A digitally tracked green bond uses technology such as blockchain to improve data transparency and data collection efficiency for green or environmental securities.
The Japan Exchange Group (JPX), the parent company of the Tokyo Stock Exchange, is pressing ahead with plans to issue a “Digitally Tracked Green Bond” using blockchain technology, the Tokyo bourse announced April 15. To be issued in the form of a publicly offered security token—or tokenized IPO—this is the first initiative of its kind in Japan.
A digitally tracked green bond uses technology such as blockchain to improve data transparency and data collection efficiency for green or environmental securities—an asset class that issuers and investors have noted has lacked trust due to inefficient data collection and poor traceability. Thus, the initiative aims “to improve transparency around the use of funds raised” in such bond issuance, JPX says.
In the pilot, JPX aims to create “a mechanism that measures the amount of power generated by...solar and biomass power-generation facilities and convert it into an amount of CO2 reduced,” the Tokyo bourse added. This will allow investors to independently monitor the green credentials of their investment in a power plant, for instance, without reliance on an annual report.
To deliver the new initiative, JPX Market Innovation & Research, a newly formed subsidiary of JPX, will partner with three entities: financial-technology startup Boostry, which will deploy blockchain technology to host the corporate bond-type security tokens; securities firm and investment bank Nomura Securities, which is the bond’s underwriter; and Hitachi, which will record and monitor the data, including CO2 emissions, from the power generators.
JPX’s initiative is in line with Japan Inc.’s road map to carbon neutrality, a goal set by the government in 2020 to reduce greenhouse gas emissions to net zero and achieve a decarbonized society by 2050. And it aligns with efforts, also led by the government, to accelerate digital transformation—or DX—across society.
Indeed, in January, the JPX noted that it was laying down plans to issue digitally tracked environmental bonds “as part of its efforts to achieve carbon neutrality across group companies, as well as to improve the overall operational efficiency of bond issuance through digitalization.”