Impact investing, which seeks to generate positive, measurable social and environmental impacts alongside a financial return, faces challenges to better address the financing needs of the United Nations Sustainable Development Goals (SDGs). Impact tokens, and blockchain in general, offer solutions to mobilizing investments toward the SDGs. For that to happen, though, innovation must continue and needs to be supported by public and private sector actors, non-governmental organizations and international organizations. All will have an important role to play in speeding up the development and adoption of this technology.
Blockchain technology offers solutions that are particularly promising to address the underlying challenges of the impact investing industry by converting non-financial value such as impact into digital tokens that can be tracked.
Impact tokens describe a group of digital tokens used on a blockchain with the specific goal of unlocking investments for projects with positive social and environmental impacts in support of the SDGs.

The United Nations Sustainable Development Goals (SDGs) invite a range of public and private sector actors to support its agenda of ending poverty, protecting the planet and ensuring that all people enjoy peace and prosperity by 2030. They offer a solid framework for investors and corporations to follow and align their activities and investments accordingly. This has spurred a growth in impact investing, which is an investment approach seeking to generate positive, measurable social and environmental impacts alongside a financial return. However, according to a 2018 survey done by the Global Impact Investing Network (GIIN), the following barriers are still preventing impact investing from scaling up to better address the financing needs of the SDGs:

Appropriate capital across the risk/return spectrum
A common understanding of the definition and segmentation of the impact investing market
Suitable exit options
Sophistication of impact measurement practice
High-quality investment opportunities.

Blockchain technology offers new investment and economic opportunities by enabling the transfer of value in a frictionless manner, providing trust as an immutable ledger and converting assets into digital tokens that can be programmed through smart contracts. Blockchain offers solutions that are particularly promising to address the underlying challenges of the impact investing industry. “Impact tokens” describe a group of tokens with the specific goal of unlocking investments for projects with positive social and environmental impacts. A review of over 200 projects that are either active or in development gleaned four key benefits of impact tokens:

Increasing trust between parties
Promoting financial and social inclusion
Improving data collection and accelerating monitoring, reporting and verification processes
Incentivizing behaviours that promote sustainability.

Most of the reviewed cases focus on digitizing existing marketplaces, reducing transaction costs and creating new platforms for exchanging non-financial value such as impact, natural capital and data. This paper looks at some of the key characteristics of these tokens; how they can be applied in sectors such as agriculture, fisheries, education or energy; how they can provide verified proof of impact for investors; and, ultimately, how they can address each of the five barriers to upscaling impact investing.

Selected Case Studies1) Fishcoin incentivizes data capture and sharing at all stages of the seafood supply chain.2) Veridium transforms industry standard carbon offsets into digital tokens.3) Plastic Bank is a plastic offset program that rewards people with tokens or fiat currency for collecting plastic.4) Moeda is a social investment platform that connects investors directly with entrepreneurs.5) Hara incentivizes the collection and verification of data and connects farmers with each other.6) Redd-Chain tokenizes land-use assets and incentivizes the engagement of local community actors.7) ixo Foundation records children’s school attendance on the Ethereum blockchain and issues tokens as proof of impact.8) Energi Mine promotes energy-saving behaviours.9) BYD is a carbon banking solution that rewards individual users of electric vehicles with carbon credits.10)SolarCoin incentivizes solar energy production.

About:
The International Institute for Sustainable Development (IISD) is one of the world’s leading centres of research and innovation. The Institute provides practical solutions to the growing challenges and opportunities of integrating environmental and social priorities with economic development. We report on international negotiations and share knowledge gained through collaborative projects, resulting in more rigorous research, stronger global networks, and better engagement among researchers, citizens, businesses and policy-makers.

IISD Reporting Services Division (IISD RS) provides a variety of multimedia informational resources for environment and sustainable development policymakers, including daily coverage of international negotiations, analyses and photos. As the publisher of the Earth Negotiations Bulletin, IISD RS is recognized for its objectivity and issue expertise in the field of international environment and sustainable development policy. The various products provided by IISD RS make it an essential source of information for government officials, policy and decision makers, UN staff, non-governmental organizations, intergovernmental organizations, business, industry and academia