Blockchain Makes Headway in Carbon-Busting

Not Ready for Prime Time in Mortgages, But…

Despite the growing pains and the volatility, crypto assets (the good ones, at least) are finding their use cases. Numerous financial and tech giants are offering customers digital asset options, and investing in the sector in various ways. The federal government recently put all hands on deck to find ways of keeping crypto assets useful, fair, and secure.

The mortgage industry, though, has done no more than dip a toe into distributed ledger a.k.a. blockchain technology. But the industry has to get to grips with the digital age. It has to smooth out the experience for borrowers of mortgages and home equity financing. Today’s mortgage applicant has to submit stacks of paper statements. Underwriters reject copies of webpages because they could be falsified. Title searches involve multiple sources of data when one ought to be enough. And so on. The process is antiquated and stressful, to put it mildly. “We’ve always done it like this” seems to be the only justification for much of the mortgage and title processes. Perhaps distributed ledger technology can help reinvent it. We’re not there yet.

Meanwhile, blockchain and real estate seem to be meshing quite well in the area of greenhouse gas emissions tracking.

Real Estate Starts Measuring Carbon Cuts With Blockchain

Recently, a large real estate company adopted an interest use case for distributed ledger technology.

Brookfield Properties, together with Brookfield Renewable Partners, announced in March 2022 that it will bring hydropower-sourced electricity to its 67-floor office building One Manhattan West. It’s Brookfield’s first New York City building to go 100% into renewables. And the companies are tracing the use with distributed ledger technology.

Brookfield is one of the backers of Cleartrace. Based in Austin, Cleartrace runs a cloud-based platform that issues proof of electricity origin and delivery hour by hour. Investment companies and their lease holders can refer to their own data any time. The Cleartrace platform takes the guesswork out of monitoring electricity-related greenhouse gas emissions.

Future Opportunities and Responsibilities

Real estate investors and the companies that lease from them all have sustainability goals to meet, and they want to show the public and regulators how it’s going. Environmental, social and governance (ESG) factors are also important to the investors in these companies.

Therefore, a number of other high-profile real estate investors and financial companies, including JPMorgan Chase, are putting blockchain tech to work in ESG monitoring, too. The concept has a great deal of value. It’s one thing to set “carbon net neutral” goals, and another thing to actually show the metrics on the origins, volumes, time and type of the energy being used.

Effectively addressing the impact on climate is a necessity. This creates new opportunities, along with heightened responsibilities, for those in the real estate industry. Now that blockchain technology has proved its use, companies, residents, and lease holders would need to examine their monthly electricity bills and then look up the power sources (which can be a moving target), and do their best to figure out how much of their electricity was from this source or that, and then add up the volume of carbon emissions related to each component of the stream.

Major companies depend on transparent, precise reporting and so do the regulators.

The Carrot-and-Stick Approach

In New York City, the use of distributed ledger technology to demonstrate the accuracy of emission reduction claims will pay off for the building owners. Local Law 97 will require large building owners to stay within emission limits. The law goes into effect in New York City in 2024.

The law will fine violators, but it will also serve as the basis of a carbon credit exchange. Low-emitting building owners will make profits by selling extra credits to higher-emitting peers.

The takeaway? Expect blockchain to find rising demand in New York City and beyond, as businesses that tout their sustainability must now show their numbers.

Supporting References

Philip Russo for Real Estate Starts to Use Blockchain for ESG Goals (May 3, 2022).

Kyle G. Horst for DS News: Real Estate and the Blockchain: Is It Possible? (May 16, 2022).

And as linked.

Photo credit: Roberto Lee Cortes, via Pexels.