External publications

Scaling up sustainable investment through blockchain-based project bonds

Chen, Yushi / Ulrich Volz
External Publications (2022)

in: Development Policy Review, 40 (5), article e12582

DOI: https://doi.org/10.1111/dpr.12582
Open access

This paper explores options for mobilizing domestic savings through fintech solutions to scale up sustainable investment. Most developing and emerging economies face an urgent need to scale up sustainable finance for low-carbon and climate-resilient infrastructure investment, yet underdeveloped capital markets tend to inhibit domestic resource mobilization for infrastructure investment. At the same time, domestic savers in many developing and emerging economies face a scarcity of “safe” assets in the local currency, resulting in the exporting of capital to financial centers in advanced economies. The paper discusses how fintech can help to complement conventional capital markets and mobilize financial resources for sustainable infrastructure investments. It puts forward a proposal for blockchain-based project bonds to raise finance through a digital crowdfunding platform, which is also able to record transparently and certify the use of proceeds, sustainability impact, and revenue streams of projects by combining timestamp, public and private key mechanisms, and smart contract technologies. This approach would not only provide investors of different sizes with the opportunity to purchase local-currency assets and issuers such as municipalities to raise funds for sustainable infrastructure investment. It would also facilitate project management once the project is operational, for example through metering and billing, and create full transparency over the life cycle of the investment, reducing problems concerning the misuse of funds.