Emerging Digital Carbon Market and Regenerative Finance ReFi

The Carbon Neutrality Blockchain (CNB),[lxxxviii] launched on the LBank crypto exchange[lxxxix] in October 2022, mirrors Bitcoin with a maximum supply of 21 million coins with a difference of being what is regenerative finance closely pegged to climate change. The price is above $3,000, and the crypto downturn shown below has not affected the CNB asset. Bitcoin comes with an enormous carbon footprint, so there is a chance CNB will get a lot of attention in the market. Treedefi[xc] is a token on the Binance exchange and has a development platform and use fees to plant trees and sell them as NFTs.

Cost-Saving Tips for Blockchain Wallet Development

What Is a Regenerative Finance Company

Smart contracts are essentially small computer programs that are stored and run on the blockchain, and they can interact with information that has been saved on-chain. A smart contract could, for example, automatically buy and retire tokenized carbon credits whenever a user sends funds from one account to the other. For a long time, economists have been thinking about how to systematically embed care for our planet and for communities into the way our world works, and studying how financial policies affect social and ecological well-being. Regenerative economic theories look into improving the well-being and health of communities and nature by addressing issues like poverty, inequality, and environmental degradation. Regenerative Finance (often shortened to ReFi) is a transparent, accessible, and inclusive alternative to traditional financial systems. We’ll explore the basics of ReFi, and look into https://www.xcritical.com/ what it can mean for individuals and businesses.

What is the Tragedy of the Commons and How Does ReFi Aim to Solve It?

OpenESG aims to advance ESG ratings by creating an open, AI-powered rating system to provide more independent assessments of companies’ ESG performance. New standards like OxCarbon, and companies like Pachama and Kumi Analytics, are leading the way to make D-MRV essential to credible carbon offsets. Finally, various companies have used blockchain platforms like so|bond and GFT to issue tokenized green bonds with performance tracking happening on-chain. These approaches all seek to provide better-quality, more accessible, more transparent data to inform financial decisions within a TradFi approach. ReFi development combines the principles of decentralized finance with sustainability and social impact, aiming to create financial systems that not only generate profit but also contribute positively to the environment and society. Examples of successful ReFi projects in this domain include microfinance initiatives that provide small loans to environmentally sustainable businesses and impact investing funds that support social enterprises.

What Is a Regenerative Finance Company

The Next Frontier in Finance: Web3, DeFi, ReFi and Impact Investment

This has not only boosted the company’s sustainability credentials, but it has also won access to worldwide markets. Finally, governments in the ASEAN region may accelerate their sustainability and NetZero goals by embracing ReFi, enacting supportive laws, and partnering with the commercial sector. This comprehensive strategy has the potential to pave the way for a greener, more prosperous future. ReFi is more than simply a financial phenomenon; it is a ray of hope for ASEAN’s sustainable future, a catalyst that not only drives progress but also defines the very essence of sustainability and net zero within the ASEAN region and beyond. To understand Regenerative Finance, it is important to first comprehend the problem it is trying to remedy and blockchain’s role in achieving this purpose.

What Is a Regenerative Finance Company

The EU ETS has implemented Carbon Contract for Differences (CCfDs)[cx] where companies reducing CO2 emissions will receive grants especially for replacing fossil fuels with hydrogen. Energy-intensive industries are compensated by climate protection agreements for a period of 15 years to cover production conversion costs to hedging against carbon price volatility and regulatory risk. Japan Blue Economy Association’s (JBE’s) J Blue Credits[cxi] scheme is focussed on the creation of offsets from seaweed sequestration. This leads to blue carbon initiatives, including the establishment of seaweed beds in several regions. Malaysia has the Bursa Carbon Exchange (BCX)[cxiii], a subsidiary of the stock exchange of Malaysia, and the first Shariah-compliant carbon exchange.

RSF makes loans, grants, and investments for companies that commit to resolving serious social and environmental issues. They provide substantial support to the field of Regenerative Finance by investing in social entrepreneurs, impact-driven firms, and regenerative projects. Indigenous peoples and local communities have co-developed Savimbo’s biodiversity credit methodology and this has then been translated for use in global markets. The methodology is intentionally simple and relies on indicator species (i.e. flora and fauna which can only survive in intact ecosystems).

