Building a Decentralized Climate Finance DAO

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This research was originally posted on January 11, 2023.

Series: Build in Web3

Hi everyone.

This is an entirely different yet innovative “Build in web3” series I’m trying out here. In 2022, I set out a goal to help bring as many believers as possible to help decode and democratize web3.

While my previous investment & thematic research has been very detailed & specific to a particular target market, I've generously offered as much detail as possible regarding the many primer series, investment, and research thesis on the web3 ecosystem.

Now, the reverse holds as well.

I deliberately chose the term “build in web3” because, in general, most of these articles will explain the working model in more detail. Often people don’t put much thought into how many layers of abstraction we are working with.

The goal is to explain in these posts how each of the web3 solutions will potentially integrate into new & existing business models.

To start things off, below, I've included an outline of a DAO business model focusing on Climate Finance.

Decentralized Climate Finance DAO: Segmenting a Fragmented Green Finance Infrastructure.

A DAO is a decentralized autonomous organization.

A Decentralized Climate Finance DAO is an organization responsible for managing climate finance in a decentralized way.

GOAL: Use blockchain technology to address climate finance transparently and efficiently. The goal behind this DAO is to segment a fragmented green finance infrastructure making it more accessible, efficient & transparent for retail investors like you & me.

FOCUS: Public blockchain infrastructure for carbon markets, green bonds, renewable energy credits, carbon credits, and other environmental assets.

Why is this needed?

  1. There's an oligopoly of intermediaries: The responsibility for a targeted environmental offset is often silenced.

  2. There's no single marketplace where green assets are traded & monitored independently or according to climate agreements.

  3. There's an existing assortment of markets & financial instruments that are responsible for the following:

    1. excess volatility, and

    2. different patterns of rules/regulations which are very hard to follow

The Climate DAO would focus on 4 key points:

  1. Measuring & tracking +ve or -ve impact from industries, polluters & dedicated climate projects

  2. Per the international climate agreements—issue, trade, regulate & dismiss green assets such as green bonds and carbon credits.

  3. Democratize access to green assets through dApps or, if regulations approve, through existing governmental financial institutions.

  4. Tokenization of every activity to track & assess spending

Why would this work?

  1. For financial institutions: P2P assessment of green bonds, carbon credits along with P2P operations

  2. For retail investors (me & you): buy assets in verified GHG reduction activities that have actually taken place.

  3. For companies/industries: a cost-effective process of offsetting environmental negligence

  4. For economies:

    1. Assess corruption from the ground up.

    2. Double-verify the actions from the ground up.

    3. Raise funds for green projects & invest in viable projects vetted from the ground up.

How would this work?

  1. Every family, group, or company using sustainable energy or indulging in green activities will be credited tokenized green credits. The tokens can be:

    1. traded for existing carbon credits

    2. gives access to verify & invest in green projects through DAO

  2. Traded tokenized credits get more & more of us involved in making sure environmental obligations are met & observed

  3. dApps & DeFi applications will make sure adequate liquidity is available to finance green projects & reward contributors for their work

In 2021, $500B worth of green bonds were issued, but the impact is still negligible. There's no transparency in activities & accountability for negligence.

Advantages & Challenges

The Decentralized Climate Finance DAO would have several advantages over traditional organizations that manage climate finance.

  • First, because the Decentralized Climate Finance DAO would be decentralized, it would be much more resistant to corruption and fraud.

  • Second, the use of blockchain technology would allow all transactions to be transparent and trackable, further reducing corruption and fraud.

  • Third, the Decentralized Climate Finance DAO would be able to tap into a global pool of talent and resources, which traditional organizations often need help to do.

  • Finally, because the management of climate finance is done in a decentralized way, i.e., stakeholders are shareholders, it is likely more efficient than traditional methods.

Decentralized Climate Finance DAO could revolutionize how climate finance is managed globally.

To make this happen, however, some challenges need to be addressed.

  • First, developing a robust governance model for the Decentralized Climate Finance DAO will be necessary. This will ensure that the organization can make decisions decentralized while still being accountable to its members.

  • Second, building trust in the organization's members and the wider public will be essential. This can be done by ensuring that all transactions are transparent and by developing a good reputation through successful initial projects.

  • Finally, it will be essential to scale up the DAO to significantly impact global climate finance by giving access to critical climate-hit areas.

If these challenges can be addressed, Decentralized Climate Finance DAO can transform how climate finance is managed globally.

Possible Additional Operational Models to Explore for the DAO

  1. Building a carbon credit exchange platform to support an ecosystem of green finance applications on the blockchain along with a Green Assets Protocol. The first use case will be to launch Green Assets Wallet (GAW), a digital wallet for storing and trading carbon credits, renewable energy credits (REC) & other environmental assets.

  2. Creating an Ethereum-based accelerator program to select promising projects that want the critical support and resources to succeed. The goal is to improve the dApps and accelerate deployment continually.

  3. Creating an Investment Exchange/Crypto-Index fund featuring ETF products (group or pooled investments) based on virtual portfolios. The portfolios are modeled to respond automatically to the underlying market's complex dynamics.

  4. Creating a simulated social currency/rewards network on the blockchain. The intention is to see how the global community will react to the incentives and reward system.

Diving deep into the first revenue stream use case:

The first use case will be to launch Green Assets Wallet (GAW), a digital wallet for storing and trading carbon credits, renewable energy credits (REC) & other environmental assets.

The wallet can be integrated with existing exchanges, so it acts as another avenue for buying & selling these assets without worrying about managing the underlying blockchain infrastructure.

GAW will also have real-time pricing data and market analytics tools built into it, making it easier for users to make informed investment decisions when buying or selling their assets.

The next application they are developing is called the ‘Green Assets Protocol,’ which aims at simplifying transactions between buyers and sellers of environmental assets by standardizing contracts using smart contracts on the Ethereum blockchain.

This will eliminate counterparty risk while allowing both parties to track their asset holdings securely in real-time via GAW. Also, a carbon footprint calculator will help individuals & businesses calculate and offset their carbon footprints. The goal is to integrate the application with decentralized exchange platforms so that users can easily buy/sell credits to offset their emissions.


Not financial or investment advice. This blog is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any investment decisions. Do your own research.

Thank you for reading through. I’d appreciate it if you shared this with your friends, who would enjoy reading this.

You can contact me here: 0xArhat.

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