Decentralised Sustainable Finance

The whole world is talking about two things: climate change and blockchain. However, few have been talking about these together, and not to mention that they can actually be combined. This is what we at Likvidi are striving to achieve.

Sustainable finance

Let’s start with the basics. Global warming refers to the rise in temperatures due to increasing concentrations of greenhouse gases in the atmosphere. In other words, the long term warming of our planet. Climate change refers to a wider range of changes facing the Earth. It includes global warming but also rising sea levels, shrinking glaciers and ever changing environments. The common factor for all of these changes is the cause: they are all consequences of human activity which involve the burning of fossil fuels.

Climate bonds and Green bonds refer to fixed-income financial instruments that aim to have a positive impact on climate. A positive impact results from the way in which the capital is invested. Climate bonds focus on mitigating climate change whereas Green bonds can refer to some other type of environmental or social impact. However, it is fair to say that a large majority of Green bonds are climate focused.

Decentralised finance

Blockchain refers to a list, ledger of records or blocks that are interlinked using cryptography, which is the technology used to secure communication or content. Every block includes a cryptographic hash of the previous block, a timestamp and transaction data. This means that every new block also includes the data from the previous blocks. In order to retroactively change data in a previous block, it requires changing all the consecutive blocks as well. Given this open and distributed ledger model (also known as DLT which means synchronised digital data that is spread geographically to multiple sites, countries and institutions) blockchain is a great technology to record transactions between parties in a verifiable, immutable, open and secure way.

A smart contract is not a conventional legal document, although it might sound like it. A smart contract is a transaction code made between a buyer and a seller. Implementation of a smart contact takes place by sending a transaction from a wallet for the block that is part of the blockchain. It includes the code for the smart contract as well as the recipient’s address. The existence of smart contracts in a blockchain network makes them trackable and irreversible.

Decentralised finance, or DeFi, refers to a blockchain based financial system. It is independent from central financial institutions, brokers or intermediaries, and yet it offers all of the same traditional financial instruments available to you from your own bank. DeFi uses smart contracts on blockchains to offer financial instruments for investors. These smart contracts allow transactions to be made directly between participants without third parties taking a share for acting as an intermediary. DeFi offers the same options and possibilities with higher margins, better transparency and improved risk management.

How does all this link to us?

Likvidi is a decentralised sustainable finance platform and ecosystem. Yes, it does have a bit of an oxymoron sound to it, but we can assure you that it is anything but that. We are creating a platform that utilises blockchain technology to speed up capital flows to projects and processes that have a clear climate impact. Likvidi offers a full-stack technology platform ecosystem for issuing tokenized securities and raising decentralised funds which helps us to speed up the flow of capital to investors. While traditional financial service providers utilise old fashioned processes and intermediate structures, we eliminate inefficiencies and administrative costs, utilise the benefits of DeFi and scale up impact investing.

Likvidi is a platform that brings together issuers and investors while at the same time resolves the administrative burden behind the whole process. To put it simply: Likvidi is the ‘Amazon’ for Green bond issuers and impact investors. It is THE marketplace for saving our planet. We need to stop climate change as soon as possible but it requires resources, a lot of resources, and that’s what we are here for.

Platform of experts

Likvidi is a platform that not only engages issuers and investors but also brings together experts from different fields to verify and review the business cases behind the bonds. It’s the gig economy for professionals all around the world. Not only do we review the legal, compliance and regulatory aspects of the planned issuance but also the sustainability matters linked to each bond. Although we have a very experienced group of professionals here at Likvidi, we still don’t know everything, and therefore a network of professionals is key to ensuring that all bonds are issued, managed and that funds are used in the way that was intended. It is also a way to limit greenwashing and counterparty risks. Additionally, the platform offers issuers the opportunity to apply for both the Climate Bond Verification and the Green Bond Certification.

So, how does it all work then? Below is a short process description explaining our process and how we aim to accelerate capital flows to mitigate climate impact with decentralised finance.

So, this is what we are doing at Likvidi. Is it big? Yes. Is it challenging? Enormously. Is it rewarding? Big time. And at the same time it brings together like minded people from different parts of the world who share the same ambition to save the planet. Welcome on board!

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Elina Seppala

Energy & sustainability professional with background in politics, consultancy, heavy industry and investing.