Digital technologies for sustainable financial markets – A commentary on Blockchain and FinTech in the context of green investments

by Alexander Freier

Summary:

Sustainable finance has become a key global trend. This article analyses how digital technologies such as Blockchain and FinTech are transforming sustainable financial markets, from the tokenisation of green assets to the inclusion of small investors. While highlighting the opportunities, it addresses regulatory, technical and socio-economic challenges, particularly for Latin America. Digital transformation does not replace responsibility, but it offers key tools for achieving an inclusive, efficient and transparent green transition.

Introduction

Green finance is no longer a niche topic: it has become an integral part of the global financial system. However, its success increasingly depends on how efficiently, transparently and verifiably it is structured and implemented. Digital technologies such as blockchain and fintech play a key role in this process: they enable a new generation of sustainable investments – decentralised, verifiable and accessible to many people.

Studies show that blockchain-based financial models can significantly increase the speed at which funds are allocated to sustainable projects. Through automated processes such as smart contracts, i.e. self-executing digital contracts, investment money flows faster and in a more targeted manner, without the need to go through numerous intermediaries. At the same time, the risk of greenwashing, i.e. the practice of presenting investments as sustainable without verifiable justification, is reduced. Blockchain technology builds trust through transparent and immutable data structures. What was once a promise is now a verifiable reality.

Tokenisation and transparency: The power of blockchain

A central feature of blockchain is its transparency. Every transaction is visible and permanently documented, making it ideal for tracking financial flows and complying with ESG (environmental, social and governance) criteria. At the same time, decentralised data storage combined with robust cryptographic security ensures a very high level of protection. Manipulation becomes virtually impossible.

A particularly innovative aspect is tokenisation: green assets such as CO₂ certificates, solar parks or sustainably managed forest and agricultural land can be digitally recorded and divided into small, tradable fractions. This so-called ‘fractional ownership’ allows small investors to access green financial markets. For example, companies can tokenise their CO₂ emission savings and trade them transparently on the market, creating a tangible link between climate protection and the capital market.

FinTech platforms: Sustainable investments for everyone

FinTech – technology-based financial services – reduces barriers to entry for green investments. Crowdfunding and peer-to-peer models allow many people to collectively finance large projects with small amounts – such as solar plants or reforestation initiatives.

In addition, ESG (environmental, social and governance) assessments based on artificial intelligence are increasingly being used. Automated data analysis generates a new form of transparency and comparability. Smart contracts only execute investments when specific sustainability targets are met – such as a certain reduction in CO₂ or water consumption below a critical threshold. Combined with mobile apps, ESG dashboards or digital platforms, sustainable investing from a smartphone or tablet is now a reality.

Regional relevance: Why Latin America needs to catch up

Latin America offers great opportunities for the application of digital solutions in green finance. Countries such as Argentina, Brazil and Colombia have dynamic IT ecosystems, highly skilled developers and an environment conducive to technology start-ups. Chile, for its part, is positioning itself as a leader in sustainable financial innovation, especially in the issuance of green bonds and solid regulatory frameworks.

It is precisely in these countries that conditions are favourable for tokenising projects related to renewable energy, water and agriculture. However, many regions are still technologically lagging behind – a major obstacle to development.

As promising as the digitalisation of sustainable financial markets may be from an economic and development perspective, it also presents major challenges.

On the one hand, there are legal uncertainties and political instability that deter investors in Latin America. Above all, however, there is a lack of regulations, solid institutions and functional control mechanisms for the greater use of digital solutions – especially in the area of sustainable financial products.

While regulatory frameworks such as the Sustainable Finance Disclosure Regulation (SFDR), the Markets in Crypto-Assets Regulation (MiCAR) and national laws such as the eWpG (Electronic Securities Act in Germany) in Germany or the PACTE Plan (Action Plan for Business Growth in France) in France already exist in the European Union, much of Latin America still lacks an equivalent regulatory framework. In particular, there is a lack of clear classifications of ‘digital assets,’ definitions and consistent tax treatment for so-called ‘green tokens,’ as well as reliable ESG certifications, which seriously limits the scalability and credibility of digital sustainable finance in the region.

The digital divide is also a problem: the lack of digital infrastructure and education – especially in rural areas and sectors with weak structures – makes investment in digital competence centres, partnerships with universities, NGOs and accelerators, as well as support programmes for local entrepreneurs, urgent. On the other hand, the migration of qualified professionals trained in urban centres limits the innovative potential at the local and regional level.

Furthermore, the quality of data input for sustainable asset classification represents a challenge. While Blockchain stores data permanently, it does not guarantee its accuracy. Without reliable data sources such as oracles or external audits, the risk of information manipulation persists.

Another criticism points to the energy consumption of classic blockchain models such as Bitcoin. Proof-of-work mechanisms require enormous computing power – and therefore a lot of energy. Research, including that conducted by Juan Ignacio Ibañez and Alexander Freier at the Centre for Blockchain Technologies at University College London, shows that it is worthwhile combining these processes with renewable energies to promote their global expansion.

However, the use of alternatives such as Proof of Stake is not yet widespread enough.

From an economic point of view, caution is also needed: tokenised ESG products tend to be highly volatile. This is mainly because these digital assets are often traded on new and poorly regulated platforms that do not offer deep markets or sufficient liquidity.

Furthermore, the lack of clear ESG criteria and standardised sustainability data makes it difficult to assess how ‘green’ a token really is. This uncertainty can encourage speculative behaviour and sharp price swings. Developing countries in particular lack reliable institutions and regulatory frameworks that can provide long-term stability – a key obstacle to the scalability of sustainable digital financial products.

Conclusion: Technology does not replace responsibility – but it is a powerful tool

Digital technologies such as Blockchain and FinTech will not solve environmental problems on their own. But they offer powerful tools to make sustainable financial flows more transparent, efficient and equitable. Combined with clear rules, robust regulation and social participation, they can become real drivers of green transformation.

This is especially true for countries such as Argentina, which have research centres, a young and well-educated population, and an urgent need for development. The digital transformation of financial markets is not an end in itself: it is a strategic tool for achieving the UN Sustainable Development Goals and the Paris Agreement. For regions such as Latin America, this represents an opportunity not only to catch up, but to take a leading role in global change.

Originally published in InfoClima.com.ar