Japan’s first wholesale digitally tracked green bond

Japan Exchange Group (JPX), Hitachi, Nomura Securities, and BOOSTRY today announced their cooperation in the issuance of a publicly-offered wholesale “Digitally Tracked Green Bond”, the first in Japan, using a corporate bond-type security tokens scheme (hereinafter, “digital bond”) that utilizes a blockchain provided by BOOSTRY.

The digital bond will be in the form of a publicly offered Security Token Offering (STO) issued by JPX. An STO is a scheme to raise funds using “security tokens”, which are tokens issued by electronic means such as blockchain that represent stocks, bonds, or other securities, in place of conventional securities. Amendments to the Financial Instruments and Exchange Act and the corresponding amendments to ministerial ordinances that came into effect on May 1, 2020, defined such digital bonds as “electronically recorded transferable rights to be indicated on securities, etc.,” enabling their use under laws and regulations. This digital bond will be the first issued for wholesale trading in Japan.

The digital bond will be issued and administered through a consortium-type blockchain network, “ibet for Fin”, led by BOOSTRY, instead of the normal book-entry transfer by the Japan Securities Depository Center. Operational processes will be completed electronically, from issuance to administration during the bond’s term and redemption. Using ibet for Fin will enable the management of a bond registry as well as allowing issuers to keep track of bond holders on an ongoing basis, which is difficult with conventional bonds.

To raise the transparency of the usage of funds raised through the digital bond, JPX and Hitachi will adopt a system that automatically measures the volume of electricity generated at the generation plants to which funds were allocated, and converts this into a volume of CO2 emissions reduced. Utilizing these digital technologies, the partners will establish an external monitoring system accessible to investors at any time, aiming for transparency on a higher level than just annual reporting.

In addition, sharing data with BOOSTRY and recording the volumes of generated electricity and reduced CO2 emissions on ibet for Fin will enhance data transparency and timeliness. These initiatives could in future be considered for application in sustainability-linked bonds, which feature automatic changes in bond terms and conditions, such as the interest rate, depending on the achievement of sustainability targets. The launch of the system for investors to monitor the generated electricity volume (the digital tracking function) is expected to be implemented promptly after operation at each power generation plant.

Source: Nomura Securities press release

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