Capital markets News

Sumitomo Americas invests in tokenized carbon credits through World Bank-backed fund

forest sustainability carbon credits

The World Bank’s International Finance Corporation (IFCannounced that Sumitomo Corporation of Americas (SCOA) had invested in tokenized carbon credits generated through the Carbon Opportunities Fund. The Fund was created last year by IFC, the Chia blockchain network, fintech Aspiration, and Cultivo which sources regeneration projects.

Multiple World Bank tech climate initiatives

Today’s announcement brings together multiple World Bank climate initiatives. The World Bank’s Climate Warehouse is an umbrella project aiming to create digital infrastructures for carbon markets. One of the warehouse initiatives is the Climate Action Data Trust (CAD Trust), a data aggregator for carbon credits. It was launched last year in association with the International Emissions Trading Association (IETA) and the Singapore government. It uses the Chia blockchain.

With dozens of carbon registries emerging around the world, the CAD Trust is a meta registry, storing data from multiple carbon registries. This helps to address fraud where a single project might attempt to issue carbon credits across multiple registries. Hence the initiative enhances transparency and carbon credit quality.

The Sumitomo carbon credit tokens

For the Sumitomo investment, the underlying carbon assets were logged on the EcoRegistry carbon registry. The Carbon Opportunities Fund tokenized 10,000 tons of carbon on the Chia blockchain as Chia Asset Tokens. The Fund then sent these tokens to Sumitomo. Once the tokens are retired on Chia, the EcoRegistry subsequently marks the units as retired in the CAD Trust.

“Creation of digital carbon (‘token’) assets is an important component of the effort of the Climate Warehouse program to increase traceability and fungibility of high-integrity carbon markets,” said the World Bank’s Hania Dawood. “IFC’s successful tokenization with registries managing the digital carbon assets though the full transaction cycle will allow more liquidity and greater participation in the carbon markets.”

Expanding carbon markets is an important goal. Unfortunately, there’s been some controversy around registries and tokenization. Last year one of the largest registries Verra suspended tokenization. That wasn’t because the blockchain firms were doing something wrong per se, but the process resulted in a mismatch between retiring the carbon credit token and retiring the credit on the registry. That’s something that CAD Trust is trying to address.

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