This week Hitachi is issuing a 5 year, 10 billion Yen ($69 million) digital green bond. In addition to issuing the unsecured tokenized bond, Hitachi developed the technology used to track the green credentials. It created the green credential tracking solution in conjunction with JPX, the Tokyo Stock Exchange owner. They are part of a consortium that includes Nomura and Nomura-founded DLT platform BOOSTRY.
We previously reported on plans for the “Digitally Tracked Green Bond” in November.
Last year the same consortium participated in the first Japanese digital green bond issuance by JPX. However, the size of that green bond was just 500 million Yen ($3.5 million) and its term was one year. The JPX bond proceeds were used to finance renewable energy facilities, and it publishes the green credentials in real time and logs them on BOOSTRY’s iBet for Fin blockchain network. The same blockchain network is used for bond tokenization.
Now Hitachi and JPX Innovation (JPXI) have expanded the tracking system to measure building emissions. It will use the tokenized bond proceeds to refinance the renovation costs of an energy saving building.
Nomura Securities is the underwriter and digital structuring agent. The green bond structuring agent is Mitsubishi UFJ Morgan Stanley Securities. And Mizuho Bank is the bond registry administrator and fiscal agent.
Digital green bond learning curve
Meanwhile, after the previous green bond issuance in June last year, JPX convened 64 organizations to explore the learnings. The group included many of Japan’s biggest securities companies, banks and asset managers.
One of the key issues is the lack of on chain settlement. The first bond was settled free of payment, with settlement done later using conventional bank payment. We’re guessing that might still be the case.
However, given new supportive legislation, we’d expect stablecoins or tokenized deposits to be used in the not-too-distant future. Both the MUFG-found Progmat Coin platform and the DCJPY tokenized deposit offering should be online by mid 2024.
Other tokenized bond issues include unappealing tax treatment and the lack of a secondary market. The Osaka Digital Exchange will launch a solution to the latter point when it starts supporting tokenized securities from Christmas Day.