Responsible investment and blockchain

This paper introduces blockchain and its relevance to responsible investors. Part one is a technical primer on blockchain, while part two explores some of the ways in which blockchain could transform the financial system and the implications this may have for investors.

Technology matters for institutional investors – it disrupts and transforms the economy, society and the environment. Digitisation, automation, AI and new fintech have the potential to significantly impact and alter the financial system and investment industry in which investors operate – something institutional investors are acutely aware of.

Indeed, the PRI’s recent megatrends survey with Willis Towers Watson found that institutional investors rated technology advances as having an “extremely significant impact”. Respondents also expected technology to have the most disruptive impact on the financial system.

One of these disruptors is the emergence of blockchain technology, which has generated substantial hype though the proliferation of cryptocurrencies, notably Bitcoin and Ethereum. However, amid the speculative frenzy, much discussion has focused on cryptocurrencies, rather than the underlying blockchain technology which has the potential to reshape the investment industry, offering significant opportunities as well as generate potential risks to system stability.

Blockchain could facilitate secure decentralised transactions, reduce incidents of fraud, and increase transparency and efficiency in multi-party transactions. The real-world applications span a cross-section of markets and industries including travel, energy and real estate, as well as finance.