The climate change and loss of biodiversity risks are growing bigger...

And we have only this one Earth! Lumoin

Financial infrastructure that scales from human to Earth

Renewable
energy

Renewable energy and especially micro-grid like solutions are an important subset of investing that can scaled up substantially with modern financial engineering.

Nature-based
solutions

Nature-based solutions synergize with grey infrastructure, forming "hybrid" solutions. NBS can provide a cost-effective and flexible approach for disaster risk and water resource management, reduced cooling costs and improve bio-diversity while also delivering other natural amenities to population. They can provide about one-third of the climate solution and restore biodiversity, boost livelihoods and health, and create resilience to climate change.

Transportation
projects

Transport systems are the backbone of economic activity while also responsible for ca. 22 percent of energy-related greenhouse gas (GHG) emissions worldwide and is a significant air pollution source in urban areas. This is an important sub-set of financing problems.

Data
framework

All financial infrastructure needs to build on data infrastructure that can interlink public and private data and preserve its integrity without central authority. The framework needs to support adversarial interoperability, creating products or services that can plug into the existing ones without permission from the existing providers for the benefit of the people and businesses.

Impact
evaluation & ESG reporting

Fact-based knowledge and training are essential to make the unseen causes and effects seen, scale cooperative learning and coordinate global action. For that people and institutions producing, gathering, curating and eminating data and information need to be compensated. This same data can unlock businesses to transition to circular economy and doughnut economics by means of reporting environment, social and governance (ESG) automation to financial purposes and cooperation methods.

Project
tokenization

The current pace and quantity of financing climate and biodiversity is not enough. Project data can and should be tokenized with modern technology to a modern data framework to enable efficient data collection, monitoring, reporting and steering services. This can support mitigation and adaptation-related activities, especially in the energy, transport and agriculture industries, and unlock financial resources.

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The climate change and biodiversity loss are accelerating.

Everyone is affected now and in the future.

We need to understand the problem and build an inclusive path to transform our economies and ways of living according to reality.

Now.

Pace and quantity of financing needed

The pace and quantity of financing needed

The estimates to critical timeline for action range from approximately 18 months to 12 years to hold global warming to 1.5 °C. Investing 1.8 trillion USD globally 2020–2030 could generate 7.1 trillion USD. Some estimates are that transitioning the world to sustainable infrastructure will require 100 trillion USD investment over the next 15 years. Ultimately the the world’s 386 USD trillion financial system needs to be transitioned. We are falling behind by the moment.

Financial infrastructure is how we channel our activity and resources and is what we need to make the econonomic transformation to happen. The estimates to critical timeline for action range from approximately 18 months to 12 years to hold global warming to 1.5 °C. Ultimately the the world’s 386 USD trillion financial system needs to be transitioned. Nick Robbins summarizes this aptly as ‘climate change triple jump’ in his article in London School of Economics (based on IPCC special report Global Warming of 1.5 ºC) as a need to rethink

  1. investment strategy,
  2. capital intensity and
  3. societal impact.

The societal impact, capital intensity and investment strategies manifest most clearly in built environment where we live, work and grow our food. The Global Commission on Adaptation commissioned a report Adapt Now: A Global Call for Leadership on Climate Resilience stating that adaptation can deliver high rates of return, bring multiple benefits to people and the economy and urges three revolutions for a better future the revolutions being:

  • Revolution in understanding,
  • Revolution in planning and
  • Revolution in finance.

Their research finds that investing 1.8 trillion USD globally in

  • food,
  • natural environment,
  • water,
  • cities and
  • disaster risk management
from 2020 to 2030 could generate 7.1 USD trillion in total net benefits. For infrastructure the benefits outweigh costs by 4:1. World Bank concludes similarily the net benefit of building more resilient infrastructure in low- and middle-income countries would be $4.2 trillion. Moreover, Skandinaviska Enskilda Banken (SEB) et al. estimate in UNEP comissioned raport [pdf] that transitioning the world to sustainable infrastructure will require 100 trillion USD investment over the next 15 years. The capital requirement being so large that banks alone cannot finance it. Further alignment of financial system and bond markets are needed together with removing maket barriers. These figures are for infrastructure projects only.

