The Thematic Bonds Market in the Context of Digitalization: State and Prospects

Authors:

Pages: 38-48

Abstract:

Digitalization and sustainable development are the mainstream directions related to the transformation of the economy today. The most sensitive to changes is the sphere of finance, where after the appearance of innovative instruments (green bonds) in 2007, their market saw exponential growth and laid the foundations of the sustainable debt market. Thus, in 2021, the latter reached record volumes of over one trillion dollars, and, regardless of macroeconomic challenges, it was already 5% of the global bond market in 2022. However, issuing bonds is a complex procedure involving multiple participants with conflicting objectives, and it usually requires a significant financial commitment from investors. In the case of thematic debt instruments, the uncertainty of whether the issuer will fulfil the other promised non-financial commitments is also superimposed. On this basis, blockchain technology in the issuance of green and other labelled bonds can provide an efficient system reducing information asymmetry and increasing transparency. Several financial institutions and companies, as well as the Hong Kong government, have already experimented with the idea of issuing digital bonds related to sustainable development. This report analyzes the state of and outlook for the nascent market for digital green and other sustainable bonds.

Keywords:

green transformation; climate change; green finance; green bonds.

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