Financing a green future through innovation in distributed ledger technology (DLT). That is the subject of a white paper due to be published shortly. The report’s co-author, Émilie Allaert, head of the Luxembourg Blockchain Lab, presented its conclusions at Nexus2050 on Thursday 27 June at Luxexpo The Box.
DLT is a digital technology for recording asset transactions in which the details of the transaction are recorded in several places at the same time. Unlike traditional registers, DLT is decentralised and can be more secure because each party in the network must validate changes collectively.
Guillaume Meyer: What is the purpose of this white paper?
Émilie Allaert: Together with Oriane Kaesmann from the Lhoft and other contributors, we thought about the potential impact of DLT in the field of green finance, in particular how these technologies can support sustainable development goals. Our white paper explores how Luxembourg can position itself in this area. We analyse the different applications of DLT in sustainable finance, assess the educational needs and discuss Luxembourg's place in this landscape.
What role can DLT play in achieving the sustainable development goals?
There is currently a lot of activity in the field of sustainable finance. Many solutions exist without the use of DLT, and it is not necessary to use it systematically. But DLT is an invaluable tool that helps to avoid greenwashing by ensuring that the information provided, in particular the labelling of investments, is reliable. In this way, we can ensure that the data as extracted is correct right up to the moment it reaches the hands of the citizen or the financial institution that has to make an investment decision.
Once DLT is in place, data collection becomes automatic.
If the data is no good from the outset, DLT won’t change a thing.
This is where the combination with other technologies becomes interesting. With the Internet of Things, for example, we can use sensors to accurately measure greenhouse gas emissions throughout the production cycle. The data captured by the sensors is then immutably recorded in the blockchain. In this way, they reflect actual emissions rather than estimates.
So the main benefit for investors is transparency?
Yes, and once DLT has been set up, data collection becomes largely automatic, which lowers the barriers to entry and enables more people to make informed investments in sustainable solutions.
Are there any concrete examples in Luxembourg where DLT has been implemented in sustainable finance projects?
Absolutely. The value-based investment platform Moniflo, for example, uses DLT in the development of its technical infrastructure. DLT is also part of projects linked to carbon credits and tokenisation, whether of real assets--such as water or forests--or green bonds--where the European Investment Bank, Caceis and Société Générale have been particularly active in recent years. The boom in such projects is making these solutions increasingly accessible to both retail and institutional investors.
What are the main barriers to the adoption of DLT for sustainable finance?
DLT sometimes suffers from a negative image because it is associated with cryptocurrencies, whereas it can be used independently [Editor’s note: the bitcoin blockchain is in fact a specific form of DLT, characterised by the use of cryptography and hashes]. It is crucial to educate people about the real applications of DLT. It is not necessarily a question of understanding in detail what this technology is, but rather of showing its concrete benefits for citizens and for the economy.
The energy consumption of DLT is an aspect that should not be overlooked.
How do you respond to criticism of DLT’s energy consumption?
It’s an important subject and we address it in our report. Some DLT technologies, such as the bitcoin blockchain, do consume a lot of energy. But this is an area that is constantly evolving and significant progress has been made. One example is ethereum, which has reduced its energy consumption by almost 99.5% by changing the way it validates transactions. New protocols such as Chia Network and Hedera demonstrate a growing commitment to reducing our environmental footprint.
I’d also like to point out that other consumer technologies, such as AI or cloud computing, also consume a lot of energy... Yet nobody seems to be worried about this.
What advice would you give to investors, companies and regulators wishing to integrate DLT into their sustainable finance practices?
We need to remain open to the use of DLT while carefully assessing its usefulness in the context of sustainable development. Energy consumption is an aspect that should not be overlooked. It is crucial to educate investors about the real benefits of DLT and to ensure that the solutions proposed offer real added value. Providing accurate and reliable data is also important for making informed investment decisions.
What does your report say about the regulatory aspect?
Europe has new regulations and standards that are regularly updated. This regulatory framework ensures that solutions developed in the field of sustainable finance meet strict requirements, guaranteeing a positive impact.
Request a copy of the report here.
This interview was originally published in French by Paperjam and has been translated for Delano
