As extreme weather events continue to increase in frequency as a result of rising temperatures, Web3 stands ready to address one of the biggest issues impacting the global fight against climate change: the climate funding gap, says Elizabeth Tan, founder of Intent Capital Group and a Web3 investor and strategy adviser.
In 2009, delegates at the 15th United Nations Climate Change Conference (COP 15) pledged to reach a target of $100 billion in annual climate financing for developing countries by 2020. However, the amount of actual funding is estimated to be between $21 billion and $83.3 billion – a fraction of the now-estimated $1 trillion needed annually.
Web3 can help close the funding gap by allowing retail investors to participate in the fight against climate change. Evidence suggests that most retail investors would take a lower return in exchange for significant environmental impact. Web3 can enable the creation of new financial instruments specifically designed for retail investors, such as tokenization of existing climate assets, fractionalization of big-ticket instruments like green bonds and creation of special-purpose decentralized autonomous organizations (DAOs).
Crowdfunding campaigns through licensed Web3 launchpads and launch pools can also provide retail investors with the opportunity to invest in projects they believe will have a big environmental impact. Web3 can also provide a method of low-cost and accessible value transfer through fiat-backed stablecoins.
Demand for carbon and renewable energy credits is steadily growing, and Web3 has proven its worth as a fundraising platform. Launchpads, special-purpose DAOs and other mechanisms such as quadratic funding have helped raise billions of dollars to get Web3 projects off the ground. The same can be used for climate and other regenerative projects, which can open up access to retail investors and provide institutional investors with returns that are more in line with their expectations.
Web3 stands poised to be the catalyst that unlocks access to retail capital, spawns and scales a new generation of grassroots climate projects, and finally gives at-risk countries a chance to leverage their climate assets, says Tan.