How blockchain technology is reforming the impact of ESG investing

ESG investing has significantly transformed since its inception in the 1960s. Back then, companies could reap rewards just from reporting their ESG efforts – environmental, social, and governance acts – without needing to prove any real impact.

But amid recent “greenwashing” accusations and the consequent rise in regulation, transparency, and proof of impact are becoming key challenges of ESG investing today.

The KimboCare founders believe blockchain will be the answer to improving ESG reporting and accountability. Blockchain’s ability to collect and analyze large amounts of data will be vital for implementing standard metrics. It will also be pivotal for other related goals, such as achieving universal healthcare through value-based care systems.

We talk a look at the current ESG investment environment and how blockchain might address some of the challenges:

- ESG impact investing and challenges

- Blockchain technology in ESG reporting

- Applications of blockchain to ESG investments

Challenges in proving the impact of ESG investments

Besides investors demanding transparency and accountability, company leaders also want to make a real impact. In a poll by Domini Impact Investments, more than half of respondents chose achieving ESG goals over investment performance. 

However, Deloitte’s research in Switzerland shows that the practice of one-off, “feel good” campaigns prevail as companies struggle to “create value” from them. These challenges are partly attributed to the lack of data standardization, which hinders companies from justifying scaling their campaigns.

Another obstacle is the difficulty of effectively collecting data across various third parties in the supply chain. This is especially compounded when managing international stakeholders. These data silos make it difficult to report and be transparent about the entire supply chain. In-depth reporting can also be costly from a human resources perspective.

This is pushing the adoption of technology at a record rate, for several reasons:

- To digitize and automate data collection for better and easier measurement

- To improve standardization of data to measure real impact across various stakeholders

- To boost transparency and provide a basis to justify scaling ESG investments 

- To meet the rapidly changing ESG regulations for reporting and transparency

In many cases, technology will be the only cost-effective solution to deal with the large data requirements and security and privacy for international stakeholders.

How blockchain technology is improving ESG reporting

Companies are increasingly exploring how technology alternatives can improve the current issues of transparency and boost trust in ESG investments.

Blockchain technology offers numerous applications in the ESG environment. Decentralized, peer-to-peer systems can facilitate better collaboration, transparency, security, consistency, and processing times between multiple stakeholders.

The OECD Global Blockchain Policy Forum lists the potential benefits of blockchain:

- It can strengthen cross-border commerce and international regulatory cooperation

- It can facilitate linking companies with investors

- It can bring new levels of transparency to the digital economy.

The founders of KimboCare similarly believe that blockchain could overcome many of the challenges related to ESG investing. They have developed innovative blockchain-enabled tokens – called ‘health credits’ – to enable companies to drive healthcare access at large. Companies can purchase medical services for communities in need while enjoying full traceability on how their investment is impacting the end patient on the ground.

The token essentially enables transparency throughout the whole process – from the ESG health investment to the actual delivery of care – with the commitment to deliver the best care possible at affordable rates. 

“We found that an integrated data system between patients, medical providers, and investors could breakthrough the data silos that typically hinder measuring ESG impact,” says KimboCare. “For example, healthcare data is usually isolated in legacy systems between clinics, hospitals, and pharmacies. By creating a centralized platform with real-time data, all stakeholders can customize their campaigns as they monitor where funds are spent, the quality of care, and the direct impact of each effort.”

Similarly, the UN’s Climate Chain Coalition project has developed several projects to advance the development of blockchain digital solutions. Let’s look at a few common use cases in more details.

Traceable transactions for ESG investments

One of blockchain’s main attractions is that it can provide a traceable record of transactions that is relatively resistant to altering. This is especially useful when applied to monitoring supply chains to track the environmental and social impact of each step.

Blockchain also simplifies recordkeeping for financial digital assets and boosts security for fund management and large transfers across the world. As Blockchain enables more automated data collection across various sectors and bypassing traditional financial providers, ESG investors can facilitate faster investments and reach their ESG typically at a lower cost.

With a secure and transparent environment, corporations will be able to invest with more trust and find effective ways to scale their investments. Further enhancements in data collection and management though AI and Advanced Analytics will also keep them in line with changing ESG regulations.

Carbon tracing is one of the most common applications. Tracking ‘carbon credits’ is one way that companies or people can monitor their carbon footprint,then buy credits to offset their impact. Carbon X and Poseidon are two examples in this field.

Similarly, with KimboCare’s“health credits”, medical services can be prepaid by a sponsor (a company or an individual) for use by a person with limited means. Companies aspiring to boost their KimboCare’s “health impact index”, simply partner with KimboCare to purchase health credits and deploy targeted health interventions at a community level.

