Blockchain bonds go ESG

IFR 2442 - 16 Jul 2022 - 22 Jul 2022
2 min read
Julian Lewis

An EDF subsidiary has made the first renewable energy project bond issue on the public blockchain, using clean energy to maintain the deal’s ESG credentials and mitigate cryptocurrencies’ huge electricity consumption.

The deal, which PFI reported to be a €100,000 project bond, was arranged by BNP Paribas and issued by EDF ENR, a supplier of rooftop and shadehouse solar installations. It was structured on the public Ethereum blockchain and the buyer was BNP Paribas Asset Management.

The digital bonds' token was minted with low-carbon energy generated by another EDF subsidiary, Exaion – a dedicated supplier to blockchain and high-performance computing users.

The bonds' reversibility was also confirmed. It was switched back to a standard non-digital format within 48 hours, which BNPP called “a key element for interoperability with traditional systems”.

Blockchain bonds offer notable potential for financing the trillions needed by solar and other renewable projects, according to BNPP, which terms them a potential “game-changer” for ESG financing.

They can be “instrumental in broadening the scope and increasing the efficiency of project financing, including better transparency of ESG data along the value chain”, the bank said. It said both EDF ENR’s bond term sheet and ESG data are embedded in its token, which it views as a significant improvement in verifying investors’ ESG impact.

BNPP, which operates its own tokenisation platform AssetFoundry, also sees scope to bundle smaller renewable projects into “dynamic opportunities” for investors via blockchain bonds. The instrument provides “better granularity for smaller amounts”, as well as greater transparency and verifiability of data across the value chain.

“This innovation creates further bridges between issuers and investors, bringing a unique end-to-end ESG financing solution from origination to distribution to custody,” said Arnaud Boyer, chief digital officer at BNPP CIB.

“Innovation and sustainability are at the heart of our investment philosophy for private debt investing. Tokenisation and blockchain are opening exciting new opportunities to diversify portfolios,” said David Bouchoucha, head of private debt and real assets at BNPP AM.

Updated story: Adds deal size