The European Investment Bank (EIB) has announced the launch of a blockchain-based digital bond supported by node infrastructure and incorporating environmental incentives.
This groundbreaking bond, known as the “Climate Awareness Bond,” is denominated in Swedish krona and is now available for institutional investors to acquire. With a value of 1 billion kr, the bond offers a fixed interest rate of 3.638% over a two-year term.
The bond is described as a “digital native green bond,” and it is recognized as the first blockchain-based bond. It has been listed on the Luxembourg Green Exchange and included in the Securities Official List of the Luxembourg Stock Exchange.
The bond will operate on the newly launched So|bond platform, specifically designed for sustainable blockchain digital bonds. The platform would facilitate the issuance, trading, and settlement of the digital bonds while incorporating pro-environmental incentives for its node operators.
Nodes on the So|bond platform are incentivized through the Proof of Climate Awareness protocol, which encourages a reduced environmental impact. Node operators are compensated based on a formula that considers their climate impact, with higher rewards given for lower impact ratings. This approach motivates nodes to actively contribute to mitigating their environmental footprint. The protocol was developed in collaboration with Finaxys, a French IT service firm, and implemented with the assistance of Skandinaviska Enskilda Banken (SEB) and Credit Agricole CIB.
To address concerns about the high energy consumption associated with blockchain technology, Ben Powell, Head of Sustainable DCM at SEB, explained that So|bond tackles this issue by implementing mechanisms to mitigate the environmental impact of financial infrastructure. The platform introduces a disclosure mechanism for network providers’ environmental footprint, promoting transparency and enabling stakeholders to make informed decisions for a more sustainable blockchain ecosystem.
According to EIB Vice President Ricardo Mourinho Felix, the issuance of the first green bond aims to leverage blockchain technology to advance sustainable financial institutions.
Over the past three years, the EIB has been exploring the application of blockchain-based systems for digital bonds. In April 2021, speculation about the EIB issuing a digital bond based on the Ethereum blockchain led to a surge in the price of ETH, reaching all-time highs.
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