Northern Trust has joined Project Ensemble, a Hong Kong Monetary Authority ( HKMA ) initiative, to help develop an experimental framework for cross-border trading of digital carbon credits.

The collaboration aims to explore how overseas investors can seamlessly access tokenized voluntary carbon credits traded in Hong Kong and will be supported by The Northern Trust Carbon Ecosystem, a fully digital platform for the end-to-end lifecycle management of digital carbon credits, which uses private ledger digital blockchain technology.

The initiative will leverage the ecosystem’s seamless settlement experience by recording, transferring and settling digital carbon credits as instructed in its role as designated custodian.

Project Ensemble, launched in 2024, is the HKMA’s initiative aimed at supporting and shaping the development of the tokenization ecosystem in Hong Kong.

Central to this initiative is the Ensemble Sandbox, which is now facilitating the testing of tokenization use cases across different areas, including green and sustainable finance.

In the sandbox, Northern Trust along with other industry pioneers, will test a framework for the cross-border trade of tokenized carbon credits.

The Northern Trust Carbon Ecosystem, launched in September 2024, connects institutional buyers with project developers focused on climate solutions to avoid, reduce or remove greenhouse gases in the atmosphere.

Buyers can purchase digital carbon credits directly from project developers and retire these against their emissions footprint.

The ecosystem can support a variety of verified carbon credits, including those from removal and avoidance, providing a unified and fully transparent ledger.

“Our participation in Project Ensemble represents a significant step in bridging digital asset innovation with sustainable finance on a global scale,” says Justin Chapman, Northern Trust's group head of strategic partnerships, digital assets and financial markets. “By collaborating with industry peers and regulators in Hong Kong, we are exploring new ways to connect markets and facilitate cross-border carbon credit transactions.”