Northern Trust Launches Blockchain-Based Carbon Credit Ecosystem for Institutional Investors
Northern Trust has officially launched its blockchain-powered Carbon Ecosystem, marking a significant advancement in the institutional voluntary carbon credit market. The platform, which completed its first live transactions on September 12, 2024, enables institutional buyers to digitally access and trade carbon credits from leading project developers.
The Northern Trust Carbon Ecosystem is built on the company’s digital assets platform, Northern Trust Matrix Zenith, which utilizes private ledger blockchain technology. This innovative system connects institutional buyers with project developers focused on climate solutions aimed at avoiding, reducing, or removing greenhouse gases from the atmosphere.
Pete Cherecwich, president of Asset Servicing at Northern Trust, emphasized the platform’s role in supporting the growing interest in the Voluntary Carbon Market. “The seamless and secure settlement experience is designed to give project developers and institutional buyers confidence in their carbon credit transactions, with Northern Trust as the custodian,” Cherecwich stated.
The ecosystem’s launch follows a successful minimum viable product stage announced in September 2023. Now fully operational, the platform allows buyers to purchase digital carbon credits directly from project developers and retire these against their emissions footprint. Northern Trust acts as the designated custodian, recording, transferring, and settling digital carbon credits based on client instructions.
Among the first participants in live transactions were Water Recovery Systems IP Limited, a UK-based water purification and membrane technology company, and CUT Carbon Distributed Technologies AG, a Liechtenstein-based carbon credit proponent. These project developers sold carbon credits to institutional buyers, including Adapt Global Limited, a global telecommunications company focused on sustainable technology solutions.
Christopher Steele, company director at Water Recovery Systems IP Limited, praised the platform, saying, “The Northern Trust Carbon Ecosystem provides us with a set of solutions to securely transact in the Voluntary Carbon Market.”
The blockchain-based system aims to enhance the accessibility, convenience, and transparency of carbon offsetting. By tokenizing carbon credits, the platform potentially reduces the risk of double-counting, a common concern in carbon markets. However, industry experts note that broader solutions, such as the World Bank-backed CAD Trust, may be necessary to address this issue across multiple platforms.
Justin Chapman, global head of Digital Assets and Financial Markets at Northern Trust, highlighted the broader implications of the Matrix Zenith platform. “It supports key digital asset lifecycle events from asset creation, trading, pricing and custody to reporting,” Chapman explained. “Leveraging blockchain technology, Northern Trust Matrix Zenith integrates with our core traditional asset servicing infrastructure to support digital and traditional assets side-by-side.”
The launch of the Carbon Ecosystem builds on Northern Trust’s extensive experience with distributed ledger technology. The company has previously developed a private equity fund workflow platform, holds a minority stake in Standard Chartered’s institutional custody platform Zodia Custody, and provides custody solutions for bond fractionalization.
As institutional interest in carbon markets continues to grow, Northern Trust’s blockchain-based ecosystem represents a significant step towards modernizing and streamlining carbon credit transactions. The platform’s success could pave the way for further innovations in the intersection of finance, technology, and sustainability.
