Evercity is a platform for impact measurement and investment that helped to enable the world’s first carbon credit transaction on blockchain in 2017. With such a resumé, Silicon Luxembourg decided to have a conversation with co-founders Alexey Shadrin and Liza Romanova. Here is what they had to say about sustainability, the benefits of blockchain and their future.
In layman’s terms, how would you explain what Evercity works on?
Evercity accelerates global finance flows into projects and innovations needed to attain UN Sustainable Development Goals. We make sustainable finance easier and more accessible for institutional investors and SMEs while increasing transparency of the impact data.
You helped/worked on the first carbon credit transaction on blockchain in 2017. Can you tell us more about that?
My co-founder Alexey and I have been running a Carbon Fund since 2011. After visiting the historical Paris Climate Conference in 2015 we started to look at investments into breakthrough innovations for climate change mitigation. One of the teams that we supported was DAO IPCI (Decentralised Autonomous Organisation International Platfrom for Climate Initiatives).
Lead by the Austrian school economist Dr. Anton Galenovich the project team developed a visionary concept of an open-source blockchain protocol for the fair assessment and valuation of transactional costs and natural capital of the planet.
The first stage of this ambitious approach was creating a global universal marketplace for carbon credits. The main benefit of blockchain waas to enable radical transparency of climate mitigation outcoems and their peer-to-peer exchange with no need of intermediaries.
The world’s first carbon credit transaction on the blockchain was executed on March 14, 2017 at 8:00 am (UTC+1:00). 100 carbon units representing 100 tons of CO2 were transferred from a French Trader AERA Group to Alexey’s and Liza’s Carbon Fund. Carbon units were certified agains the Voluntary Carbon Standard and came from a solar power plant project “La Ferme – Bambous” on Mauritius island. The technical support of this transaction and DAO IPCI project was made by Aira Lab (Robonomics).
Carbon emission trading has been a hot topic for quite some time, especially since Paris. In which markets have you seen the biggest opportunities and interest for it?
Carbon markets are steadily growing all around the globe and this growth has significantly accelerated in recent years. In December 2021, the EU’s benchmark carbon price hit the maximum of €90.75, having stood at around 20 euros before the coronavirus.
Big opportunities for carbon emission trading lie in two factors: market expansion and adoption of new technologies. Carbon intensive economies, such as USA, China, Brazil, India, Russia have significant market growth potential. Carbon markets and trading can also play a great role for raising climate finance in developing countries in Asia-Pacifc, Africa and South America regions.
However, there are some challenges preventing market growth that can be solved with digital technologies. These challenges are high intermediation costs, impact transparency and accountability. Some of the companies and nations are already adopting innovations to solve these problems. To unlock the potential of digital tech for climate finance UNFCCC have established the Climate Chain Colaition and UN Climate Change Global Innovation Hub. We actively participate and contribute to both initiatives from their foundation.
“Our goal is to receive the Virtual Asset Service Provider license in Luxembourg to be able to serve more SMEs and arrange issuances of digital sustainable debt starting 2023.”
Alexey Shadrin
Why should someone decide to undergo the process of issuing green and ESG linked debt on blockchain if there are issuers/banks out there with strong reputation and long tradition? What are the benefits of using blockchain and Evercity solutions?
Huge institutional players, such as development and commercial banks are actively exploring the benefits of blockchain technology issuance of conventional and green bonds. Many banks including the European Investment Bank have already issued blockchain-based bonds and claimed efficiency and transparency to all stakeholders among their main benfits.
The next competition area will be digitalisation of the sustainable debt market. Some of the banks that are experimenting in this field are the World Bank, Bank of International Settelements, BBVA, HSBC and others. However, none of them have issued and end-to-end green bond on the blockchain so far. We are now searching for such an innovative leader to make this issaunce happen in 2022 using Evercity platform.
Other benefits of blockchain technology for sustainable debt include:
- The full lifecycle of a bond can be managed within a single automated workflow shared among all bond issue stakeholders. This saves time, reduces issuance costs and manual errors.
- Key actions of bond issue participants are signed with a unique signature. They are recorded on a public immutable blockchain and can be easily traced throughout the bond lifecycle.
- Interest rate calculation is executed automatically in blockchain according to pre- agreed bond conditions. This creates a golden source of truth for everyone, excluding human errors and bringing trust.
- Connecting the interest rate to real economy impact data enables creation of new sustainability-linked instruments. They can better stimulate Issuers to deliver on SDG commitments
How does Evercity compare to “traditional” debt issuers?
Evercity uses Web 3.0 and other digital technologies to make the whole bond lifecycle more automated, efficient and transparent. The fees for creating a green framework, issuance, monitoring and reporting on our platform could be up to 10x lower than some of the consultants and underwriters offer.
We make the whole process intuitive and easy to understand without prior market knowledge. Among other unique features we are allowing automated recalculation of the interest rate based on the physical impact measured by sensors and satellites.
In collecting physical sustainability data one of the methods, you are using are satellites/drones – can you explain us how this works?
Our platform helps identify the exact geographical boundaries of an asset to measure ESG risks and performance with IoT, satellites and drones. This also helps to create automated reports in line with the sustainable finance framework, global standards, and taxonomies. While doing that we adhere to national regulations in each country.
To identify risks, we use openly available data from various sources. We are also developing our own risk models and integrate third party solutions. For example, we have integrated an AI modelling tool for agricultural data.
Our main goal here is to integrate as much data sources as possible. Then we refine it in accordance with sustainable finance standards and visualize on a beautiful user-friendly interface. By using it investors can have a better understanding on the ESG risks and impact of their investment and invest wisely.
What is in store in the future for Evercity?
We are preparing a big project with a contract with the ASEAN Secretariat. We will be making a pilot issuance of a green bond on the blockchain to finance a sustainable project in one of the Southeast Asian countries. The issuance will be technologically powered by Evercity Platform using the open-source Sustainable Finance Protocol built on the Polkadot blockchain infrastructure. This blockchain is low-carbon and interoperable.
In general, this year we plan to continue our interaction with banks in EU and other countries, scale our sales and international outreach even further and proceed with the development. Our goal is to receive the Virtual Asset Service Provider license in Luxembourg to be able to serve more SMEs and arrange issuances of digital sustainable debt starting 2023.
The collaboration with the UNFCCC will be continued via Climate chain coalition and Global Innovation Hub. Thanks to their methodological and outreach support we have made significant progress towards our mission – accelerate global sustainable finance flows.
