UN Secretary-General António Guterres believes that trillions of US dollars are needed annually to achieve the 2030 sustainability goals. The question that arises: “Where does this come from?” Official aid, charitable work and public financing are insufficient, which means that the stock is turning towards private capital to finance sustainable development projects.
On the topic: The UN Decade of Implementation requires Blockchain technology to succeed
But the gap between financing and environmental impact is not the source of private investors ’confidence in financing development projects. India, the Center for Resilience Risk and Innovative Interventions, is an example of this gap. Between 2014-2015 and 2018-19, CSR or CSR spending on nearly 1,100 Indian listed companies increased by 16%, while India’s score in the United Nations Human Development Program increased by nearly 1% in total. Annual growth rate, or CAGR. Ironically, most corporate social spending in India goes to education and health services – specifically the sectors that the HDI focuses on.
Time for blockchain technology
Could blockchain technology be a practical solution? This may be due to development projects measuring the measurement, reporting, verification, or measurement, reporting and verification processes to measure project results and impact. Most of the readers know that distributed ledger technology stores data packets in blocks on the network, and the need for independent verification by network users makes records transparent, secure, verifiable, and immutable. These are the features that the blockchain can use to improve its measurement, reporting, and verification processes, thus improving the ability to review data and reduce false reporting / data fraud. This may encourage private equity to consider investing in this area.
Moreover, if we wanted to define the exact activities of a typical development project that might involve blockchain technology, it would collect and tag data at the project level for monitoring purposes. The problem is that many under-resourced development projects, especially in developing countries, still collect field data manually, which can lead to inaccuracies, errors and fraud. With blockchain, this data can be collected and reported in a secure, transparent and verifiable manner.
In addition, the negative impact is reinforced by the fact that local institutions in developing countries implementing such projects often lack systems to ensure that the data they report can be verified. The weakness of the rules in such countries makes it difficult to hold such domestic institutions to account. Add to that the distance between foreign investors and these local projects, and it becomes difficult to stay on the same level.
Blockchain can reduce risk to these local enterprises, increase the reliability of the data they report to impact, and give confidence to private foreign donors / investors to fund such development projects.
Blockchain and MRV operations
This means that more funding can be directed to the local level. In 2017, the International Institute for Environment and Development estimated that only 10% of $ 60 billion in public and private climate financing is directly linked to the local level, due in part to perceived data risks. Using the blockchain to improve measurement, reporting, and verification can make it easier for local organizations to access capital.
Thanks to blockchain technology that allows local enterprises to report verifiable performance as part of their measurement, reporting, and verification processes, local development institutions can have more capital flows. An example is the Amazon in Brazil. The Rainforest project is using the blockchain and the Internet of Things to record and transmit data from electricity meters, robotic devices, and emissions monitors related to environmental impact. The remote sensing satellites independently verify the status of the fixes, at which point the smart contracts on the blockchain reward farmers saving their rainforests directly. Performance data can be verified, and eliminating middlemen in transferring incentives reduces management costs and outflows.
Measurement, reporting, and verification processes with blockchain support help eliminate middlemen when issuing social or sustainable bonds, thus reducing issuance costs and allowing small firms to access the bond market or pool smaller assets into bonds. Spain’s leading bank, BBVA, is already using the blockchain to structure bonds and green loans.