Tokenization of Infrastructure: A blockchain-based solution to financing sustainable infrastructure

Key Messages

• The main value proposition of tokenizing sustainable infrastructure lies in its potential to decrease the cost of financing.
• Tokenization can also deliver a wide range of financial and operational benefits.

The paper examines how the tokenization of sustainable infrastructure can address some of the fundamental challenges of the asset class. Tokenization is the digitalization of an asset, where each token represents ownership of a part of the underlying infrastructure project. Blockchain enables the storage and transfer of these cryptographic tokens in a frictionless manner.

Tokenization can deliver a wide range of benefits—such as lower transactions costs, better transparency, enhanced liquidity, access to alternative sources of capital, decentralization and increased efficiency—while addressing the issue of scale.

Improving efficiency throughout the financing and operation phases is particularly important for sustainable infrastructure projects. They tend to require a bigger upfront investment (capital expenditure) and have higher perceived technological risks compared to more traditional infrastructure. As a result, there is often a need to explore innovative financing solutions to make sustainable infrastructure financially viable and attractive to investors. Tokenization can play an important role in decreasing the cost of financing, making the whole asset class more bankable.

Tokenizing real assets is still in its early stages; however, as the case studies in this paper demonstrate, there are already several initiatives gaining considerable traction. There are of course challenges, both regulatory and related to technology, that need to be overcome in order to have wider adoption.