Proof of Impact

The idea of carbon credits is not new. Governments and companies have been buying and selling them for years. But the problem has always been that there’s no way to know if the money you paid for a carbon credit was actually spent on an environmental project or just frittered away.

Now, we can finally solve this problem with “Proof of Impact” (PoI). Here's how it works: A company or investor purchases carbon offsets from a verified carbon offset partner. ImpactScope automatically posts proof on the blockchain that they purchased the credits, which are then retired permanently from any further transactions.

PoI has been defined for ImpactScope by following the framework provided by the Global Impact Investing Network (GIIN) and which has been specialized for our use case. In essence, the framework of GIIN requires three elements: intentionality, additionality and impact measurement. Intentionality requires the will of the user of the token to contribute to generating a positive environmental benefit by combating climate change. Additionality measures the contribution of the investment in terms of what would have happened if the investment would not have been done. As such, the offsetting projects proposed by the token will focus on areas that otherwise would have unlikely obtained financing, such as developing countries. Finally, the token will measure the amount of positive externalities – in our case tons of CO2 offset – generated by the offsetting projects.

The ramifications of this are huge. Tokenization ensures that all money spent on carbon credits goes towards verified environmental projects, it makes sure that no unspent funds remain in some backroom somewhere and can’t be traced back to their original source, it solves the problem of fraud and mismanagement in the carbon credit markets, and also makes sure that carbon credits are only purchased by verified buyers who will actually use them to offset their emissions. In addition we create new revenue streams for environmental projects that would otherwise be unable to compete with more traditional funding sources like grants or loans.

PoI can be illustrated by example across a variety of initiatives:

• Carbon Offsetting on crypto exchanges - Each token represents a set amount of kgs of CO2 / token, with the token holder getting a set kg offset. A higher price can still be justified in this scenario by a higher market price for carbon offsets as well as access to new and innovative offsets which ImpactScope will be developing. Furthermore, exchanges that are offering ImpactScope’s offsetting API solutions using the token will also automatically have visibility and liquidity of these offsets.

• Fractionalize traditional Verra or Gold Standard offsets – working together with offsetting developers, by fractionalizing already existing and future offsetting projects, we will provide a clear and transparent platform to provide easier access and tracking as well as instant ownership without extra needless interaction with intermediaries.

• Tokenizing aspects of marine and wildlife conservation. Marine plants and animals have significant carbon sequestration capabilities, even though there are very few certification programs which deal with validating offsets from such projects. ImpactScope would like to provide a protocol for the tokenization of blue carbon.

• Incentivising developments of innovative and scalable social initatives– In the same spirit as we discuss tokenizing CO2 here, other measures of social and environmental impact may be quantified and tokenized; ie disease prevention, human trafficking, literacy rates, poverty, etc…

• Monitoring impact of investment as sustainable investments frequently lack reliable data to measure the success of such investments. Frequently, the focus is on the amount spent without being able to measure the impact, also considering the requirements for additionality and intentionality. As such, the measurement of impact can represent a further revenue stream obtained from impact investors willing to monitor the performance of the funds invested while increasing transparency and traceability.