Green finance is an important source for raising necessary funds for preserving/conserving the environment through developments of green projects. It is a loan raised especially for environmentally friendly activities such as biodiversity financing, optimum use of natural resources, etc. Prudent use of green finance attracts the use of digitized technologies which will facilitate prosperous accomplishment of environmental projects. One of the primary and significant digitized technology is blockchain. Further, it ensures effective monitoring of environmental projects, enhances transparency and accountability, and minimizes greenwashing risk. The bank for international settlement (BIS) has stressed blockchain for bringing transparency in usage of green finance thereby improving efficiency. Thus, the present study is an attempt to have insights on the use of blockchain for streamlining green finance. The study proposes the use of digitalized technologies for supporting and promoting green finance.
TopIntroduction
Green finance is any financial activity which ensures a better environmental outcome. It consists of debt mechanisms, array of loans and investments that encourage the development of green projects. It is a new sources of mobilizing and financing existing industries into carbon reduction by establishing new verticals of finance. It will improve liquidity, expanded access to finance, transparency and lower the cost of capital for infrastructure projects.
In the recent years, many research has been done on the green finance. Green finance has been defined by many authors (Wang and Zhi 2016; Zhang et al., 2020; Hafner et al., 2020; Taghizadeh-Hesary and Yoshino (2019) Zhang et al. (2019) has described the present status of green finance and obstacles faced in proper utilisation of green finance. Blockchain technology is widely used in different sectors of the economy. One such application is in financial system (Trivedi & Malik, 2022). Blockchain is a revolutionary tool for ensuring optimum use of green finance by monitoring the climate change, which significantly influences green finance. Blockchain technology is designed in such a way that it is massively resistant to frauds and modifications. It ensure data integrity and reduced the operational costs. Blockchain convert money into digital form wherein transparency increase in use of finance. With the help of block chain, one can easily find out the trading of green bonds & project financed through green finance & its impact on the environment.
“Blockchain is a shared ledger that facilitates the process of recording transactions and track assets, whether it be tangible or intangible”. Bitcoin, blockchains first application is known to pollute the environment by emitting vast amount of CO2 in order to make transactions successful with consumption of massive energy. Blockchain can be laid in more efficient ways which won’t use more energy.
Blockchain might bring alignment visibility with sustainability goals by enabling everyone to track data on infrastructure projects. He et, al (2020) A blockchain based infrastructure management system could improve transparency in current multi party contract agreements. A blockchain based protocol can support the governance, alignment and monitor infrastructure standards. Debrah et al. (2022) in a study described that in Hong Kong “Leveraging Blockchain Technology and Tokenizing Green Assets is used to Fill the Green Finance Gap”. It is a global change as buildings fuel this by accounting for global energy use and carbon emissions further tells us the need for green buildings.
The bank for International Settlement (BIS) has stressed on the blockchain for bringing transparency in usage of green finance thereby improving efficiency.
Sharma et al. (2020) describes that reassessment of infrastructures and services as a need of an hour. New technologies will enable sustaining green finance, thus improving the environment. Naderi et al. (2022) conducted a study in USA to illustrate how emergence of ‘Distributed Ledger Technology’, such as ‘Blockchain’ improves current process and systems by being a digital enabler across the infrastructure. Blockchain and Distributed Ledger Technologies can start deeper technological integration and beginning of new business models. Public and private sector will provide guidance on bringing ideas to life through various programme.
Many countries have been achieving green growth while constantly developing their economies. A country must strive towards developing high quality finance and utilise such finance to break economic uncertainty and further promote the economy. Fintech in short can be explained as financial innovation by new technologies. Technology creates products and applications which further impact the working of financial institutions. Green finance promotes the optimization of the economy and maintain its growth.
The green financial system can promote firms to carry green innovation by reducing market transaction costs further leading the customers towards green consumption. Introduction of blockchain helps in promoting rural revitalization, funds will be invested into rural revitalization which will promote rural upliftment by developing rural green financial systems. Blockchain is a facilitator in promoting the green environment by providing necessary green finance.