Impact investment business Kula has taken further steps to bring blockchain technology to traditional impact investing with the launch of $Kula, a governance crypto token.

Kula invests into opaque companies and projects that have the potential to improve their negative impact on the environment and local communities by increasing their transparency through the use of blockchain technology. It also offers communities an equity stake in the company or project, which is delivered through the issuance of illiquid tokens.

Speaking to Impact Investor, the firm’s co-founder Micah Yeackley explained that the company’s aim is to offer a governance-first approach to real-world assets, where both investors and local communities help to steward a diversified portfolio targeting long-term impact and sustainability.

“Through decentralised decision-making, the platform aligns capital with community-led development, supporting a new model of shared economic participation and value creation. The only difference is that instead of selling stocks or shares, we’re selling digital tokens, which represent not just a stake in our treasury but also a stake in the governance of the assets.”

Blockchain works like a digital ledger, storing data in entries that can be viewed by the public. Yeackley said this is a benefit for investment into high-risk sectors and regions of the world, which have been ignored by traditional avenues of investment.

“For companies struggling with issues such as corruption, the blockchain can mitigate a lot of that by making transactions visible to investors,” he said explaining his belief that whilst the hype around cryptocurrencies is overstated, blockchain technology has the potential to radically change the world of investment.

“We’re trying to make a difference by applying the transparency of blockchain to generally opaque industries. We’re not setting out to completely eliminate corruption or the negative impacts, but if we can move the needle in the right direction and make these industries a little more transparent for investors, then we’re making a positive difference,” he added.

Kula’s liquid tokens can be bought and sold by investors through cryptocurrency exchanges MEXC.com, Coins.ph, and Coins.xyz. They provide a stake in Kula’s treasury and exposure to all of its underlying investments.

At the asset level, after buying an equity stake in a vetted company or project, both Kula’s and the investee’s share of the company is represented through the issuance of illiquid tokens. These tokens cannot be bought or sold on the market and both parties are contractually obliged to give away a proportion of their tokens to local communities impacted by the project.

“The ownership structure is informed on the blockchain but we also have it secured in real-world legal wrappers, whether it’s an LLC [limited liability company] or a limited company that also sets up that equity split,” said Yeackley, explaining that the tokens not only give communities the right to claim profit sharing with Kula contractually obliged to buy back their tokens , but also to be involved in the governance of the business.

“The tokens also give them a say in how the company is run,” he added.

Yeackley said the illiquidity of this second tranche of tokens also prevents other companies or entities from taking over the equity in the underlying assets. At the end of the investment period, the tokens are liquidated and Kula can invest into another project.

Among Kula’s first five investments is a limestone concession in Zambia’s Eastern Province, in partnership with limestone mining company Bekazulu Mining.

According to Kula, through its investment in the mine it has improved water access for operations and local communities, identified and drilled a new aquifer system and mitigated water stress. It has also entered into a partnership with a local foundation linked to the mining sector through which revenue generated from the investment is to be reinvested into employment, healthcare, education and agriculture in surrounding communities. Communities have also used their stake in the company to vote through equal pay rights for women working at the mine.

Other projects include the building of a hydropower plant in the Tsum Valley, Nepal and a sustainable forestry initiative in Bintulu, Sarawak, Malaysia, among others.

“Future projects can be anything from real estate development to gold mining. We can also invest in local artisan entrepreneurs. Anything with real-world value that is looking for capital,” said Yeackley, explaining that Kula was both sector and region agnostic.

Once a project is vetted and put through an impact evaluation, a report on the company is put together and submitted to liquid token holders who can vote on whether it should be included as an investment.

“We think the true incentive of this model is giving a voice at the asset level but also at the governance level. So, if you hold a token at the governance level you get to vote on which assets you think are going to benefit our portfolio,” added Yeackley.