Redefining Value From Outcome Based Funding to Tradeable Impact 2025

Lessons learned for social impact markets: –Design for localized flexibility with pathways to global integration. Given the context- dependence of social impact, market architecture must be modular. Early-stage markets should prioritize local-level issuance and trading that has the capacity to aggregate or interoperate over time. Designing for interconnectivity, rather than premature standardization, promises a more sustainable growth path. –Build trust infrastructure for verification and transparency. Social impact verification faces a higher trust burden than environmental metrics. Third-party validation, open methodologies and digitized tracking are essential. Harnessing blockchain, participatory data collection and independently governed certification bodies will reinforce credibility and reduce verification costs over time. Implementation challenges Operationalizing social impact markets presents structural and practical difficulties. The current absence of universally accepted standards makes it difficult to create interoperable systems. Verification is particularly resource-intensive, often requiring qualitative evaluation, interviews or participatory data. Market liquidity is a concern since social impacts are so localized and heterogeneous that credits may not be easily traded or repurposed. The result is a market that – at least initially – needs to dedicate more effort to overcoming issues of scale and fragmentation compared to its environmental counterpart.Lessons learned for social impact markets: –Link demand to regulation, sustainability strategy and financial incentives. While voluntary participation may be sufficient to initiate an early market, it is not enough to scale it to the required level. Tradeable impact markets must be integrated into regulatory frameworks, procurement rules and tax incentives to reach their full potential. For example, social credit holdings could influence sustainability ratings, qualify for tax deductions or fulfil public contract eligibility requirements. –Accept and design for complexity. Social change is rarely linear or attributable to a single actor. Tradeable impact markets should incorporate tools to communicate this complexity – combining quantitative indicators with narrative context, qualitative data and time- sensitive models. Accepting complexity and designing for interpretability will enable more honest, resilient markets. By internalizing these lessons, tradeable impact markets can navigate the pitfalls of early market development (as witnessed by the early carbon markets) while facilitating scalability. The goal is not to replicate the carbon model but to adapt it – to build a human-centred market infrastructure where positive social action is not only morally encouraged but economically rewarded. While carbon markets offer a strong conceptual foundation, social impact markets must be designed with flexibility, contextual intelligence and inclusive stakeholder engagement at their core. By internalizing these lessons, tradeable impact markets can navigate the pitfalls of early market development (as witnessed by the early carbon markets) while facilitating scalability. *Compliance market: around $850 billion in 2021, a 164% increase from 2020. Voluntary market: current voluntary market worth $723 million in 2023, down from $2 billion in 2020 due to increased market scrutiny; projected to reach $1 trillion annually by 2050.Differentiation between carbon, biodiversity and social impact markets TABLE 2 Carbon markets Biodiversity markets Social impact markets International framework –Paris Agreement Article 6 enables cross-border trading –Early-stage discussions in the Global Biodiversity Framework –Limited international frameworks Amount per annum –Compliance: $850 billion* –Voluntary: $700 million* –Offsets: $12 billion –$185 billion OBF in total Main buyers –Industrial emitters –Power companies –Airlines –Traders –Property developers –Infrastructure firms –Mining companies –Governments –Development agencies –Philanthropists –Potentially the private sector in the future Market driver –Regulatory compliance –Emission targets –Development permits –No-net-loss requirements –Social outcome goals –Development targets –Enhance sustainability performance Unit definition –Clear (CO2e, tonnes) –Globally fungible –Complex (habitat/species) –Location-specific –Varied outcomes –Context-dependent Market structure –Global trading –Futures markets –High liquidity –Local/regional –Limited trading –Low liquidity –Bilateral contracts –Limited secondary markets Primary focus –Harm reduction –Negative externalities –Harm mitigation –Offset requirements –Positive outcome creation Redefining Value: From Outcome-Based Funding to Tradeable Impact 24