Evercity, a Berlin-based green debt and carbon origination platform and developer of an open-source sustainable finance protocol, will utilise Hedera to create new instruments for green debt and carbon markets. The Guardian framework for Hedera will be used to accelerate the development process and make sustainable finance more accessible to subject matter experts (SMEs) around the globe.
Over the last decade, debt issuance aimed at financing the UN Sustainable Development Goals agenda saw tremendous growth, reaching $1.6 Trillion USD in 2021. However, it still accounts for approximately less than 1.5% of the global debt market and is used mainly by big banks and corporations, who comprise only 10% of global businesses. In contrast, SMEs represent the remaining 90% and equate to 50% of employment worldwide. This demographic could largely benefit from sustainable debt, but the problems of complex structuring, liquidity, and profitability have to be solved.
Evercity provides a Software-as-a-Service (SaaS) tool which makes sustainable finance easier to use, more cost-effective, and transparent than traditional debt financing. By combining distributed ledger and monitoring technologies, it reduces green-washing risks and connects green assets with crypto-investors. Evercity also develops an open source sustainable finance protocol, which serves as a global common good infrastructure enabling issuance of green and sustainability-linked debt instruments.
Hedera and The HBAR Foundation have been long-committed to sustainability, and the creation of infrastructure for issuance of ESG assets - enabling a series of open source infrastructure solutions as part of their goal to bring the balance sheet of the planet to the public ledger. The cornerstone of this ecosystem is built around the Guardian, which is expected to become a game changer in environmental markets by offering greater auditability, discoverability and liquidity particularly with additional open source tooling around Automated Regression Market Makers.
Two other important features of the Hedera network are its carbon-negative footprint and low transaction fees. Within this collaboration, Evercity aims to develop and commercialize several interconnected products to make sustainability finance more auditable and enable transparency, so the world can answer critical questions on where green finance goes and if it funds projects in an equitable manner.
At COP27 in November 2022, Evercity presented the first collaboration result - carbon forward tokens on Hedera. These digital contracts on the future delivery of carbon credits will provide an ex-ante financing mechanism for carbon projects. Actions of all stakeholders and transactions are recorded in a transparent and immutable database to prevent fraud. Self-executing smart contracts allow automation of the distribution and delivery of carbon forwards. Public Ledgers also provide additional liquidity opportunities, opening access to high-quality carbon credits to market participants that otherwise would be forced to use traditional methods such as OTC transactions, which oftentimes create adverse incentives by providing a large portion of the value to middlemen rather than projects doing the work to combat climate change.
“Opportunities to keep carbon out of the atmosphere are all around us. But they require capital, and must deliver real climate benefit at scale to succeed.” Said Joseph Pallant, Founder & Executive Director at Blockchain for Climate, and Director of Climate Innovation at Ecotrust Canada. “I’m excited about the launch of Evercity’s Carbon Forwards platform on Hedera, as we can now connect real projects with capital and demand, enabling project developers to implement their project and complete the offset standards and issuance process. As demand for climate action grows, secure delivery of early-project carbon finance is often a stumbling block to achieving emission reductions & removals targets. With Evercity’s Carbon Forwards platform, leveraging Hedera’s Guardian, we are focused on clearing that pinch point, and getting society on a quicker path to addressing the climate crisis.”
Based on research by HSBC, Bank of International Settlements and European Investment Bank, digitization of green bonds is expected to bring many benefits to the market, including 10x cost reduction, faster settlements and coupon payments, additional transparency and single source of truth on the interest rate. The Evercity platform will also implement best market practices on digital bonds and allow issuance of both green and sustainability-linked instruments.
“I have been along supporter Evercity because they are bridging key innovative elements that need to be integrated in order to scale climate finance in developing countries. ” Said Katherine Foster, Executive director, Green Digital Finance Alliance and Evercity advisor. “This is to a large extent enabled by co-founders’ Alexey’s and LIza’s unique experience that combines both sustainability and web3 expertise as well as their engagements with international institutions and partners from across the globe.
Last but not least, Evercity will enable integration between green bonds and carbon forwards based on the ideas presented by Massamba Thioye, Manager, Sustainable Development Mechanism Program at United Nations Framework Convention on Climate Change (UNFCCC).
The key idea is that if buyers of the green bond can also receive tradable carbon credits generated by the financed project, they will have additional incentive to pay the premium for the green bond. Also, integration of carbon credit and green bond markets will make carbon credits more attractive for investors. This major innovation will help to make both carbon credits and the green bond markets more accessible to SMEs in developing and developed countries.
“The development and implementation of a methodological framework requires a digital platform, with the combination of IoT, DLT, digital methodologies, AI and smart contracts for the management of the data value chain.” Said Massamba, “The work Evercity is doing can be very much relevant to the UNFCCC secretariat work.”