Who wins when ESG investing principles and crypto investing collide? (2/2) By DailyCoin

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Who wins when ESG investing principles and crypto investing collide? (2/2)

Weeks after Musk’s tweet, Saylor and Musk attempted to take action to address Bitcoin’s environmental issues. The couple organized and launched a renewable BTC mining initiative in the United States called the Mining Council. Saylor then tweeted a list of the biggest Bitcoin mining operations invited to join this inaugural meeting.

Saylor’s tweet referred to the intention to “… pursue industry ESG objectives…”. In fact, the formation of the Bitcoin Mining Council meets PRI principles three to six. This is a good example of how collaborative ingenuity can bridge the gap between ESG investing and crypto investing.

There are other positive examples to consider that may suggest mutually beneficial synergies between investors seeking a balance between cryptocurrencies and environmental, social and governance (ESG) factors.

Environmental impact

To help solve its energy consumption and sustainability issues, the digital asset industry has proactively launched its own green initiative. The Energy Web, the Alliance for Innovative Regulation and RMI have launched the Crypto Climate Accord. The Accord is a private sector-led initiative for the entire crypto community. It is inspired by the Paris Climate Agreement and focuses on reducing all carbon produced by the net zero emission cryptocurrency industry by 2030.

Signatories to the Crypto Climate Agreement include 45 companies and individuals spanning the cryptocurrency, technology, finance, non-governmental organizations, energy and climate sectors. These supporters publicly commit to meeting emissions targets for all of their respective operations related to crypto using electricity.

The Crypto Climate Accord is also supported by the Climate Champions of the UNFCCC. This proactive initiative is a bold step towards reconciling pro-environmental investment principles with crypto business, even though crypto’s environmental impact is lower than that of the financial industry and gold mining. traditional.

It is according to the Ark Investment website, measured by electricity costs alone, Bitcoin is much more efficient than traditional banking and gold mining on a global scale. Traditional banks emit 1,368 megatonnes (Mtoe) of carbon per year and gold mining emits 144 Mtoe. Bitcoin emits 61 million Mtoe, which is less than 5% and 45% of traditional banking and gold mining, respectively.

Note: Carbon dioxide equivalent (CO2e)

Source: ARK Investment Management LLC, 2021. Data source: Source: Hass McCook (@FriarHass), https://bitcoinmagazine.com/business/bitcoin-vs-financial-sector-energy-use

Societal benefits

One of the biggest benefits of cryptocurrency is to democratize banking services for the 1.8 billion people around the world who have no access to any type of financial offer, defining them as “unbanked” .

Financial “access for all” is a noble goal. It is currently in beta testing in the country of El Salvador, which recently adopted Bitcoin as its sovereign currency. Regarding implementation, El Salvador has announced that it plans to roll out Bitcoin as legal tender using the cryptocurrency Lightning network, a tier two solution through digital wallet provider, Strike.

According to Strike, its mobile payment app was already launched in El Salvador in March and quickly became the first downloaded app in the country. This rapid adoption of the digital wallet app is not surprising given that over 70% of Salvadorans do not have access to banking or financial services, but the penetration of mobile devices in this country is 146%.

The world will be watching the implementation and deployment of Bitcoin as a reserve currency. Success regarding the principle of societal good of PRI would go a long way in normalizing cryptos as viable investment options, even for the most ardent ESG devotees.

Governance

By necessity and design, most crypto service providers have taken significant steps by deploying safeguards to protect investor privacy and invested assets. They also implemented anti-corruption technology, which includes anti-money laundering and terrorist financing blocking protocols using programmed frameworks. All of this was put in place before formal regulatory requirements were imposed on them.

Additionally, an oft-cited criticism of cryptocurrencies is that they fund criminal activity such as the recent ransomware attacks against energy and food companies in the United States. handful of privacy tokens. Additionally, blockchain analytics firm Chainalysis reports that criminal activity only accounted for 0.34% of cryptocurrency transactions in 2020, up from 2.1% in 2019. These activities should encourage investors focused on the market. ESG that crypto is making headway in these critical areas.

Optimism grows

At least one Bitcoin miner believes the industry has turned a corner on the ESG front and will be successful in overcoming the concerns of major investors. Daniel Roberts is the co-founder of Iris Energy, a successful and sustainable Bitcoin mining operation that owns and operates real assets, including data center infrastructure – all powered by renewable energy, with a net zero carbon footprint.

In a recent interview with Bloomberg, Roberts championed Bitcoin’s value proposition. “The recent news in space and the focus on ESG continue to underscore that the business model we embarked on many years ago is probably the right one,” said Roberts. “We hope to attract the right financial partners to help us grow. “

Given these facts, perhaps when an overwhelming force meets a real object, the result is a long-lasting investment with great potential for institutions.

On the reverse

The biggest risk to the cryptocurrency could be its own success, which is likely to result in increased government regulation and oversight, despite industry efforts to manage ESG concerns.

This is the second part of a two-part article. You can read part one here.

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