This white paper aims to present a revolutionized approach for financial institutions to certify the way how they comply with ESG standards. Briefly, this document details the approach developed by BNI in three different parts. The first one explains how an estimation of a level of compliance to a given set of standards is used to assess a company’s ESG objectives. A second part describes how a blockchain infrastructure is set up to record smart contracts implied transactions containing a defined picture of the company’s ESG standards. Finally, a third part will show how to insert and protect the newly certified blockchain infrastructure into a dedicated wallet.
- Estimation of a compliance level to a given set of ESG standards
In the context of an economic environment under the strong influence of new climate change driven regulatory policies, companies are more and more impacted in their day-to-day reporting duties. In the field of financial services particularly, constraints linked to these duties are already burdensome due to a high number of reports required by each local regulator. To face any surge of additional reports linked to the new climate regulatory policies, banks and financial institutions need to build technical capabilities aimed at producing new types of reporting. Moreover, they will also need to publicly certify they comply with all the new climate regulations. Today, Blockchain Network Infrastructure can help financial institutions to comply with new regulations and offer them the real capabilities to certify they comply with the instructions imposed by these regulations.
Regarding investments and banking activities, there are now a range of entities and organisations able to certify that a financial institution respects the green credentials of a fund in which it invests or a client to whom it lends money. There is also a range of new labels like RSI, Greenfin, Finansol, Fair, Impact Financing, Net Zero Banking Alliance,… that a financial institution has to comply with to attract new customers, let alone to develop new commercial offers for its existing clients. If a company can today cope with the challenge of building some new reporting by considering all these labels and their subsequent requirements, it will be able to position itself as a leader in its sector. Moreover, if this company can demonstrate technically and independently that it complies with these set of rules, it will reinforce its leading position. Today BNI can propose a roadmap by developing a complete package and allow a company to certify it conforms with current climate reporting duties and make it public through the setup of a valid blockchain in a decentralised environment. - Set up of a blockchain infrastructure to register smart contracts implied transactions
Once the level of compliance has been estimated, the big challenge surrounding the project is to record the estimated level onto a blockchain to make it publicly available and shared along a decentralised way. Another aspect of the challenge implies the choice of the blockchain type used to record a complete set of information onto the framework. Obviously, one logical choice would be to develop such an infrastructure on bitcoin-type blockchain. However, an Ethereum-type blockchain must be considered as it is the best solution to use smart contracts considering each condition attached to the definition of the compliance level. In that case, indeed, it would be desirable to use a secondary-cryptocurrency style blockchain to use the Ethereum advantage linked to smart contracts. The selection of another Ethereum-category crypto-currency would bring the advantage of allowing a high volume of recordings necessary to define the corresponding level of compliance. It will be interesting to assess if a more secondary cryptocurrency is also valuable to cope with the challenge of developing a blockchain infrastructure. For example, last emerging crypto currencies like Solana or Avalanche could be suitable for supporting the development of a blockchain infrastructure in the context of ESG certification.
- A dedicated wallet to insert the whole blockchain infrastructure.
Once the type of blockchain has been determined, it will be necessary to attach a wallet to the fully developed infrastructure. At first, the aim of the wallet is to contain the fully developed framework built around the assessment of a compliance level for the institution. Then, the second goal of attaching a wallet to a newly built ESG Certification framework will be for the entity to safeguard the blockchain code linked to the newly assessed compliance level in the context of the certification. The choice of the wallet application is quite important in this case for 2 reasons:
– 1. The wallet must contain the whole picture of the compliance level of the entity so that it could be encrypted and securely recorded.
– 2. The wallet must be enough flexible to allow a public sharing of the blockchain code used for the ESG certification and welcome an updated version of the blockchain code in case a new assessment is realised the following year.
