Did you know that every technological transaction you make leaves a carbon footprint? From dialing the Spectrum 1800 number and paying your bills, to sending money to a vendor, every financial transaction affects climate. As impossible as it sounds, it’s true; and since most transactions are becoming online, it has a massive role in the worsening climate conditions. Luckily, there is a solution: Blockchain Technology!
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What Is Green Finance?
Global warming is a real issue. Hence, there is no surprise that green finance investments have become important. They are required not only from the public but also from private resources. But what is ‘Green Finance’? The term refers to the integration of environmental protection and economic profits. And as simple as it may sound, it takes years and decades to not only eradicate climate-damaging behaviors in the finance industry but also reverse the damage already done. In addition, it requires proper alignment of sustainable developments with financial systems, which includes banking, insurance, and capital markets. And believe it or not, blockchain can positively impact sustainability and encourage the development of a green finance market.
5 Ways Blockchain Encourages a Sustainable Future
Blockchain innovation has direct and indirect effects on green finance and sustainable investments. Some of these ways are the following:
#1. Positive Climate Action While Creating Economic Return
Even though blockchain technology is an infant concept, developed only ten years ago, it has massive potential to impact financial transactions and improve sustainability. For example, it reduces climate damage by improving carbon emission trading, better tracking gas emissions, reducing greenhouse gases, and enhancing the climate finance flow. So, blockchain has a direct and evident impact on economic returns by reducing carbon and gas emissions, properly keeping track of them, and reporting any reductions.
#2. Improved Transparency of Data Sharing
Blockchain has the well-known benefit of transparent and open data sharing. But many people are unaware that this same benefit also brings sustainability to the table. Blockchain improves traceability, transparency, cost-effectiveness, and the overall sustainability of an investment. Thus, it would serve as an excellent framework for private institutions to work on SDGs. The same Idea has been proposed and strongly advocated by the UNFCCC (United Nations Framework Convention on Climate Change).
#3. Fighting At a Global Level
As of right now, green finance has numerous supporters worldwide, and as they continue to participate actively, sustainable financial practices and innovative technology will expand around the globe. As a result, humans will be in an overall much better position in terms of global climate change in a few decades. Furthermore, experts worldwide believe that adopting blockchain and making it mainstream will eventually facilitate sustainability projects funded by international investors. Governments, financial institutions, and private investors collectively fund power projects and large infrastructure to make this dream come true and help the climate.
#4. Fast Transactions
Those familiar with blockchain’s concept know that it has an aspect called, Smart Contracts. It improves the overall execution speed of financial transactions and increases their autonomy. This way, it minimizes trapped cash in the transaction’s value chain and enables task automation simultaneously. Therefore, it helps financial institutions adopt green finance trading at an international level, leading to increased global cooperation. Moreover, with support and encouragement coming from a global level, it ensures more awareness and practical climate action.
#5. Financial Transactions Made Easier
Every day, financial transactions are becoming more and more complex and time-taking. This is especially true for transactions that involve international projects of sustainable development. This complexity leads to delays and backlogs, both of which are a nightmare! The good news is that platforms and processes that are enabled by blockchain can make numerous transactions easily and more efficiently. Plus, they can easily manage a variety of stakeholders, even if they have varying capacities and are from different projects around the world.
Overall, it will increase the efficiency of every transaction. Moreover, since blockchain processes and transactions are speedy, it will be easier to persuade private investors and financial institutions to pay attention to it and support it. This international support will lead back to the benefit of going global.
Blockchain has been an upcoming trend and an intriguing concept for the last decade. But only some saw its potential to change the way people make financial transactions and make them sustainable. To think that technology and computerized actions can impact the environment truly boggles the human mind. But when climate damage has gone so far that planting more trees and using bicycles isn’t enough anymore, it is relieving to see that the world has other ways of reversing the damage or at least minimizing it.