Some of the structural challenges are in capital adequacy managed by regulations such as Basel III, bond and securities transparency, EU Action Plan on sustainable finance and a EU Sustainable Finance Taxonomy. These require quick and accurate data collection and reporting while altogether decisions made by fiduciaries can cascade down the investment chain affecting decision-making processes, ownership practices, and ultimately, the way in which companies are managed. Conquering these structural challenges can unlock the chicken-and-egg problem that investors do not have enough verified green assets to invest on.

It has become abundantly clear there is a financial incentive and socio-economic pressure to move quickly, but:

  1. the current global financial infrastructure is not fit for the challenge nor it is aligned with physical reality,
  2. people working in financial industry need help and cooperation with subject matter experts outside finance to fulfill their fiduciary duties while also
  3. the projects and solutions need to be planned and brought to use quickly and inclusively to generate social buy-in and
  4. the projects and solutions need to be designed so they are financially feasible, bankable and investable.
We need projects for adaptation as well as resilience and incentives and tools to transform economic activity using financial infrastructure that can deliver them starting with what we have today.

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Nature-based solutions

Nature-based solutions

Nature-based solutions are attractive since they can provide multiple benefits on critical issues such as cooling and water management with reduced operational costs and as green assets. They can also mitigate some of the adverse climate that already happen while potentially regenerating biodiversity in the future.

Nature-based solutions (NBS) are infrastructure that synergize with grey infrastructure, forming “hybrid” solutions. NBS are attractive since they can provide a cost-effective and flexible approach for disaster risk and water resource management, reduced cooling costs and improve bio-diversity while also delivering other natural amenities to population. The World Bank estimates in Putting Nature to Work: Integrating Green and Gray Infrastructure for Water Security and Climate Resilience green infrastructure opens up new opportunities to tackle the global infrastructure financing gap while He Xie Zhenhua et al. noted

  • they can provide around one-third of the climate solution and
  • restore biodiversity, boost livelihoods and health, and create resilience to climate change
in speech Scaling-up Nature-Based Solutions for Mitigation, Resilience and Adaptation deliverd in UN Environment Programme as delivered Nature-Based Solutions workstream for the Climate Action Summit.

Nature-based solution can reduce consumption of virgin raw materials. The Finnish Innovation Fund Sitra identifies in its report The circular economy – a powerful force for climate mitigation Transformative innovation for prosperous and low-carbon industry methods to reduce EU industrial emissions by 56 percent (300 Mt) annually by year 2050, which is more than half of what is necessary to achieve net zero emissions.

Nature-based solutions are a natural stepping stone to less resource intensive economy while also delivering social benefits as reduced living costs, increased resilience and amenities while also being a source of green assets for investors and thus moving the financial industry and the supply-chains associated with built environment to greener economy, circular economy. The problem is, however that

  1. nature-based projects are more complex than traditional projects to prepare, plan and build while also
  2. financing is more complex and risky due to their novelty and requirement to gather, verify and analyze information that hasn't been required before.
These problems risk to grow financing costs of projects due to complexity of preparation, reporting and risk mitigation wheras they should be reduced to accelerate the pace and increase the quantity of projects and engagement with companies.

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Retooling our project preparation, financing,
data collection and reporting

Human

Economic, cultural, social networks & structures.

Green

Urban forests, parks, trees, living, walls, green roofs, sport fields, agriculture.

Gray

Buildings, roads, bridges, drains.

Blue

Water-sensitive, urban design, waterways.

Project preparation and market sounding

Solution #1

Project preparation and market sounding

Lumoin is currently developing project preparation and market sounding tooling to accelerate the pace and quantity of new nature-based, bankable projects brought to markets.

Currently there is not a shortage of capital available to well built projects. Rather there is a shortage of projects that attract financing, bankable projectsm which is one of the key bottlenecks starting the urgntly needed projects. Project preparation is a key stage when financial support is provided to project owners or concessionaires. It covers a range of activities, for example:

  • project feasibility studies,
  • various risk assesment studies,
  • social and environmental studies,
  • creating awareness among the stakeholders,
  • developing procurement documents,
  • developing concessional agreements and
  • value-for-money analysis
Nature-based solutions and green projects are more complicated since they require expert input on issues such as how soil and trees regulate water flow and they require more reporting before, during and after projects while also otherwise being more complex to develop to steady state phase where risks are reduced. Unchecked these issues will increase project financing costs prohibitively.

