As philanthropists and impact investors pour money into social and environmentally focused businesses and projects, a nagging question often hovers over their efforts: Is the capital actually ending up where it is intended, and is it delivering impact in a measurable, tangible manner?

The Global Impact Investing Network (GIIN), an industry group, says that investors committed $22.1 billion to projects that deliver both financial and social and/or environmental purpose in 2016. Philanthropies increasingly believe that putting money into social businesses rather than issuing grants to nonprofits brings bigger, more sustainable, returns. And a wide array of mainstream funders, including pension and sovereign wealth funds, have recently entered the impact investing field. One prominent example from 2017: the $2 billion Rise Fund backed by TPG, a private equity firm, and a host of celebrity investors including Richard Branson and Bono.

However, a lack of measurement and verification standards may be holding back further capital flows in the impact investing sector. GIIN’s survey last summer of more than 200 funders found that 40% see data about performance as a “significant” or “very significant” challenge.

Could blockchain technology come to the rescue? The Ixo Foundation, based in South Africa, believes so. It is developing a “proof of impact” protocol allowing data about projects–for example, that a child has been vaccinated or that a tree has been planted–to be recorded on a distributed ledger (a blockchain). This enables the claim of impact to be verified as legitimate and for funders thousands of miles of away to see that their money has been well spent. It also creates a new asset class, a cryptographic token that’s issued as the claim is authenticated, that could become the basis for a more organized, regulated form of investing.

“By tokenizing information related to impact we can create new kinds of information assets,” says Ixo’s cofounder Shaun Conway, a veteran technologist in sustainable development. “Funders can fund an end-organization [that delivers a service] but fundamentally what they are buying is proof of the impact: a new digital asset that creates an opportunity for a new economy.”

Ixo is involved with several initiatives that could help make the case for a verifiable impact token. One is Project Amply, which is digitizing the management of South Africa’s $200 million early education program. The program serves about 700,000 kids aged two to five across thousands of small centers around the country.

Currently, when these centers want to claim subsidies for the services they provide, they submit lengthy attendance reports to the Department of Social Development. Administrators need to review the reports before sending out payments to the centers’ bank account. The system is time-consuming, expensive, and prone to error or even fraud (for instance if the centers wanted to put ghost kids on their attendance sheets).

Now, backed by grants from the UNICEF Innovation Fund and Innovation Edge, a local investment fund, centers can use a mobile app to record attendance. Children are given self-sovereign identities on a ledger. So when a child arrives at school and is logged in, the system generates an impact token that the school can redeem for subsidies from the government.

The Amply project is one example of how blockchain technology can be used in development to improve transparency, cut costs, and reduce corruption. Several aid agencies and charities, including the United Nations World Food Program, are already using a blockchain-based system to distribute payments and track their impact. But the potential of blockchain goes beyond simply being a new mechanism for distributing funds. It could also offer a new way to raise funds for projects under the rubric of the Sustainable Development Goals, which aim to end poverty and hunger, curb climate change and conserve oceans, forests and other natural resources.

Impact investors and philanthropic groups are increasingly aligning their funding around the SDGs, according to a recent report from the GIIN. But Conway argues there is a need for greater assurance that investments really produce hoped-for results, and for cutting the cost of evaluating projects. Estimates show that evaluating the effectiveness of development projects costs as much as 5%-7% of the overall budget. Social impact bonds, where public agencies contract with investors and service providers to deliver pre-agreed outcomes (like cutting the rate of prison re-offending or improving childhood literacy) are thought to be even more costly. Evaluation, which is crucial for assessing whether investors should be paid a return on their investment, could go as high as 30% of a social impact bond’s costs, according to some research.

The tokenization of impact events–say that a child is attending a school–potentially opens up the impact investing market. Much as initial coin offerings (ICO) allow anyone to invest in companies issuing tokens for sale, the Ixo impact protocol could let more people become involved in funding social and environmentally oriented projects around the world, Conway argues.

“ICOs have decentralized the fundraising process for startups. The exciting thing here is the decentralization and democratization of funding and delivery of impact,” he says. “It will become possible for anybody with a bit of money to fund a project anywhere.”

This article was first published by Fast Company on 5 January 2018