Blockchain technology can help to restore trust in 2020 – so what?

The growth of Environmentally Social and Governance investing (ESG) is becoming a more and more popular asset class, driven by investor interest and the realisation that companies that are mindful of ESG do create better returns over the long term.

Looking globally, the Global Impact Investing Network (GIIN) claims there are over 1,300 organisations responsible for over $500 billion of funds under management around the world. Trust and transparency are among the key challenges that often deter investing in ESG initiatives. However, Blockchain technology systems can help build trust and ensure transparency, as every transaction (be it in receiving funds, managing them or tracking how these funds are utilized) is recorded.

Against a backdrop of ‘fake news’ and where trust in NGOs, governments, media many traditional institutions is at an all-time low, according to Harvard Business review. Any way that trust can be restored can be no bad thing. Indeed, one could argue that it is vital, not just for fund managers and corporations to find ways to rebuild trust, but it is vital for governments too  – which may, in part, explain why more and more governments are exploring how Blockchain technology can help by offering transparency and a source of information that is immutable and can be verified.

Populism is a political and social phenomenon which arises with ‘the man on the Clapham Omnibus’ being fed up with:

• wealth and opportunity gaps
• perceived cultural threats from those with different values across the country, and from outsiders
• the “establishment elites” in positions of power
• governments not working effectively for them

The rise of populism ought not to be ignored. Just look at the riots in Hong Kong, Chile, Iran, France and Barcelona, to name just a few. However, if systems can be introduced, not only to hold governments to account, but also to be made freely available for citizens to track and trace that what they are being told is actually happening, then trust and confidence ought to be restored.

Blockchain technology could prove to be a very helpful tool to help ‘weed out’ corruption, thus reducing the size of the shadow economy and giving citizens more confidence about what they are being told.

There are a number of people who express a dissatisfaction with the status quo of alternative investments, where they are made to choose between doing well for themselves (and doing good for others) or indeed the environment. ‘Conscious Capital’, as it is sometimes referred to, is where investors have monies they wish to invest in a more mindful manner –  and usually in a measurable, tangible way. This is how Blockchain technology is able to help.

One of types of a very sustainable and environmentally-friendly investment category is forestry which, since 1972, has returned 11% p.a. and more importantly, has achieved this return in a very uncorrelated manner compared to other assets such as property, bonds or equities.

A Danish firm has recognised the potential of investing in forestry, Ekofolio using Blockchain technology enables access to proven sustainable forests. Ekofolio, is in the Danish Financial Supervisory Authoritysandbox, is also trying to make the process of investing accessible for smaller investors by offering a digital share class, backed by forests.

Meanwhile in the US, a company called Regen is using Blockchain technology in order, as the US Rain Forest Foundation describes, “to track, verify, and reward communities for protecting and regenerating forests”. It is using smart contracts to help make automatic payments to those farmers who are able to demonstrate they are farming in a more environmentally and sustainable way.

The Blockchain- powered platform enables local communities to, in effect, engage with investors and donors as it ensures that donor payments get to go where needed – and anyone can also track how much went where, and when.

This enables businesses, institutions, governments, and individual donors the ability to find and pay for verified evidence of forest protection from data sourced directly from a community and satellites.

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