Adopting Digital Green Bonds
Benefits, Barriers, and Solutions
P.J. Haagsma (TU Delft - Architecture and the Built Environment)
Daniel M. Hall – Mentor (TU Delft - Design & Construction Management)
M. Peeters – Mentor (TU Delft - Real Estate Management)
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Abstract
This research addresses the barriers in adopting Digital Green Bonds (DGBs), which are financial instruments that integrate Distributed Ledger Technology (DLT) into traditional green bond processes. DGBs aim to enhance transparency, liquidity, and efficiency, which can potentially reduce transaction costs and improve sustainability outcomes. Despite these theoretical benefits, practical adoption remains limited, leading to an in-depth exploration through a stakeholder-based case study focusing on the landmark ABN AMRO-Vesteda DGB issuance in the Netherlands. Identified barriers in traditional green bond processes include regulatory fragmentation, market inaccessibility, high transaction costs, gaps in technical expertise, and risks of greenwashing. DLT and DGBs show promise in addressing these issues by facilitating real-time compliance monitoring, fractionalization, 24/7 trading, automation, faster settlement processes, and improved transparency and reporting. However, significant obstacles persist, particularly outdated regulations, liquidity constraints, high initial investments, infrastructural and technical fragmentation, and limited market familiarity with DLT applications. Through empirical findings from semi-structured interviews with key stakeholders—including financial institutions, regulatory bodies, and technology providers—this research outlines actionable strategies to overcome these barriers. Recommended measures include developing clear and adaptive regulations, investing in interoperable and standardized infrastructures, conducting pilot projects to demonstrate feasibility, and raising market awareness through education and successful case studies. Ultimately, this research contributes to the growing body of knowledge on sustainable finance innovation by identifying practical strategies to accelerate DGB adoption and supporting the broader objective of closing the green financing gap.