Modern technology makes investing in the future easy
Last week the Nordic Blockchain Association was invited to speak at the Copenhagen Impact Investing Days (CIID) – a conference for social entrepreneurs, investors, philanthropists, academics and policy makers held by the Copenhagen Business School (CBS).
The Nordic Blockchain Association was asked to speak during a specialised session on Blockchain for Impact Investing, focused on the decentralized, transparent and democratic aspects of blockchain technology and was asked to outline, how the technology can help facilitate low-entry investments and identify future impact investing opportunities.
According to the Global Impact Investing Network (GIIN), Impact Investing ”is the practice of Investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return”.The aim of the conference was to help formulate a research agenda ”that will help understand the effectiveness of impact investing. This in turn is intended to guide investors towards implementing impactful investment strategies.”
In other words, Impact Investing can be viewed as business-logics applied to development aid, a sort of conscientious investment strategy that opens the development-space to private capital and official development aid in concert. Leveraging the strengths of blockchain technology can make impact investing both easier and more…. Impactfull.
Transparent and decentralised
While most investment opportunities, both national and personal, are likely safe and honest, the issue of corruption (on many levels) and mis-appropriation of funds is a salient subject in the public debate about development funding, and expectations of misallocated funds threatens donations aid-donations. One of the key-traits associated with blockchain-technology is the transparency of data-transactions when verified across a large decentralized network of nodes. Essentially, what happens on a public blockchain is easy to double-check and trace.
“There are many complexities buried in the matter, but simply put, using the blockchain to move money around allows for high trust. A key characteristic of blockchains in general is that they are open databases with transparency in regards to transactions that take place on the system. This opens up new possibilities of tracing where your monetary investments go every step of the way. In the future it will allow for a more realistic, real-time assesment of investments.”, explains Nikolai Søndergaard, Chairman of the Nordic Blockchain Association.
He continues by underlining, that the point is not to suggest any specific levels of corruption or negligent behavior, nor that blockchains could combat such fully. But, the blockchain allows individuals to monitor their own investments (or ones made collectively) enabling trust over time.
Another strong asset that can be derived from using blockchain technology to invest in development is the potential analytical gains that strong, verifiable data-sets provide – the opportunity to make better informed, intelligent choices down the line.
“As an example the blockchain can provide the data to assess which investment opportunities are more popular with private individuals as opposed to direct foreign aid and perhaps that allows us to prioritize better”, says Nikolai Søndergaard.
Crowdsourced and accessible
Perhaps the most interesting thing about blockchain technology seen from an impact investing perspective is the peer-to-peer, crowdsourcing aspect. Having access to efficient ways of moving finances efficiently and with great independence enable much higher amounts of small scale investments.
“Simply put, blockchain networks and crypto-economies simply make it easy to invest privately in impact projects anywhere on earth, if the issue is appealing”, explains Nikolai Søndergaard.
Blockchain technology also allows for a reverse crowdsourcing logic, where services rather than finances appear decentralized. Using auto-executing smart-contracts conventional foreign aid could be used to simply buy fragmented “development services” instead of establishing and maintaining traditional development programs.
This report from the Danish Ministry of Foreign affairs dives further below the headlines presented above and is worth a read.
A real need
According to the United Nations Development Program (UNDP), the organisation championing the Sustainable Development Goal’s (SDG’s), there is a significant need for private investors keen to create impact. If the organisations official development-playbook, the SDG’s, are to be met.
The organisation estimates that the price-tag associated with meeting the SDG’s by 2030 to be between 5 and 7 trillion USD. However in 2016 the total official international development aid peaked at 142 million USD which is a far-cry from the goal. According to the same blog the lion’s-share (50-80 percent) of the funds needed are likely to come from sovereign governments developing their own economies and infrastructure, while the remaining finances could potentially be raised as private investments. And there is money to be made. Citing outside research by the UNDP suggests that meeting the SDG’s could open up a “12 trillion USD of market opportunities in food and agriculture, cities, energy and materials, and health and well-being alone and create 380 million new jobs by 2030.