Distributed Ledger Technology and Climate Finance

Tim Schloesser*, Karsten Schulz

*Corresponding author for this work

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    Abstract

    Enormous amounts of capital will need to be mobilized in the coming decades to drive the transition of our global economy toward climate neutrality. In recent years, the financial system started to move in a more environmentally sustainable direction, inter alia offering more green investment opportunities. Speeding up this process is inevitable if humanity wants to meet the Sustainable Development Goals (SDGs) and achieve the targets of the Paris Climate Agreement. Distributed Ledger Technology (DLT) may enable climate finance to effectively accelerate this transition toward sustainability. Inherent characteristics like security, immutability, transparency, and auditability make DLT a highly promising tool for climate-related use cases. However, the mainstream adoption of these digital innovations is still constrained by various obstacles, including technological and regulatory barriers, especially in the highly regulated finance sector. Existing digital divides between developed and developing nations further exacerbate these challenges. Based on these initial deliberations, this chapter shows how DLT can be used effectively for innovative climate finance. We first introduce the technology and discuss its sustainability as well as different possible DLT governance structures. Based on this introduction, we provide an overview of sustainability-related initiatives and networks linked to DLT. We review various DLT applications in Decentralized Finance (DeFi), asset management, Measurement, Reporting and Verification (MRV), tokenization, and other relevant fields. We conclude with an outlook on the role of DLT in climate finance and present recommendations for overcoming some of the remaining risks and obstacles.

    Original languageEnglish
    Title of host publicationGreen Digital Finance and Sustainable Development Goals
    EditorsFarhad Taghizadeh-Hesary, Suk Hyun
    PublisherSpringer
    Chapter13
    Pages265-286
    Number of pages22
    ISBN (Electronic)978-981-19-2662-4
    ISBN (Print)978-981-19-2661-7
    DOIs
    Publication statusPublished - 2022

    Publication series

    NameEconomics, Law, and Institutions in Asia Pacific
    ISSN (Print)2199-8620
    ISSN (Electronic)2199-8639

    Keywords

    • Blockchain
    • Climate finance
    • Decentralized finance
    • Distributed ledger technology
    • FinTech
    • Governance
    • Green finance
    • Sustainable finance

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