Likvidi, the Finnish word for liquidity, is creating a new market that connects green finance with blockchain, a sector that, surprisingly, has received little publicity compared to other projects and earlier first generation ICOs.
In this Q&A he explains the huge opportunities for this meeting of money and technology and is convincing in his argument that Likvidi is about to transform the sector.
Q: Welcome to the Mob76 Outlook audience, Ransu, tell us what you’re trying to do for the planet
Ransu: As we all know, climate change is a huge challenge for humankind. But what you maybe do not know is that the financial markets will play a major role in fixing this.
Professional investors around the world will do two switches: 1. divest from the nasty stuff such as fossil fuels, unsustainable agriculture and internal compulsion engine based transportation 2. Have new investment thesis and/or mandates where sustainability is one of the key principles on investment decisions.
In the sector of green finance, one of the main questions will be whether these investments really are green or are they just so called ‘greenwashing;?
Here comes a real, future-proof user case for blockchain. We can use blockchain to store and track sustainability and financial data and this way create immutable track records for green instruments such as carbon credits and green bonds, which are the two fastest-growing sectors in green finance.
This transparency is a crucial part of increasing investors’ trust in green investments and actually saving the world instead of just talking about it.
Tell us more about the history of green finance
Ransu: Green finance has been around for about 15 years, but the sector really got going about six years ago with the Paris Agreement. As almost 200 countries agreed on drastic measures towards sustainability, the market for green bonds and carbon credits got its first shake-up.
Fake carbon credit and wishy-washy green bonds had to be replaced with something more solid. While the market indeed improved with more serious players coming in, better audits and reports, the past six years have still been a coming-of-age period for green finance. Now the market is ready for reen Finance 2.0.
Green Finance 2.0 is all about going mainstream as a combination of increased investor demand (both retail and institutional), fintech/blockchain, improved regulatory frameworks and the market learning from the past mistakes.
So what do you actually do?
Ransu: We do two things:
- We work with farmers, landowner and managers around the world to turn their carbon capturing efforts into tokenized high-quality carbon credits that have all the crucial data attached to them offering the best possible transparency, auditing and tradability. These life-improving Carbon Credits (LiCC) will be soon available for individual and for companies who are looking to offset their carbon footprint.
- We also help utility size solar parks and wind farms to raise capital so that there will be more renewable energy available for everyone. The energy market will be more decentralized as cities, communities and even houses will have their own renewable energy sources and parties will trade electricity very efficiently 24/7. The green bonds that we issue will have all the sustainability data on blockchain and as they are digital assets, they are ready for DeFi as the market evolves.
So are you a tech company?
Ransu: Yes, we are a green finance fintech company. Over the past year or so we have built an investment platform on Ethereum that is a unique combination of traditional finance market features and digital assets/securities management.
So, let’s talk more about carbon credits. What are they and what is innovative with your approach?
Ransu: A carbon credit represents the right to emit a measured amount of greenhouse gases (GHG). Carbon credits work as a certification that business or individual owning them is counterbalancing the emission of greenhouse gases (GHG) aka carbon footprint.
What we are offering is a tokenized version of an actual carbon-reducing credit. This means that we have worked with our network of partners such asforest owners and farmers who capture an increasing amount of carbon and turn those actually life-importing carbon credits to tokens.
Why tokenization is important:
Ransu: Carbon credit market has been somewhat shady in the past. It’s been hard to figure out if the credits are real and also there has been double spending issues.
With the help of blockchain we can increase transparency and make sure the retired (offsetted) carbon credits can’t be resold anymore but they are “burned” as the cryptomarket likes to call it.
Also, as the carbon credit market is growing it’s important that they are easily tradable that is what tokenization will do that.
How about the energy markets?
Ransu: One of the most important things that we can do for climate change is to move away from fossils. The future of the energy market is pretty much the same as the future of the financial markets: decentralisation
As we move to renewable energy,he energy market will be more based on smart grids and therefore be more accessible for the small players. Every electric car can play a part on smart grids.
For us, the first product is the Green Bond Launchpad. This all-in-one platform enables renewable energy projects and companies to raise money via green bonds faster and more cost efficiently. We can be up to 90% cheaper than the old way of issuing these debt instruments. We work with top notch third-party verifiers and administrators to make sure the green aspects are real.
This year the global green bond market is up 39% and the estimate is that the total issuance will be about $375 billion US (Moody’s projection).
What about DeFi?
Ransu: DeFi is very exciting for us as we are creating carbon credits and green bonds that are tokenized and transparent and therefore ready for the DeFi market.
What needs to happen next is that the DeFi market expands to the real-world assets. MakerDAO has now had couple proposals on this as a USA based solar park funding and now the Sociate General’s $20M MakerDAO loan with bond tokens as collateral.
My guess is that we are about 1 year away from working with leading DeFi platforms to finance renewable projects that can pay 5-10% interest for green sector investors and have assets and power purchase agreements as collateral.
Thank you, for sharing your vision with our audience. We look forward to seeing how your progress
Ransu: It was my pleasure, happy to add value