Asset Tokenization Can Reform Sustainability Investing, but Not Without Regulation

By Prakash Somosundram, co-founder and CEO of Enjinstarter and AYA Foundation

With COP28 in Dubai over and financial pledges well short of the necessary targets, trillions are still needed annually between now and 2030 if we have any hope of mitigating and adapting to climate change. To bridge this gap, private finance has emerged as a critical funding source. Case in point, a Standard Chartered report on sustainable banking in 2022 suggested that retail investors alone have some $10 trillion in investable wealth ready to be directed at sustainability investments.

The challenge so far has been providing such investment opportunities beyond basic environmental, social and governance (ESG) exchange-traded funds (ETFs)—which can be difficult to link to actual impact on the ground. This is a primary reason why asset tokenization is poised to have a big year in 2024. It can rapidly expand offerings for retail investors in ways that traditional finance can’t.

The catch is that tokenized sustainability investments needed to be issued by licensed companies in jurisdictions with sound regulatory frameworks. Any other approach will only limit the potential of tokenization to help bring trillions of dollars in private finance to the fight against climate change.

Barriers to Sustainability Investing

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