Tokenized green bonds
A tokenized green bond is a debt security recorded as a digital token whose proceeds finance environmental projects. The issuer borrows money from investors and commits to using the proceeds for eligible projects such as renewable energy. A distributed ledger records the bond and its holders, connecting the financing agreement with digital issuance and transfer processes.
The green character of the bond depends on the use of its proceeds and reporting about the financed projects. Tokenization changes the record and processing of the security, while the issuer remains responsible for the debt obligations. Investors therefore need both the bond's financial terms and information about the environmental purpose and use of the money.
Project Genesis in Hong Kong
The BIS Innovation Hub and the Hong Kong Monetary Authority built two prototype platforms for green bond tokenization with private sector groups in Project Genesis, and published three reports on 4 November 2021. The first prototype ran on a permissioned distributed ledger and simulated a bond's life cycle from origination and subscription to settlement and secondary trading. The second tested the same steps on a public permissionless blockchain, with simpler investor onboarding and direct payment and settlement between issuer and investor.
The BIS also describes where the project wanted to go: an investor downloads an app, invests any amount in government bonds and tracks in real time how much clean energy the financed projects generate. That stayed a vision; the published prototypes covered issue and settlement.
Issues in Europe
On 20 June 2023, the European Investment Bank issued a digital Climate Awareness Bond of 1 billion Swedish kronor as the first bond on so|bond, a blockchain platform developed by SEB and Crédit Agricole CIB, as SEB announced. The EIB lends the proceeds to climate projects.
In Germany, the solar developer Greenrock Energy issued GRE Bond two in February 2023, a tokenized green bond of 25 million euros under the Electronic Securities Act, approved by BaFin and recorded on Polygon, with technical support from Tokenforge in Berlin. pv magazine reported (in German) a minimum investment of 1,000 euros, a base interest rate of 7.5 percent plus a variable bonus, and a project pipeline of more than 420 megawatts that the money was to speed up. Investors were entered in a crypto securities register; the page on the crypto securities registrar explains that role.
The EU Green Bond Standard
The token form does not make a bond green under EU law. Regulation (EU) 2023/2631 on European Green Bonds applies from 21 December 2024. A bond that uses the European Green Bond label must allocate its proceeds in full according to the EU taxonomy, with up to 15 percent allowed for some activities without technical screening criteria, and the issuer must use external reviewers registered with and supervised by ESMA. These rules apply to a tokenized bond in the same way as to one held at a central securities depository.
Upcoming events on investment and digital assets in Germany
Finance Loop and tokenized green bonds
Finance Loop has pages on ESG investing and green fintech; tokenized bonds sit in its Investment & Digital Assets track. Finance Loop has a cooperation with 21X, the Frankfurt venue that trades and settles tokenized securities.
Investment & Digital Assets
Risk & Compliance
What is a tokenized green bond?
A green bond, whose proceeds fund environmental projects, issued and held as a token on a distributed ledger. The bond terms and the use of proceeds are the same as for a conventional green bond.
What was Project Genesis?
A project of the BIS Innovation Hub and the Hong Kong Monetary Authority that built two prototype platforms for tokenized green bonds, one permissioned and one on a public blockchain. The project's reports came out on 4 November 2021.
Is a tokenized green bond a European Green Bond?
Only if it meets Regulation (EU) 2023/2631, which applies from 21 December 2024: full allocation of proceeds to taxonomy-aligned uses, with limited exceptions, and an external review by a reviewer registered with ESMA.
Has a tokenized green bond been issued in Germany?
Yes. Greenrock Energy issued GRE Bond two in February 2023, 25 million euros under the Electronic Securities Act on Polygon, from 1,000 euros per investor.
Tokenized green bonds and Finance Loop
Finance Loop covers tokenized green bonds in its Investment & Digital Assets track, next to tokenized bonds, ESG investing and crypto securities registers. Finance Loop brings people from asset managers, banks, issuers and tokenization platforms together at events in Frankfurt, Munich, Berlin and Hamburg.
Finance Loop is a professional network supporting the institutional use of emerging technologies in finance, such as AI, digital payments, cloud and blockchain solutions. Finance Loop helps its members build skills and personal networks in these fields: Investment & Digital Assets, Payments & Digital Money, Digital Infrastructure & Sovereignty, and Risk & Compliance.