Bitcoin and ESG credentials are, in fact, aligned
There’s a well-known narrative regarding Bitcoin that’s twisted. You’ve probably heard about it. It’s the one that goes that the world’s largest cryptocurrency has shockingly bad ESG (environmental, social and governance) investment credentials.
However, like me, a growing number of experts – including investment legend Cathie Wood and Twitter and Square founder Jack Dorsey – are keen to flag up why this is a significantly flawed narrative.
Let me share my thoughts.
Environmental
Bitcoin is often referred to as ‘digital gold’ because, like the precious metal it is a medium of exchange, a unit of account, non-sovereign, decentralised, scarce, and a store of value.
However, