BBVA Group issued the first structured green bond using blockchain technology to negotiate the terms and conditions. It is a private placement in which MAPFRE invested €35 million six year term bond linked to the evolution of the five year euro swap rate. With this bond issue, the BBVA Group demonstrates that it has the means, knowledge, and commitment to provide its clients cutting-edge products based on the latest technologies and innovative sustainable solutions.
Structured bonds are negotiable assets with a fixed maturity and a return that can be based on interest rates, shares, an index, or an exchange rate. Furthermore, this kind of product is designed according to the required rate of return, terms, and risk tolerance of the investor, in this case MAPFRE.
This deal is particularly groundbreaking given its dual nature: it is both sustainable and high-tech. On one hand, the funds are earmarked to finance green projects within the BBVA’s framework of the Sustainable Development Goals (SDGs). As such, the bond has been categorized as green, according to the Second Party Opinion issued by DNV GL - a global leader in certification. On the other, the terms of the bond were negotiated on BBVA's internally developed blockchain platform.
Juan Garat, BBVA's Head of Global Sales noted: “With this deal, BBVA reasserts its firm commitment to both sustainable financing and new technologies. Using DLT – distributed ledger technology – for this transaction allowed us to simplify the processes and streamline the negotiation time frames, which is in line with our pursuit of excellence in customer service".
José Luis Jiménez, Chief Investment Officer at MAPFRE, explained that this bond “contributes to the diversification of MAPFRE's investment portfolio, and it does so with an innovative and sustainable product - two qualities that fully align with the company’s investment policy".
This deal is particularly groundbreaking given its dual nature: it is both sustainable and high-tech
Technology for global markets
The use of this platform offers the following advantages throughout the process:
- It allows all participants to have access to the transaction. Distributed ledger technology reduces issuing time and ensures that negotiations and agreements reached are traceable and immutable. These features of traceability and immutability make it easier to demonstrate compliance with relevant regulations.
- The platform allows the client to choose between numerous product configuration options. This feature provides the client considerable flexibility in terms of designing the bond that best suits their needs.
- It works for the simplest, to the most complex products. This enables a self-service approach in which investors who know what product they want to invest in can save time and effort by limiting the definition of the different variables. Investors looking for new investment solutions can quickly and easily explore new products.
- It is an entirely digital process in which the negotiation of the structure and prices, and the creation of documentation for the bond are part of the same tool.