Trillions of dollars are needed to achieve the 2030 Sustainable Development Goals. This is according to United Nations Secretary-General António Guterres’ estimations. There is a need to move towards private funding of sustainable development projects as official development aid and public coffers are way overstretched. Are private investors ready to splash the cash towards global development?
Most private investors worldwide take caution when it comes to investing in these projects due to several factors. One of the factors is the gap between funding and the environmental impact. It makes private investors cautious towards funding development projects due to a lack of confidence.
Can Blockchain Offer Solutions?
Well, blockchain technology might be the solution to achieving Global Sustainable Development Goals. How is this possible? In case you are wondering, these projects need measuring, reporting, and verification, commonly known as MRV processes to determine their outcome and impact.
So how does blockchain technology come in to aid? Ledger technology, a critical element of blockchain, stores data blocks in blocks of a blockchain network. This makes independent verification from users a straightforward process. Hence, this makes the network transparent, secure, and immutable. That’s the blockchain for you, in case you aren’t familiar with the technology.
Through these features, blockchain can better the MRV processes thereby improving data collection and audibility. Eventually, this will boost private investors’ confidence in funding development projects.
How will Blockchain Improve MRV At The Local Level?
Lack of proper systems that ensure critical data verification may significantly affect local institutions in developing countries when implementing development projects. Due to this, it may not be comfortable to hold such institutions accountable. This may cause concern to potential foreign investors. When this happens, it creates a gap between local projects and the investors.
By investing in blockchain technology, the local institutions can reduce the data risks, boosting accountability by improving their data validity. Doing so will also increase foreign investments. Why? Because this will instill confidence in private investors and donors from abroad.
Data collected by the International Institute for Environment and Development in 2017 indicates that only 10% of the $60 billion invested in public and private climate finance is directed to the local level. This might be due to the perceived data risks to which blockchain may offer solutions.
Blockchain technology can improve MRV facilitating continued access to capital at the local level. The infrastructure will enable these institutions to gain foreign donations and investment. This is all thanks to verifiable MRV processes’ performance.
There are examples of local projects that are already benefiting from using blockchain in their MRV processes. Brazil’s Amazon development project is a great example. The project relies on blockchain technology to record and transfer data from electrical meters, robotic appliances, and emission monitors. This makes it easy for the local institution to monitor the impact of the project on the environment.
The project also uses the technology to reward the farmers who preserve their rainforest patches through blockchain smart contracts. It reduces administrative costs as the data is verifiable.
Moreover, blockchain-based MRV processes enable the following:
- Removes intermediaries
- Creates sustainable bond issuance
- Reduces issuance cost
- Making it possible for small organizations to access the bond market