The blockchain-based Climate Awareness Bond, which will be issued in Swedish krona, would provide incentives for node operators to reduce infrastructure’s environmental impact.
The European Investment Bank (EIB) has unveiled a blockchain-based digital bond that makes use of node infrastructure with environmental incentives. The financial institution announced the issuing of a “digital native green bond” with a Swedish krona par value, with institutional investors being offered a fixed rate of 3.638% over a two-year term.
It is being heralded as the first blockchain-based bond to be listed on the Luxembourg Stock Exchange Securities Official List and displayed on the Luxembourg Green Exchange. The bond is known as the Climate Awareness Bond.
The bond will function on the recently released sustainable blockchain digital bond platform, So|bond. As was previously reported, this platform incorporates pro-environmental incentives for node operators while facilitating the issue, trading, and settlement of digital bonds.
The “Proof of Climate awaReness” protocol developed by So|bond encourages nodes to reduce the environmental effect of their infrastructure. Nodes are compensated according to a system that takes into account their climate impact; nodes with lower impact ratings receive greater compensation.
The French IT company Finaxys created the protocol, and Skandinaviska Enskilda Banken (SEB) and Credit Agricole jointly run the So|bond project.
The EIB worked with Goldman Sachs and Société Générale Luxembourg in 2022 to settle a digital bond worth 103.7 million euros ($103.7 million) on a private blockchain platform.
Over the past three years, the EIB has been actively investigating the use of blockchain-based systems for digital bonds. The possibility of an EIB-issued digital bond based on Ethereum in April 2021 even helped Ether to achieve record highs.
The EIB’s decision to use blockchain technology for digital bonds, especially with a focus on green bonds, demonstrates both its dedication to sustainable finance and its understanding of the potential advantages that blockchain technology could bring to the bond market, including improved transparency, efficiency, and environmental impact measurement.