Another popular application is when blockchain is utilized to facilitate access to personal information, contracts, and certifications.

Distributed access to ESG investment data reports

A key challenge is getting access to various sources of isolated or fragmented data.Another issue is that the data is not often standardized or compatible across multiple systems, making it difficult to create valuable metrics and justify ESG impact.

An advantage of blockchain is the ability to create shared data environments, enabling both internal and external stakeholders to access the same data, no matter where it is actually hosted or changes made to it by any one stakeholder. This ensures stakeholders are always working with updated and accurate data and reduces inconsistences across departments.

As Blockchain enables decentralized access to federating data platforms, investors also gain better control and more holistic visualization of their metrics, rather than relying on separate third parties to supply the data. With consistent and transparent data collection, metrics can be measurable and easily verified, driving faster, data-driven decision making as well as more robust analyses and ratings of ESG portfolios.

Moreover, the combination of data sources across sectors enables investors and organizations to gain end-to-end, real-time business insights on the use and performance of their investments. In light of such findings, leaderscan manage risk, close quality gaps, or meet unmet needs, eventuallyredirecting investments and uncovering opportunities to create true sustainable value.

In a simple example, remote communities in Africa during covid-19 were able to better coordinate allocation of limited vaccines and health staff by coordinating health efforts via the app ReportCovidCase.com. Another example is KimboCare’s integrated data platform, which helps pin point gaps in the supply chain and monitorquality and outcomes of healthcare funds.

“Our centralized data breaks the issue of datasiloes because we can see what’s happening across the healthcare process,” says KimboCare. “We can use this data to see where healthcare investments are beingutilized and even create best practices in medical delivery. We share this information back to investors who can funnel their investments to make the most necessary impact.”

In the future, this could increase the customization of investments, where people can more easily and more intentionally choose specific funds that are more important to them, such as healthcare, women-led funds, or plastic-free initiatives.

Digital systems like blockchain, when used well,reduce costs and time by automating data collection and reducing the dependency on human resources.

Efficient financing services

Developing new financing systems and incorporating blockchain-enabled tokenization opens many possibilities to sources of funding. Digital financing assets also reduce costs by removing the dependence on intermediaries. For example, KimboCare converts funds into ‘health credits,’ which can be used to cover healthcare costs in numerous countries without needing to use foreign exchange or banking services. 

Additionally, decentralized or democratized financing can help funds reach remote and often excluded populations. Transfer costs are typically lower than traditional services, and funds can be securely transferred via a mobile phone to make payments, significantly reducing financial barriers for the unbanked populations.

Blockchain could also better facilitate smaller funding efforts or one-off donations from the general population. People from all around the world could pay directly to cover a specific need for underserved populations. This is one potential application of KimboCare’s healthcare platform, where anyone in the world could purchase medical treatment for people in African countries.

Collaboration to solve ESG challenges

Centralized systems allow various stakeholders to communicate and work on joint projects regardless of their location.

In recent years, a number of giant partnerships have formed to tackle complicated environmental and social issues. For example, six big banks came together to work on decarbonizing the steel industry, and a range of companies with big fleets partnered to call for federal standards on EV charging and payments.

Blockchain is useful to keep a centralized record and provide actionable insights from the aggregated data. In this way, real impact can be measured and optimized, which is meant to be the underlying goal of any ESG investment.

The future of ESG Investment and blockchain

Blockchain is the future of ESG

Blockchain is vital to tackle some of world’s biggest issues today and create real ESG impact. Despite the record growth into ESG funds, there is still a large gap in the tools and technology needed for better reporting. End-to-end digital solutions, such as KimboCare’s health platform, will increasingly become vital as companies must prove their true, sustainable value. 

Blockchain enabled technology will provide companies with dedicated solutions to prove their tangible impact while keeping reporting efforts at a reasonable cost while unveiling effective ways to scale their investments without burdening human resources.

The ultimate outcome will be that organizations can move from beyond merely ‘good intentions’ and ‘feel-good campaigns’ to driving real ESG change with scalable and transparent projects.

The imperative of collaboration

Centralized systems allow various stakeholders to communicate and work on joint projects regardless of their location.

In recent years, a number of giant partnerships have formed to tackle complicated environmental and social issues. For example, six big banks came together to work on decarbonizing the steel industry, and a range of companies with big fleets partnered to call for federal standards on EV charging and payments.

Blockchain is useful to keep a centralized record and provide actionable insights from the aggregated data. In this way, real impact can be measured and optimized, which is meant to be the underlying goal of any ESG investment.