually developing local economies and market structures.
What are some of the challenges?
Some of the challenges are technological, reputational and policy/ regulatory. Technology wise blockchain is scaling challenges and the discussion about high energy consumption is part of that challenge related to how verification of transactions happen. However, blockchain is just one distributed ledger technology over the coming months and year we are going to see new ones emerge that efficiently address the technological challenges as the space matures and develops.
In terms of reputation blockchain is still perceived as part of the Bitcoin discussion as mainly facilitating speculative behaviour. A more nuanced view and deeper discussion about the deployment of the actual ledger technology is evolving and will re-brand blockchain as a governance and institutional technology with a transformative potential rather than merely being reduced to a money game.
On the regulation side much more is to come in 2019 in terms of offering greater clarity on the status of crypto assets and greater protection to consumers engaging in the space. Many developing countries are, however, currently not starting to regulate the space, which will be a big barrier to blockchain innovations taking off where they a most needed to unlock new financing instrument to deliver on the SDGs.
Some in particular interesting companies addressing topics of sustainability through blockchain that we should check out (to learn more)?
CarbonGrid is a Singaporean-Vietnamese start-up that is tokenizing carbon emission reduction certificates (CERs) for resale over the blockchain. By tokenizing CERs, Car- bonGrid restructures the market by enabling the purcha- se of smaller offsets while using a network of authority nodes to identify and select only high quality projects.
hiveonline is a Danish digital platform using blockchain, social networking, mobile data, and strategic partnerships to develop a holistic digital exchange system (DES) for the unbanked. The DES provides digital contracting and an accounting system for informal, unbanked microbusinesses, reputation building, tokenization of natural capital to underpin creditworthiness, and social network verification using phone records for KYC.
BenBen is a private sector platform that integrates land registry, land information and fintech aimed at providing digital land transaction solutions to emerging market economies. Once land is registered on the blockchain-powered platform, land information can be digitally shared with BenBen’s banking clients, which opens a whole host of financial products to the land owner. The land records uploaded onto the platform are provided by the land sector agencies and they in turn get an API to the BenBen platform enabling them to access the data. The business model is that the landowner pays a digital registration fee, whilst the bank pays a licensing fee to the platform and a percentage of mortgage-processing fees. BenBen pays land sector agencies on a transactional basis.
Thank you to Marianne for sharing her insights.
You can also follow Marianne on Twitter where she shares insights and recent news on the topics of sustainability and digital finance.
Here you can read more about the Sustainable Digital Finance Alliance: www.sustainabledigitalfinance.org