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From Credit to Credibility: Sustainable Finance in the world of Web3

Last week CreDA had the privilege of presenting to ADFSS as a sustainability innovation champion.   We highlighted how today, the World Bank estimates that nearly 4 billion people have inaccurate or no credit history at all. In the US, the FTC has reported that 79% of all credit reports contain errors. Instead, financial institutions rely on poor, inaccurate data and a lot of guesswork, which leads to inherent bias, resulting in the Credit Paradox that keeps the unbanked from accessing capital in order to better their lives.

This is where Web3 can help. By using blockchain technology, AI models and smart contracts, we can create more accurate, unbiased data that is also transparent and ownable by the user. What’s more, for the growing sustainable finance and circular economies, this same model can help institutions understand and measure the impact of their investments while empowering and rewarding communities for positive behavioural change.

As we shift to sustainable finance models, investors are faced with many of the same challenges: lack of trustworthy data to make sound investments and lack of transparency for how investments are deployed and impacting communities. With green washing, half-baked science and a culture of celebrity, there are many distractions.

According to a recent study by The Rockefeller Foundation, 70% of surveyed investors felt misled by sustainability claims made by companies they invested in. And there are many examples of this kind of greenwashing happening every day—from large corporations like Tesla and Levi Strauss & Co., who have been accused of greenwashing; to smaller companies like Appalachian Sustainable Development LLC (ASD), who recently settled with the SEC.

By improving the quality and the transparency of data and connecting directly with the communities themselves, we can build trust in the sustainable finance system and encourage ongoing positive behaviours, making it truly sustainable.

The future of transparent, sustainable and impactful investment
The technologies that enable Web3 can help ensure that capital flows directly to those that are making material change while informing investors on where to place the right bets. This is not just a technological phenomenon, it’s a material shift in how financial institutions can directly influence positive change. It’s a new credit model that is unbiased and can be accessible to everyone, can help reinforce sustainable behaviours, and unlock capital for those who add value into a circular economy.

Web3 supports a promise to sustainable investors that they can make a return on investment while making a return on impact and giving credit where credit is due to those making real change in the world. 

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