Is Blockchain Scaling Efficiently Participating In Social Impact Investing?
By Bruno Marcoux on The Capital
Did you ever think to make the world a better place and make money while you are striving to do so? If yes, then how? This concept can be said as the aim of social impact investing. You receive the best of both the worlds as you get to help yourself and the others at the same time.
What Is Meant By Social Impact Investing?
Social impact investing is the investment of the capital bearing the specific objective of gaining a positive social or environmental impact, and as well as the financial return. This is very different from traditional investing and responsible investing. In the former one, our main objective is to achieve a financial return, and in the latter one, we refrain from investing in the companies that result in harming others like the tobacco company. The impact of investing goes beyond the concept of “do no good” to “do no harm” for society.
The impact of investing is a social approach which crosses all the themes, asset classes, and geographies. It has reported an annual growth rate of about 15% to have over $500 billion of the invested amount, as noted in 2019 by Global Impact Investing Network.
Hurdles to the Social Impact Investing Mainstream Adoption
There are certain problems to mainstream adoption as an investment vehicle. The first and the foremost is that the opportunities required to invest in the environmental and social causes are often in the underdeveloped regions, where there tends to be a lack of the standards and norms in order to regulate this sector. This might create issues with transparency, especially during the data about how the funds are being used must be provided back to the investors. This also makes it hard to measure the results of their impact. In most of cases, data is stored on the inefficient, outdated systems making it challenging for data input and analysis.
Can Blockchain Be Counted As A Solution?
It is known to all that Blockchain technology underpins and powers the Bitcoin. This technology was later extended to the other types of cryptocurrencies. Nevertheless, it is also emerging as a technology, finding applications in the areas other than the cryptocurrencies. As it utilizes decentralized distributed ledger, it makes particularly useful for the applications needing transparency such as the case of impact investing.
Blockchain also creates accountability as the data is not stored by a single individual. All the users of the network have equal access to the information and share in the keeping of its record. In order to increase the trust amongst the users, it is of utmost necessity to have a ledger granting access to all users. All the transactions that are performed within the network are entirely transparent. Any user at any time can see the funds that are being received and managed. They can also track the way their investments are contributing to a cause, and if it is fueling the desired outcomes. These records are immutable, meaning that once recorded, they cannot be changed.
Blockchain is also capable of cutting out the need for a financial middleman that results in the reduced transaction times and fees for service. This increased efficiency determines more of the capital allocated for a cause that will be used for that cause.
