Bringing the Balance Sheet of the Planet to the Public Ledger
Nilmini Rubin
Jan 15, 2023
by Nilmini Rubin
Chief of Staff & Head of Global Policy

The sound of COP27 President Sameh Shoukry’s gavel, as it struck out across a sleep-deprived conference hall in the early hours of November 20 2022, signalled a hard-won victory to address the climate crisis. Following years of campaigning, the United Nations Convention on Climate Change (UNFCCC) approved the motion to create a Loss and Damage (L&D) fund for vulnerable countries.

Recent improvements in the science of attribution allow us to accurately connect climate change to impacts, such as last year’s disastrous flooding in Pakistan or intense heat waves across Europe. This data clarity contributed to the landmark decision on L&D. For parallel progress from the private sector, business leaders need more robust supply chain and ecosystem data to evaluate their own climate risk with precision and decide how to reach their Net-Zero goals.

Web3 applications, built on digital ledger technology (DLT), are making high-quality climate data easier to source and verify than ever before. DLT, often referred to as blockchain, makes it possible to transparently record climate data, bringing the balance sheet of the planet to the public ledger. In broader terms, Web3 is initiating the transformation of financial and governance operations by bringing them into the internet era through mechanisms that run more like open-source software than the top-down institutional processes that have defined the modern era. One of the key ways it does this is through the trackable and traceable creation of ‘tokens’ - think digital certificates - that represent real-world assets and liabilities on-chain.

What It Means to Bring the Balance Sheet of the Planet to the Public Ledger

With global average temperatures rising and ecosystem stress intensifying, climate change and environmental issues make up half of the top ten global risks flagged in the 2022 World Economic Forum’s Global Risks Report. Yet, a lack of attributable data has left us with systematic blind spots in how to account for, and respond to, growing ecological risk. Furthermore, the opacity surrounding carbon markets and green debt has undermined the confidence in climate finance mechanisms to deliver tangible sustainable outcomes. Compounding these problems is a lack of standardization across the tools designed to assess climate and environmental risk.

Putting the balance sheet of the planet on the public ledger establishes a single source of truth that facilitates cross-sectoral cooperation and decision-making processes that are cost-effective and rooted in real-world impact. Leveraging DLT allows businesses to go beyond traditional financial reporting to include globally contextualized sustainability metrics alongside standard accounting frameworks. Data - how we source it, who owns it and how it is used, is undergoing a seismic shift thanks to new levels of transparency and participation unlocked by DLT and Web3 protocols. By increasing the scope, as well as the granularity, of data – and putting it in the hands of a broader range of participants - we can develop economies that integrate, reflect, and respond to the health of our ultimate bottom line: the planet.

How Organizations Are Building Out a Climate-Resilient Future in Web3

Built on Hedera’s DLT, ServiceNow has launched a cloud-based ‘Now Platform’ that connects assets (sinks) and liabilities (sources) within one tokenization framework. This framework provides the basis for a trust chain that maps out the actors, roles and rules that determine the conditions in which an asset can be issued, retired, or offset. It is this foundation that allows ServiceNow to streamline climate and ESG accounting through easily comparable, automated, tamper-proof reporting.

Digital data networks such as Internet of Things (IoT) tooling, satellite imagery and Lidar capabilities inform whether policy conditions are met in the creation of a tokenized asset. Resistant to human error and the capacity limitations of manual recording processes, multi-component digital Monitoring, Reporting and Verification (dMRV) generates visibility into ecological assets and liabilities that is precise down to the metric ton of CO2e.

Data is then made verifiable through AI processes and human observers, automated and updated in real-time through timestamped, immutable on-chain records. Furthermore, the use of Decentralized Identities (DIDs) enables any actor, from anywhere in the world to participate in the validation or verification processes that underpin tokenization - provided they have proven they hold required accreditations. In this way, DLT reduces the cost of trust and breaks the reliance upon third-party institutions in asset issuance; an essential ingredient in scaling sustainable markets on the path to a rapid climate-resilient transition.

The Now Platform matches supply and demand dynamics in one place. ‘Brown tokens’ represent ecological liabilities (e.g. carbon emissions) on the ‘demand’ side of the equation while ‘green tokens’ represent carbon credits or International Renewable Energy Certificates (IRECs) on the ‘supply’ side. In an end-to-end digitized trust chain, the granular data captured by tokenization protocols are fully searchable. Buyers can demand high-quality products that fit their unique requirements in ways that have not previously been possible. Suppliers of ecological instruments are incentivized to improve the quality of their products across a range of discoverable characteristics.

Seizing the Moment: Making the Transition to Low Carbon Economies Real

We all have a role in bringing the balance sheet of the planet to the public ledger. From ensuring supply-chain accountability to the discoverability of tokenized assets and liquidity in markets, DLT is inspiring an open-source, publicly auditable reimagining of ESG from the ground up.

Going forward, we face an urgent choice: embrace decentralized collaboration through Web3-powered global blockchain networks, or flail in a sea of outdated, unaudited and unsearchable climate data. As the recent agreement on L&D signals, the informational climate risk feedback loops must be addressed sooner or later. Let’s bring the balance sheet of the planet to the public ledger and choose a prosperous, climate-resilient future, now.