SDFA and HSBC Launch Pivotal Report on Unlocking Climate Financing By Scaling The Green Bond Market

Through Emerging Technology

Date: September 23, 2019

New York – The Sustainable Digital Finance Alliance (SDFA) along with HSBC Center of Sustainable
Finance launch the report: “BLOCKCHAIN Gateway for Sustainability Linked Bonds: Widening access to
finance block by block”. The report outlines how emerging technology can enable the green bond market
to scale dramatically from a mere 2% of the current trillion-dollar bond market, unlocking capital for
solutions to meet the Paris Climate. The Report quantifies the efficiency gains to be harvested from
digitisation, shows current state of the digital green bond market, provides a toolbox and key
recommendations, and offers a glimpse into a future where green bonds become accessible to anyone to
issue and to invest.

The reporting burden associated with use of proceed bonds, such as green bonds, is set to soon diminish or
entirely disappear. The report thereby points to a future where the current reporting burden is alleviated
to make the bond market far more efficient and accurate.

Zoë Knight, Head of the HSBC Centre of Sustainable Finance said “The urgency to provide finance that
delivers a net-zero economy is increasing. Exploring how technology can accelerate financing for low-carbon
solutions is critical for speeding up the response to climate change. This report with SDFA provides a
roadmap of the benefits of blockchain”.

Emerging technology including Blockchain (DLT) offers the ability to digitise trust by using mathematical
algorithms and cryptography to validate transactions. It can step into the bond market to take over the role
of trust broker, making it easy to reduce the overall costs of bond issuance and impact the minimum
coupon size. For bonds on the blockchain there will be no difference in costs between a 10 dollar and a 10
million-dollar investment, which would have the effect of opening up the Green Bond market to a wider
investor base and makes small scale investment by individuals viable.

Blockchain offers these advantages to all types of bonds, but recent developments at the technological
frontier present even greater opportunities to Green and Impact Bonds, leading to the potential for Green
Bonds to lead the transformation. The report shows that blockchain is not developing in isolation but is
converging with both the Internet of Things (IoT) and Artificial Intelligence (AI).

Marianne Haahr Director of the SDFA explains: “We are increasingly living in a world where data about
green assets, such as clean energy produced by a solar cell, can travel directly from the roof of a house to
the digital wallet on the smart phone of a green bond investor without the involvement of human hands.
Investors can get real time information; they can invest smaller amount and can thereby put more savings
in a green future rather than letting in bank accounts with no or negative interest rates”.

Current state of the DLT Green Bond Market

Since early 2018, several financial have issued bonds and other debt products using blockchain technology,
primarily for structuring, issuance and asset transfer. The report launched today shows how blockchain
technology has been used in bonds to date. In addition, the report considers the potential for blockchain to
establish credibility on Use of Proceeds and Proof of Impact.
Banks and Regulators are key to driving the change
“Corporations, central banks, politicians and the public know we have an urgent challenge. Financial
institutions and regulators have been driving the adoption of emerging technologies in capital markets and
can be critical players in rapidly accelerating the flow of capital into critical projects to address and reverse
the impacts of climate change, especially in the countries at the frontier of the struggle.” noted Lead
Researcher Sofie Blakstad, SDFA Sustainable Fintech Expert, CEO and co-Founder, hiveonline.

10X Efficiency Gains

Moreover, the report finds that blockchain can offers to harvest efficiency gains of more than 10X the non
DLT bond process with the largest efficiency gains (as money saved) in Green Bond reporting, brokerage
and sales as well as structuring, price setting and risk rating. The report concludes that in addition to
efficiency gains, digitising Green Bonds with DLT opens up for transformational follow-on innovations.

A Future of ‘Do It Yourself ‘Green Bonds

The report points to a near future where DLT paves the way for “Do it Yourself” green bond platforms,
which allow issuers to create their own DLT Green Bonds at low cost. That means smaller entities such as
medium-sized businesses or neighbourhoods can issue their own Green Bonds without the need for costly
full-service offerings by banks. It will allow the trillion dollar worldwide locked up in savings to be invested
in a green future.

Countries stepping into a DLT future

The report points to the countries most prepared for blockchain based Green Bonds, as a support for those
considering issuing them. As of Q3 2019, just over USD 1 billion has been raised via Security Token
Offerings, a number dwarfed by global bond markets at 100 billion. The market has been driven by the UK,
USA, Switzerland, Germany and Estonia.

The report launched today is the product of a collaboration between HSBC Centre of Sustainable Finance
and the SDFA Sustainable Digital Finance Alliance.

Read the full report here: https://www.sustainabledigitalfinance.org/initiatives-publications

Watch the introductory video here: https://youtu.be/XaBRiTnfoF8

Press inquiries:
Katherine Foster (SDFA CIO)
kf@sustainabledigitalfinance.org
Tel: +1 202 644 1141

About the Sustainable Digital Finance Alliance

The Sustainable Digital Finance Alliance (SDFA) is a unique public private partnership co-founded by UN
Environment and ANT Financial Services to leverage digital technologies & innovations to enhance
financing for sustainable development. The SDFA catalyzes market innovation and policy action that
leverages digital finance to, on the one hand, address the barriers to scaling sustainable finance, and on the
other hand, promote innovation that unlocks sustainable investments in the real economy. The SDFA is a
not-for-profit organization registered in Switzerland.