Tokenization for a better world
Blockchain technology could play a major role in impact investing, says the World Economic Forum. Impact investing refers to those investments that have a social or environmental purpose.
Blockchain technology can provide greater security in the storage, management and transfer of information and things of financial value.
The World Economic Forum is a proponent of using blockchain technology in impact investing, but there are still a lot of bumps to overcome before it will work to perfection.
The benefits in a row
- Many impact investments involve developing countries where there is generally less trust in institutions. The use of blockchains can help increase that trust. Blockchains can also help automate and measure the impact of certain investments.
- So-called impact tokens (or proofs) can be attached to sustainable products and/or companies. This will allow investors to better vet their portfolios for sustainability in the future.
- The translation of the factor impact into money terms (monetization) can be improved with the help of blockchains and impact tokens.
However, there are also considerable risks associated with impact tokens and blockchains, argues the World Economic Forum. There is a lot of hype around the development of tokens and initial coin offerings (ICO’s).
Unfortunately, this also attracts scammers who try to swindle investors under the guise of, for example, sustainability or benevolence. It is therefore necessary to develop strict guidelines for impact tokens.
Central to the development of tokens should be that they are reliable. For example, tokens should be based on easily measurable data that cannot be manipulated by human hands.
An example is solar coins (SLRs), one of the first forms of impact tokens, where an SLR stands for the production of one megawatt hour (MWh) of solar energy.
Until now, this has depended on manually entered data, but work is underway to automate this process in collaboration with companies.
The difficulty of this process is demonstrated by the establishment of a reliable and effective system for CO2 emission rights, which after years of development is still not perfect.
The World Economic Forum argues for close cooperation between governments and agencies that support tokens.
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