Market sounding involves gather feedback from the lender community to shape the risk allocation and develop a risk-sharing protocol, a risk matrix with an agreed upon way to share risks and proceeds between lenders. Amongst others, risks include legal and regulatory matters, global interest rate regimes, and capital market conditions. On nature-based projects and circular economy projects some of the operational costs can be complex to asses even if the promise is lower costs and alignment with green or ESG values. Lumoin is working on decentralized tooling that helps mitigate the planning and operational risks using standard reporting frameworks so success can be analyzed and verified independelty and learnings scaled globally.

Interested?

We will let you know about the progress.

Coming soon! In the meanwhile check [email protected] :)

We need sustainable investment infrastructure that scales from human size to planetary scale

Transparency

Transparency

In order to attract capital to projects especially to more untested, nature-based and green projects, the projects and the financing need to be transparent enough to induce confidence. A common base of facts for all parties and sufficient transparency is attractive to manage investor risks and guarantee systemic finacial stability on already turbulent times when the financial system is under strain. For instance, an important technique to allow for banks more lending is securitization and there is increasinbly regulation to make securitization risks more transparent. Securitization is important, since it is a technique that can be used to provide green capital at the pace and quantity needed to make the transition happen in the required time. For instance currently in the securitization there are problems such as

  • Transparency: Origination to securitization through derivatives trading reduces transparency.
  • Multiplied costs: Each party creates an additional hedge/risk cover with appropriate due diligence, rising compliance costs.
  • Portfolio ratings: Loan portfolio and underlying tranches are rated and frozen in time, not always reflecting the underlying asset or the economy .
  • Transaction costs and time: The steps step are semi-manual, which translate to costs and reduced interoperability.

Security

Security even in small scale

The financial infrastructure need to be able to manage cases of fraud even in small projects reported by local people. Equally the financial structure needs be granular enough to allow even ordinary people invest into projects with reasonable assumptions their investment is secure. Some of these issues are discussed in more detail by OECD in their inaugiral report Blockchain Technologies as a Digital Enabler for Sustainable Infrastructure and Scaling Climate Finance Through Emerging Technology by Digital Finance Alliance.

Financial system and data

Solution #2

Decentralized financial system
and data

The new financial system needs to build on assumption of adversarial interoperability: ability to create products or services that can plug into the existing ones without permission from the existing providers for the benefit of the people and businesses. This is needed so it becomes possible to develop both local and global services that can interoperate. Such a system can specifically reduce project built time risks and create new business models that help reduce operational costs and hence making projects bankable.

Lumoin is currently working to build information architecture built on decentralized identifiers (DID), verifiable credentials (VC) and blockchain that align the interests of parties in financial industries and businesses especially concentrating on aligning the interests of actors in finance and built environment to accelerate the pace of adaptation and mitigation projects needed. The aim is to build a framework where also operational data can be interlinked, hence creating a data framework for also operational assets and so making possible more easily plug in new, circular business models that can make use of data produced while ensuring business continuity in case of disruption in operation of other companies in the value chain. This can also reduce operational costs and also create new businss models.

The technology works so that data is interlinked together using cryptograhic methods and signed electronically. This interlinked data can be public or private and it is possible to collect special kinds of credentials of multiple sources to be shown to others. This can be used also in blockchain operations.

Decentralized infrastructure

Decentralized
infrastructure

The information architecture is built on decentralized identifiers (DID), verifiable credentials (VC) and blockchain fit for green finance, circular economy and doughnut economics.

Plug & play system

Plug & play
system

The framework is built for adversarial interoperability: ability to create products or services that can plug into the existing ones without permission from the existing providers for the benefit of the people and businesses.

Tokenized assets

Tokenized
assets

    Unlock and mobilize new an existing resource for financing. For instance issuing low cost green bonds fit for general public.
    Track&trace documents using DIDs, VCs and blockchains

Transforming due diligence

Transforming
due diligence

The current infrastructure is not fit for due diligence nor do the current practices scale. DIDs, VCs and availability of base layer of information and open process to reach for every participants grows a base layer for which to build due diligence and transparency services.

Impact Evaluation

Impact
Evaluation

We need fact-based knowledge and training to scale learning and coordinate global action. People and institutions producing, gathering, curating and eminating data and information need to be compensated. This same data can unlock businesses to transition to circular economy and doughnut economics.

We have only one planet!

Let’s do this together!

Join to our GitHub to work on our decentralized identifier and verifiable credentials definitions

Join

Have questions or propositions?
Feel free to drop us a line

Lumoin in Twitter [email protected]