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Q&A: carbon, Grollo & A$DC

ANZ Insights

2023-04-30 04:30

Digital currencies are changing the way business works. Now, the Reserve Bank of Australia (RBA) and Digital Finance Cooperative Research Centre (DFCRC) Central Bank Digital Currency (CBDC) pilot is seeing several market-first transactions happen almost all at once.

In one intriguing first, ANZ has worked with Grollo Carbon Ventures (GCV) to tokenise nature-based assets. As part of the transaction, ANZ tokenised existing Australian Carbon Credit Units and issued A$DC, ANZ’s own bank-issued Australian-dollar stablecoin, to help GCV purchase tokenised ACCUs over public, permissionless blockchain. Pilot CBDC was used as a risk-free asset to support the issuance of A$DC.

To find out more about the transaction and its implications, we sat down with Grollo Group CEO Lorenz Grollo, Grollo Property Manager Martin Ansell, and ANZ Institutional Head of Environmental Markets Andreas Kodell to chat through the details. Below is an edited transcript of that discussion.

We started by asking them what it means for how transactions like this would work in the future – and what that means for the sector.

AK: This is the first time ANZ has transacted in A$DC for another financial asset the bank has tokenised, that being a carbon unit. The exchange and settlement occurred in near real-time using ANZ developed smart contracts. This is exciting as a standalone transaction.

The RBA and DFCRC pilot, which is exploring use cases for a CBDC in Australia, will help us further develop ANZ’s digital asset strategy and capability by piloting a transaction that removes friction in the carbon market.

Ultimately it adds to the customer experience, helps clarify provenance, reduces settlement time and counterparty risk to really revolutionise the space, not just carbon.

In terms of the user experience, just going on a screen and accessing a market which is digitally settled immediately is an enormously powerful proposition for our customers.

LG: What fascinates me about this is this project, GCV, is it is in many ways a start-up, but a start-up underpinned with the advice and support of a major institution with deep experience in this area.

The tech space has been of interest to me for more than ten years. Grollo has its own tech business, Equiem, which has now gone global. I've seen a lot of start-ups and incredible ideas that haven't been able to get off the ground because they can't push it through their network. They don't get the ability to do a beta test.

I see that this is an incredible opportunity, for ANZ as a major institution that can deal effectively with a tech concept in digital currency and beta test it with real clients like GCV.

That's exciting. And it comes with a high degree of integrity and a high degree of trust.

MA: GCV is a company that aims to utilise our existing land assets to help move towards decarbonising the Grollo Group overall. Also, we aim to develop the business further as a commercial proposition in its own right.

On the property side of our carbon venture, we've been engaging with ANZ for the last seven months regarding our private asset holdings, and our ability to look at carbon projects on those properties.

Executing the carbon-token transaction itself was quite amazing. It was very interesting to watch.

I think there's some exciting opportunities in the future for ANZ and Grollo together.

AK: There’s now a path to digitally access a market, where the speed of settlement is unique. It also adds an extra dimension of underlying information you can build into it.

As a business, you might want to know details at speed about where a particular carbon project is based. You might want to know more about the project managers behind it. There's a tendency for our clients to want very high transparency and integrity and we work hard to deliver that.

This type of transactional capability and platform will increase the user experience significantly in terms of ease of use, transparency of market, and transparency of the underlying projects themselves - with speed.

MA: That was very clear when we completed the transaction. The information actually came up and showed on the screen the background of the project, the details.

With the trial platform we used to complete the transaction, that information is at your fingertips, where otherwise you'd be dealing with a team of people who would probably take time to retrieve the information for you.

I think that's a huge part of our attraction to the transaction and drives that integrity theme, especially with regards to carbon and carbon credits. I think that's a massive advantage for ANZ to be able to have that on a platform.

LG: The truth is there are parts of the market still very sceptical around carbon. Even though carbon neutrality is where we all need to head.

ANZ is taking the lead on that. And I've certainly had a lot of conversations with senior executives and others in ANZ that give me the comfort they know this is real, and there's real integrity behind it. This is a big part of the future.

The second piece is having a better understanding and belief in digital currency and blockchain. Everyone knows that it's real.

I think again the market's sceptical about parts of that. But the technology has a place to play now and in the future. And integrity, transparency and governance are a key part of convincing the wider community.

And again, ANZ are taking ownership of this, and giving their clients comfort this is a high-integrity product.

That gave us the comfort we needed to set up GCV, to look very seriously at the parcels of land that we have nationwide, and what opportunities are there.

But what’s critical first is securing the right partners.

Grollo and ANZ’s partnership goes back more than 60 years. My father has actually got some letters from back then. So there's been a longstanding relationship and in good and in bad times, ANZ has always been there for us and our family.

In all aspects of business, making sure you have the right partners is critical. Grollo and ANZ has been a true partnership, with give and take on both sides.

AK: From ANZ’s perspective, that incredible historical relationship is what has given us the confidence to bring together our technological capabilities and test the use case with GCV.

I think what's important is our values are very much aligned. The Grollo group is a highly sophisticated investor that wants to make a difference in meeting the environmental sustainability transition challenge. They have the capability to understand transitional markets and technology very quickly, particularly in the new environmental market space.

At ANZ, we want to help all our clients meet the challenge of decarbonisation and nature-based solutions by providing liquidity and capital in environmental markets, but also adding value when they look to transact or seek advice.

This transaction isn’t just a key part of ANZ’s strategy on digital assets, it is a key part of ANZ’s environmental markets strategy. Our work in these areas has been developed and strengthened via ANZ’s stake in climate change investment and advisory firm Pollination.

Pollination has been instrumental in helping form further connections, contributing expertise in carbon markets and understanding the importance of reducing friction when it comes to carbon market transactions. They also introduced ANZ to climate change and human rights advisory firm Ndevr Environmental, whose technical support has been extremely helpful.

We’ve been able to leverage strong relationships there, relationships where there is a high level of alignment and trust. It has been the same with Grollo.

LG: I think, as a closing comment, this is all very real. Environmental, social and governance considerations are having an impact on the whole world.

For Grollo, it's actually important to be balanced, treat it very seriously and to make sure that we put the time, the energy in to make sure that we were doing it for the right reasons.

And that's critical because there's a lot of businesses out there leaping in without really understanding it. At Grollo our approach is to really understand what we're committing to here. Let's try and understand the journey long term.

Working with ANZ, taking a measured approach, making sure that we're doing it for the right reasons and that we really understand it is actually very important.

We don't just want to leap in, sign a contract and away we go, we actually want to understand what it is we're embarking on.

Q&A: carbon, Grollo & A$DC
Staff Writer
ANZ Insights


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