Key Takeaways
- • The 2018 Impact Investment Survey by the Global Impact Investing Network reported respondents invested $35.5 billion into 11,136 deals during 2017, per the World Economic Forum article.
- • The article identifies three constraints on impact investing growth: costly or scarce trustworthy impact data, attribution risk from double-counting, and difficulty monetizing impacts in illiquid markets.
- • Blockchain-based "impact tokens" representing UN Sustainable Development Goal-linked, unit-based impact measurements are proposed as a way to improve transparency, traceability, and transaction speed.
- • The authors propose five criteria for assessing impact token quality: real value to impact accounting, trust among stakeholders, acceleration of impact investment flows, open-source transparency, and energy consumption control.
- • The article cautions that impact tokens are at an early stage, that no existing impact token yet meets its stakeholder-trust design principles, and that the sector must prepare for trial and error.
Summary
A World Economic Forum article argues that blockchain technology could address structural obstacles to impact investing. According to the 2018 Impact Investment Survey by the Global Impact Investing Network, respondents invested $35.5 billion into 11,136 deals during 2017. The article states that growth is constrained by the lack or high cost of credible data on social and environmental outcomes, by difficulties attributing impact claims to specific investors (risking double-counting), and by illiquid impact markets, uncertain returns and high transaction costs.
The article describes "impact tokens" as a new category of blockchain application. These tokens represent a UN Sustainable Development Goal-related impact, typically as a quantified, unit-based metric linked to the activity that created it. They can be used for performance-based payments, to track impacts through supply chains, or to substantiate SDG claims. The authors cite trust, attribution, impact monetization, and reduced transaction costs and middlemen as the principal advantages.
The article notes that a number of impact tokens entered the market within the past year, some sold through Initial Coin Offerings. It warns that the hype around ICOs attracted fraudulent actors and increased scrutiny of blockchain projects, and it therefore proposes five assessment criteria. Examples cited include SolarCoin, which awards one SLR per verified megawatt-hour of solar power and is moving from manual to automated verification; the IXO Foundation; the GainForest project; and a blockchain pilot by South Pole, IXO and the Gold Standard. The World Food Programme's Building Blocks platform, which makes cash transfers to refugees, is cited as an operating example, alongside The Sun Exchange, which lets investors fund African solar projects with as little as $1.
On energy use, the article cites a Joule study, described as the first peer-reviewed work on the subject, which argues that bitcoin mining consumes at least as much electricity annually as Ireland (about 24 TWh), and that consumption could reach Czech Republic levels (about 67 TWh) by the end of 2018. The article concludes that blockchain can support impact investing at scale, but that trust, common standards and broad community cooperation must come first.
The article describes "impact tokens" as a new category of blockchain application. These tokens represent a UN Sustainable Development Goal-related impact, typically as a quantified, unit-based metric linked to the activity that created it. They can be used for performance-based payments, to track impacts through supply chains, or to substantiate SDG claims. The authors cite trust, attribution, impact monetization, and reduced transaction costs and middlemen as the principal advantages.
The article notes that a number of impact tokens entered the market within the past year, some sold through Initial Coin Offerings. It warns that the hype around ICOs attracted fraudulent actors and increased scrutiny of blockchain projects, and it therefore proposes five assessment criteria. Examples cited include SolarCoin, which awards one SLR per verified megawatt-hour of solar power and is moving from manual to automated verification; the IXO Foundation; the GainForest project; and a blockchain pilot by South Pole, IXO and the Gold Standard. The World Food Programme's Building Blocks platform, which makes cash transfers to refugees, is cited as an operating example, alongside The Sun Exchange, which lets investors fund African solar projects with as little as $1.
On energy use, the article cites a Joule study, described as the first peer-reviewed work on the subject, which argues that bitcoin mining consumes at least as much electricity annually as Ireland (about 24 TWh), and that consumption could reach Czech Republic levels (about 67 TWh) by the end of 2018. The article concludes that blockchain can support impact investing at scale, but that trust, common standards and broad community cooperation must come first.
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