Who will win when ESG investment principles clash with crypto investments? (2/2)
Within weeks of Musk’s tweet, Saylor and Musk attempted to take steps to solve Bitcoin’s environmental problems. 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 miners who were invited to join the inaugural meeting.
Saylor’s tweet indicated the intent to “… pursue ESG industry goals…”. In fact, the formation of the Bitcoin Mining Board fulfills the three to six PRI principles. This is a good example of how collaborative ingenuity can bridge the gap between ESG and crypto investments.
There are more positive examples to examine that could point to mutually beneficial synergies between investors seeking a balance between cryptocurrencies and ESG factors.
To help address energy consumption and sustainability issues, the digital asset industry has proactively launched its Green Initiative. The Energy Network, the Coalition for Innovative Regulation, and RMI have launched the Crypto Climate Agreement. The Compact is a private sector-led initiative of the entire crypto community. It was inspired by the Paris climate agreement and is focused on reducing all carbon produced by the cryptocurrency industry to net zero emissions by 2030.
The signatories to Crypto Climate Accord consist of 45 companies and individuals working in the cryptocurrency, technology, finance, NGOs, energy and climate industries. These backers are publicly committed to achieving emissions targets for all of their crypto-related operations using electricity.
The coding climate agreement is also backed by the Climate Champions of the United Nations Framework Convention on Climate Change. This proactive initiative is a bold step towards reconciling pro-environmental investing principles with crypto activities, although the impact of the crypto environment is less than that of the finance industry, and traditional gold mining.
This is according to the Ark Investment website when measured by electricity costs alone, Bitcoin is much more efficient than traditional banking and gold mining on a global scale. Conventional banks emit 1,368 megatonnes of carbon annually, while gold mines emit 144 million tons. Bitcoin issues 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
One of the greatest benefits of cryptocurrency is the democratization of banking to the 1.8 billion people in the world who do not have access to any kind of financial offering – while defining them as “unbanked.”
“Financial access for all” is a noble goal. It is currently in beta testing in El Salvador, which recently adopted bitcoin as its sovereign currency. Regarding the implementation, El Salvador announced that it plans to deploy Bitcoin as fiat currency using the cryptocurrency’s Lightning Network, a second-tier solution via digital wallet provider, Strike.
According to Strike, the mobile payment app actually launched in El Salvador in March and quickly became the number one downloaded app in the country. This rapid adoption of a digital wallet application is not surprising given the fact that more than 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 watch the implementation and launch of Bitcoin as a reserve currency. Success in terms of PRI’s principle of societal good would go a long way towards normalizing cryptocurrencies as viable investment options even for the staunch ESG loyalists.
By necessity and determination, most crypto service providers have taken significant steps in introducing safeguards to protect the privacy of investors and invested assets. They have also implemented anti-corruption technology, which includes anti-money laundering and terrorist financing obstruction protocols using programmed frameworks. All this was put in place before formal regulatory requirements were imposed on them.
In addition, an often-cited criticism against cryptocurrencies is that they fund criminal activities such as the recent ransomware attacks against energy and food processing companies in the United States. A bunch of privacy codes. Also, blockchain analytics firm Chainalysis reports that criminal activity accounted for just 0.34% of cryptocurrency transactions in 2020, down from 2.1% in 2019. These activities should encourage ESG-focused investors that the cryptocurrency is making strides in these areas. critical.
Optimism is growing
At least one Bitcoin miner believes that the industry has passed a U-turn on the ESG front and will successfully overcome the fears 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.
During a recent interview with Bloomberg, Roberts defended the Bitcoin value proposition. “Recent news in the space and focus on ESG continues to highlight that the business model we started several years ago is probably the right one,” Roberts said. “We hope to attract the right capital partners to help us grow.”
Given these facts, perhaps when an irresistible force meets something consistent, the result is a sustainable high-potential investment for enterprises.
on the flip side
- The biggest risk to the cryptocurrency may be its success, which will likely lead to increased government regulation and oversight – despite the private industry’s efforts to manage ESG’s concerns.
This is the second part of a two-part article. You can read the first part here.
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