The revolutionary potential of Web3 technology emerges as a possible option to solve one of the biggest difficulties in the global battle against climate change – the climate finance gap – as the globe struggles with an increased frequency of severe weather occurrences brought on by rising temperatures.
The goal of $100 billion in yearly climate finance for poor countries by 2020 was established by delegates to the 15th United Nations Climate Change Conference (COP 15) back in 2009. But now, some fifteen years later, the actual money, which ranges from $21 billion to $83.3 billion, is just a tiny portion of the anticipated $1 trillion annual need.
The majority of the present funding comes from rich country governments and organizations, and in some circumstances, spending for the climate may be used as a cover for resource exploitation. With this strategy, donor nations control the conditions of finance, giving developing nations little alternatives.
Enter Web3 technology, which might close the financing gap and give citizen activists more leverage to wrest control of climate money away from institutions and governments. Web3 offers a singular chance to draw billions of dollars in retail financing into climate projects, encourage fresh ideas, and provide underdeveloped countries with alternative funding options.
The fact that climate financing has historically only been available to governments and institutional investors, excluding ordinary investors who have a sizable untapped “investable retail wealth” of $8.2 trillion, presents a major problem. Notably, studies show that the majority of retail investors are keen to support the battle against climate change and are prepared to accept reduced profits in exchange for considerable environmental effect.
New financial products designed for ordinary investors in regulated countries may be made easier with the help of Web3. These developments include the fractionalization of important financial products like green bonds, the tokenization of current climate assets, and the creation of specialized decentralized autonomous organizations (DAOs). Furthermore, Web3 offers accessible and affordable value transfer through fiat-backed stablecoins.
Licensed Web3 launchpads and launch pools may help with transparent crowdfunding campaigns to efficiently enroll retail investors. Web3 platforms, as opposed to conventional ones like Kickstarter, include blockchain-based components that guarantee transparency in project appraisal, escrow services, carbon credit issuing, and stablecoin payments to investors.
There is a sizable pool of wealth available to invest in climate assets and support new climate initiatives, with tens of millions of ordinary investors currently participating in Web3. A new wave of grassroots climate initiatives will have the chance to blossom as these Web3-powered investments become more widely used.
The rising need for carbon and renewable energy credits, which is anticipated to rise dramatically by 2050, is one urgent necessity. However, non-technical climate programs, including reforestation and preservation initiatives, often struggle to get enough upfront funding to start and grow. Launchpads, special-purpose DAOs, and quadratic financing methods have all been effective in generating billions for Web3 initiatives, which is where Web3’s fundraising powers come into play.
In addition to opening doors for regular investors, Web3 can provide institutional investors with returns that meet their expectations by using the same fundraising skills to support climate change and other regenerative efforts. There would unquestionably be more financial motivation to start climate initiatives as a result of this.
Furthermore, by offering alternate choices for supporting the fight against climate change, Web3 finance solutions may provide at-risk nations more influence. Significant climatic assets including forests, mangroves, coral reefs, and sunshine are present in developing countries and contain unrealized potential. Governments may support initiatives that produce on-chain carbon and renewable energy credits by using Web3 fundraising platforms. These credits can then be sold to organizations aiming for net-zero emissions, resulting in a mutually beneficial and sustainable form of wealth transfer.
The transformational potential of Web3 is emerging as a formidable instrument to address the financing gap for climate initiatives and advance global sustainability efforts as severe weather occurrences continue to increase.