It was there that I found myself in a rabbit hole of crypto-meets-climate and became deeply fascinated by the opportunity to rethink economics in a way that regenerates the planet rather than extracts from it. As a result, forests, oceans, and other natural resources can be valued according to the amount of carbon they capture. For example, the higher the price per ton of carbon, the more attractive it becomes to get into the business of planting new forests (and deriving income from carbon credits) instead of cutting down the trees for timber. Blockchain technology has the potential to substantially elevate the credibility, exchangeability, and transparency of environmental data and action. Its architecture includes an immutable ledger, facilitating an auditable trail of data points and lending an additional layer of credibility.

Communities across the globe could make use of DAOs (decentralised autonomous organisations) for community activism, finance and social projects. Being able to predict the results of trade-offs is key, answering questions such as deciding the best path forward among several competing metrics, such as recycled content, and the carbon footprint of plastic compared with paper and aluminum. The Nature Impact Tokens and Nature and Climate Impact Tokens are blockchain-based tokens representing a relevant project stake, and blockchain is used for authentication of ownership, provenance and legacy. As common themes in ReFi projects, blockchain is used to support provenance and source tracking and to help avoid issues like double-counting and double-selling of nature credits.

Investors can lend capital to farmers or stake collateral on their behalf in the form of a token (Ethix) and there is a compensation system for lenders based on the tokens. EthicHub employs blockchain and smart contracts to make value transfers via the internet in a fast and transparent manner. The goal of ReFi is to create an economy that thrives off mitigating climate change, reversing some of the effects of carbon emissions, and pursuing social change. ReFi projects use raised capital to attempt to provide a positive financial impact on the world.

  • Tax credits for regenerative agriculture, carbon pricing mechanisms, and preferred procurement for environmentally friendly products all contribute to a favourable climate for ReFi.
  • We have two dichotomies to examine humanity’s relationship with the environment’s finite resources—Man vs. Man and Nature vs. Man.
  • There have been accusations of ‘phantom’ tokens that don’t actually affect any change.
  • Additionally, ReFi projects often have a strong community of users and developers who are invested in the success of the project.
  • In essence, regenerative companies actively work on improving the health of the entire ecosystem they operate within.
  • Even though ReFi’s actions and results are not tangible in the short term, most of these investments have a long-term perspective.

Verra approves three out of every four carbon credits globally and publishes methodologies. Verra-consolidated REDD+ methodology will be published soon, awaiting approval from the Integrity Council for the Voluntary Carbon Market (ICVCM)[lxv]. As there are many registries, a meta registry[lxvi] concept has emerged to integrate the function. Covers can be renewable energy construction infrastructure or natural, as blue carbon restoration. To get a forward-looking climate-exposure assessment of insured assets to different hazards and climate scenarios, predictive analytics and third-wave AI need to be part of the insurance underwriting data. Credits issued by regulators from compliance markets can only be applied in one jurisdiction; but in the VCM, a credit produced in one country can be applied against emissions of a company in another.

Regenerative Finance is supporting the efforts to create a sustainable economy, propelling interest, investment, and innovation. Communicating potential risks in Regenerative Finance as an investment scheme is crucial for both investors and project developers. Blockchain is not a universal fix; even if suitable for a project, it can’t address underlying flaws. Furthermore, they deploy the Web3 and sustainability megatrends that fuse together, to create the Regenerative Finance model. That was when economist John Fullerton first introduced the term ‘Regenerative Capitalism’. This leads to minorities and marginalized groups turning to ReFi, and using it as a tool for innovation and growth, often at a faster pace than people from communities with more privileged access to resources.

Only transactions that match predefined criteria are approved — for example, which funds can be exchanged against each other. DEXes are accessible to anyone with an internet connection and a crypto wallet; there’s no need to go through lengthy verification processes to open an account. Blockchains directly connect users and developers around the world with each other, allowing them to exchange goods, services, information, and digital assets. With the help of blockchain technology, we can lay the foundation for systems that are open, fair, and democratized.

What Is a Regenerative Finance Company

Many writers analogise the tragedy of the commons to The Lorax for this exact reason. Despite knowing the purpose of ReFi, this financial model is not an easy idea to understand. However, over 90% of us have heard a story about the tragedy of the commons and a world in need of a regenerative model of finance. We design all of our programs to be online, flexible and taken from anywhere in the world.

Sustainable businesses focus on minimising negative impacts on the environment and society while maintaining current levels of resource use. They embrace sustainable practices like reducing emissions, using renewable energy, recycling, ethical sourcing, and fair labour practices. Certain projects are issuing blue carbon credits which help marine protected areas track the health of their ecosystems and generate revenue to fund their conservation projects. So the voluntary carbon market (VCM) will serve as the foundation for a regenerative economy.

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