It has become unavoidable to question myself with every activity I do what carbon imprint it has and furthermore about the broad effect on the environment. It is quite likely that in the future I will may be asked to offset it. If I decide to take vacations in a very distant part of the world, I will may have to plant many trees to compensate for the effect of the long-distance jet travelling. Or I will opt to buy green security tokens of the company that will do it on my account.
What about my investment portfolio? Who or what do I support with my investments? What is the sustainability behaviour of the companies or asset managers where I put my savings? It is not just the money return I should care about. Or should I even care about the impact first?
Let’s say that all environmental effects of the companies’ activities are reflected in their costs in the projected future. In this case I could rely more on financials only. However, there are many spill-over effects that do not appear among the company costs. Or they will only appear in a distant future. And there are not just the environmental issues.
Green/sustainability criteria should not be one minor (additional) factor considered at the end of the investment process. Rather, they should be the major entering screening point. Only in this way my investments will achieve some impact and change. And the change is very much needed for our survival and the survival of many species on our planet.
Carbon Adjusted Returns
Some professional investment decisions are already based on carbon adjusted returns. The carbon price risk is becoming very tangible through increasing regulation of carbon emission through taxes and permits. The average carbon prices can increase more than sevenfold in the future as reported by S&P. However, the evidence shows that the carbon risk has not been fully recognised and priced in the stock market in Europe and North America so far.
So, as an investor I should be concerned about carbon emission footprint of companies. To capture the full effect of the carbon risk I should look for the footprint that includes the carbon emissions beyond the direct operations. It should also include the supply chain activities. Additionally, it should take into an account where the energy comes from.
Blockchain Technology Can Help
To trace and verify the carbon emissions from activities from many locations and suppliers, blockchain technology can be a good solution. Companies will search for efficiency and improvements in this field since the pressure to disclose the relevant data for the future carbon risk assessment is rising. So will rise investors’ expectations for the companies to reduce the carbon emissions. Or even completely neutralise them. Therefore, for the new investment projects green principles (green/climate bond and loan principles) should become the major consideration factors.
Security Tokens Are the Future
In search for efficiency by investors and issuers I expect a move from the traditional forms of financial instruments to security tokens and other digital assets. Certainly, by using security tokens companies can:
- reduce the issuing costs,
- automate dividend payments,
- simplify proxy voting,
- access wider investor base.
Similarly, advantages for investors come from:
- 24/7 global trading,
- real time settlement,
- reduction/elimination of the middleman and back office (settlement) costs,
- faster KYC (know your customer) procedures,
- access to higher liquidity on the global scene.
When the surrounding environment (including regulation, regulators and security) will adapt in the way that it will be up to the standards of institutional investors, the migration to security tokens will be fast.
Even More So Green Security Tokens
Younger investors who are focused on environmental concerns, foundations and institutional investors with their fiduciary duties should be most keen on green security tokens. They are already those investors with the fastest growing demand for sustainable investments. If blockchain can reduce issuing and tracking cost regarding the fulfilment of the green principles green security tokens will also gain popularity with the issuers.