Northern Trust, a leading provider of wealth management and banking services, has announced the completion of the first stage of its voluntary carbon credit ecosystem. This ecosystem will allow institutional buyers to access carbon credits from major project developers digitally. The Chicago-based company has a global presence and manages assets worth trillions of dollars.
The announcement comes after Northern Trust successfully conducted automated transactions on its minimum viable product (MVP) digital carbon credit platform. The institutional buyers involved in these transactions include UK consultancy Mycarbon, tech company White Star Capital, and Northern Trust itself. This initiative falls under the company’s Digital Assets and Financial Markets group, which supports the growing digital asset markets and provides market access and insights in traditional securities services.
The head of the group, Justin Chapman, emphasized the importance of this project, stating that “the use of digital technology to manage the lifecycle of carbon credits gives both the buyer and project developers confidence and transparency through the lifecycle of their voluntary carbon credit transactions.”
Northern Trust developed the platform in collaboration with major project developers, including a direct air capture (DAC) company. The platform utilizes private ledger blockchain technology to connect institutional buyers with carbon credit suppliers. The goal is to provide solutions to reduce greenhouse gas emissions through carbon credits. Carbon credits are certificates that allow the holder to emit a certain amount of CO2 or other greenhouse gases, with each credit being equivalent to one tonne of carbon reduction or removal.
The fully digital platform enables buyers to obtain tokenized carbon credits directly from project developers and use them for offsetting. Retiring carbon credits involves claiming their associated environmental impact, such as carbon reduction. The platform provides sustainability project managers with a workflow to track, manage, and transact with tokenized carbon credits. Project developers can transact with purchasers of voluntary carbon credits through the private blockchain, using smart legal contracts generated by the Avvoka tool to document the transfer and settlement of the tokenized credits transparently.
Northern Trust has partnered with various project developers on its MVP platform, including Go Balance Limited, a REDD+ project developer supporting the Trocano Araretama REDD+ Project in Brazil; ReGen III, a clean-tech firm recycling used motor oil into high-grade synthetic lubricants; and a DAC company. The CEO of Go Balance Limited lauded Northern Trust’s digital platform for streamlining administration tasks and facilitating carbon credit transactions with full transparency.
Tokenizing carbon credits is seen as a means to bring more integrity and trust to carbon markets. Blockchain-powered carbon credit platforms are emerging in different forms. Northern Trust’s ecosystem offers an end-to-end solution, providing access for both developers and buyers. Other initiatives, such as CarbonPlace, aim to deliver post-trade solutions by connecting sellers and buyers of carbon credits through global banks. The United Nations Development Programme (UNDP) has also unveiled open source carbon registry software to help countries manage their national data and carbon credit trading needs. Additionally, the United Arab Emirates (UAE) plans to launch its own blockchain-based registration system for carbon credits using the Venom public blockchain infrastructure. Asia’s first digital native carbon registry was launched last month through a partnership between Carbonbase, HBAR Foundation, and ImpactX.
While Northern Trust’s digital carbon credit platform is still under development, its first official live transaction is expected later this year. This initiative leverages blockchain technology and smart legal contracts to create a streamlined process and promote trust in carbon markets.