Introduction

The report examines how impact tokens, powered by blockchain technology, can support the United Nations Sustainable Development Goals (SDGs). By tokenising assets and enabling smart contracts, impact tokens address inefficiencies in current investment systems. They provide innovative solutions to mobilise funding for SDG-aligned projects by enhancing transparency, trust, and financial inclusion.

Financing the UN SDGs

Achieving the SDGs requires USD 5–7 trillion annually, with a USD 2.5 trillion investment gap in developing countries. Governments currently provide 64% of funding, but private capital is essential to bridge this gap. Tokenisation reduces investment barriers by enabling fractional ownership, facilitating capital flows, and increasing liquidity, which can attract private investors.

Impact investing

Impact investing, valued at USD 502 billion in 2018, seeks to generate measurable social and environmental benefits alongside financial returns. However, barriers such as limited exit options, fragmented definitions, and inconsistent impact measurement hinder growth. Blockchain and impact tokens offer tools to address these challenges by improving data reliability and fostering market standardisation.

Impact tokens

Impact tokens are blockchain-based digital representations of value. They enable secure, transparent transactions and programmable contracts. These tokens enhance trust, reduce transaction costs, and incentivise sustainable behaviours. Applications span sectors such as agriculture, fisheries, energy, and education, creating efficient markets for non-financial assets like carbon credits and impact metrics.

Ten case studies demonstrating the benefits of impact tokens

Case studies highlight the transformative potential of impact tokens:

• Fishcoin incentivises data sharing in fisheries, addressing a global problem where 90% of marine stocks are overfished, and 35% of catches are wasted.
• Plastic Bank promotes recycling by offering tokenised rewards, providing financial inclusion benefits for vulnerable groups, such as women and children.
• SolarCoin supports solar energy production by rewarding installations with tokens, improving payback periods.
• Veridium streamlines carbon offset markets, digitising processes and boosting transparency.
• Projects like HARA and REDD-Chain demonstrate the integration of blockchain, IoT, and AI to improve agricultural and forestry practices, enhance data accuracy, and incentivise local participation.

How impact tokens address the challenges of impact investing

Impact tokens tackle key barriers in impact investing:

• Access to capital: They reduce entry barriers, enable fractional ownership, and create secondary markets, broadening participation and attracting small-scale investors.
• Market fragmentation: Tokenisation increases liquidity, connects disparate market participants, and standardises processes, fostering scalability.
• Exit options: Tokenised securities offer peer-to-peer trade, mitigating liquidity risks and enabling efficient exits.
• Impact measurement: By digitising and automating data collection, impact tokens address attribution challenges, improving trust and accountability.
• Incentivising behaviours: Tokens reward positive actions, such as energy-saving (e.g., Energi Mine) or adopting sustainable farming practices, promoting alignment with SDG goals.

Conclusion

Impact tokens have the potential to unlock investments needed for the SDGs by reducing transaction costs, fostering trust, and providing verified impact data. Recommendations include developing guidelines for impact token adoption, promoting collaboration between public and private sectors, and supporting ventures that standardise impact measurement. While still in its early stages, the technology shows promise for scaling sustainable investments and addressing global financing challenges.