Social funding could potentially receive a significant boost through the trading of impact credits, according to a recent report.
In a groundbreaking development, a new type of currency known as Impact Credits is making waves in the world of social and environmental progress. These innovative credits reward actions that generate public goods, such as improving education, reducing emissions, or supporting vulnerable groups. Similar to carbon credits, impact credits are traded in open markets, providing a business case for social and environmental progress [1][3].
The issuance of impact credits is based on entities achieving specific social or environmental outcomes. For instance, a project that improves access to education might receive credits for every child it educates beyond a baseline level. The outcomes are then verified by independent auditors or monitoring bodies to ensure integrity and accuracy [1][3].
Once verified, these credits are traded on digital marketplaces, allowing buyers to purchase them to support projects or outcomes they value. In some cases, credits can be redeemed for goods or services, similar to how digital currencies work [1][3].
Examples of existing schemes include South Korea's Social Progress Credit (SPC) Programme, which has mobilized over $360 million in verified social value and disbursed $52 million in rewards to over 400 social enterprises [1][3]. Another example is Zlto, a digital rewards platform in South Africa, where young people can earn digital currency for engaging in community work, training, and micro-tasks, which can be redeemed at over 3,000 partner retailers [1][3].
New digital marketplaces, such as Common Good Marketplace and OutcomesX, have emerged, allowing companies, donors, and governments to support community impact [3]. These marketplaces demonstrate how impact credits can boost funding for social and environmental projects by providing a tangible economic value for positive outcomes.
The report, titled "Redefining Value: From Outcome-Based Funding to Tradeable Impact," was developed by the Schwab Foundation, SK Group's Center for Social Value Enhancement Studies (CSES), and Rockefeller Philanthropy Advisors. The report suggests that trading impact credits could generate revenue for impact-driven enterprises and become a powerful lever for change, where innovation uplifts and doing good is a strategic advantage [1][3].
However, the report also warns that poorly designed markets could amplify inequities, exclude grassroots actors, and reduce impact to tokenized data points. To address this, the report identifies six key enablers for scaling the model responsibly: shared frameworks, methods for assigning value, digital infrastructure, verification systems, financial and regulatory incentives, and governance frameworks [1][3].
The authors state that impact credits are not a silver bullet but could be a cornerstone of efforts by governments, companies, financial institutions, social entrepreneurs, and NGOs to ensure systems serve society [1][3]. Greg Spencer, CEO of Common Good Marketplace, commented that tradable impact offers a solution to rethink how progress is paid for [1][3].
Daniel Nowack, head of social innovation at the Schwab Foundation, believes impact credits are urgently needed to help offset constraints on social funding and falls in global development aid [1][3]. Achieving this goal requires investments in infrastructure that supports both scale and inclusion, from interoperable data systems to shared verification standards [1][3].
While the report does not mention any new facts about the European states, SDG Outcomes Fund, Klima fund, or Dexter Energy, it offers a roadmap to scaling up the development of impact credits as a means of generating funds for social impact [1][3]. The report was launched in mid-June at a meeting in Seoul.
- Impact credits, which reward actions generating public goods and are traded in open markets, are becoming a business case for social and environmental progress.
- These credits, based on achieving specific social or environmental outcomes, can be issued to projects improving access to education, for example, for each child educated beyond a baseline level.
- Once verified, these impact credits can be traded on digital marketplaces, allowing investors to support projects they value, or redeemed for goods or services, similar to digital currencies.
- Existing schemes, such as South Korea's Social Progress Credit Programme, have already mobilized significant funds for social value and rewarded over 400 social enterprises.
- New digital marketplaces, like Common Good Marketplace and OutcomesX, are emerging, enabling companies, donors, and governments to support community impact.
- The report "Redefining Value: From Outcome-Based Funding to Tradeable Impact" suggests that trading impact credits could generate revenue for impact-driven enterprises and become a powerful tool for change.
- However, the report warns of potential issues such as amplifying inequities and reducing impact to tokenized data points, and proposes six key enablers for responsible scaling of the model.
- Daniel Nowack, head of social innovation at the Schwab Foundation, believes impact credits are urgently needed to help offset constraints on social funding and falls in global development aid, requiring investments in infrastructure that supports both scale and inclusion.
