Abstract
This paper explores options for mobilizing domestic savings through fintech solutions to scale up sustainable investment. Most developing and emerging economies face an urgent need to scale up sustainable finance for low-carbon and climate-resilient infrastructure investment, yet underdeveloped capital markets tend to inhibit domestic resource mobilization for infrastructure investment. At the same time, domestic savers in many developing and emerging economies face a scarcity of “safe” assets in the local currency, resulting in the exporting of capital to financial centers in advanced economies. The paper discusses how fintech can help to complement conventional capital markets and mobilize financial resources for sustainable infrastructure investments. It puts forward a proposal for blockchain-based project bonds to raise finance through a digital crowdfunding platform, which is also able to record transparently and certify the use of proceeds, sustainability impact, and revenue streams of projects by combining timestamp, public and private key mechanisms, and smart contract technologies. This approach would not only provide investors of different sizes with the opportunity to purchase local-currency assets and issuers such as municipalities to raise funds for sustainable infrastructure investment. It would also facilitate project management once the project is operational, for example through metering and billing, and create full transparency over the life cycle of the investment, reducing problems concerning the misuse of funds.
Highlights
Countries all over the world are facing an urgent need to scale up their investments in sustainable infrastructure, including renewable energy infrastructure, to foster a low-carbon transition and to align their economies with the Paris Agreement and the 2030 Agenda
The international discourse on financing for development—under the catchy slogan “from billions to trillions”—has highlighted the need to unlock domestic resources, much of the discussion has centered on incentivizing private capital from advanced countries to finance investment in developing and emerging economies
While foreign aid and foreign private capital can play an important role in financing development, it is important to acknowledge the limits to the role of foreign investment in financing infrastructure and the financial vulnerability risks associated with foreign lending
Summary
Countries all over the world are facing an urgent need to scale up their investments in sustainable infrastructure, including renewable energy infrastructure, to foster a low-carbon transition and to align their economies with the Paris Agreement and the 2030 Agenda. The paper explores how fintech can help to complement conventional capital markets and mobilize financial resources for sustainable infrastructure investments It proposes blockchain-based project bonds to raise finance through a digital crowdfunding platform, which is able to record transparently and certify the use of proceeds, sustainability impact, and revenue streams of projects by combining timestamp, public and private key mechanisms, and smart contract technologies. This approach would provide investors of different sizes with the opportunity to purchase local-currency assets and issuers such as municipalities to raise funds for sustainable infrastructure investment.
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