Hitachi plans to issue a tokenized green bond. It will use a green tracking hub co-developed with JPXI to track the reduction in CO2 emissions and make the data available to investors. Nomura will distribute the tokens to investors. The securities firm is also the majority owner of BOOSTRY, the provider of the “ibet for Fin” tokenization platform used for the green bonds.
Most conventional securities issuances involve a central securities depository (CSD). However, digital securities often use blockchain as the securities registry instead of the CSD, as is the case here. Not all jurisdictions support that from a legal point of view. That’s one of the reasons for Europe’s DLT Pilot Regime and the UK’s Digital Securities Sandbox.
Tracking usage of green bond funds
Hitachi’s key role in the consortium is the solution that tracks the C02 emissions. In this particular case, it says has an opinion from Rating and Investment Information regarding its green bond framework.
The company will use the bond proceeds to refinance the construction costs of one of its energy efficient buildings built in 2021. On the one hand, one could argue that these costs were previously incurred so are they green? On the other hand, the building has ongoing CO2 emission savings – measured against a benchmark – and building costs are usually spread over long periods.
Meanwhile, the four companies published a comprehensive review of the previous JPX tokenized green bond issuance. The takeaways are the ones we often hear at this early stage of tokenization. They include a lack of digital currency for on-chain settlement, the ecosystem being too small and the need for a secondary market.
On the last point, Japan is about to solve this issue. SBI owned Osaka Digital Exchange (ODX) plans to launch a secondary market for security tokens before the end of this year. It received regulatory approval this week.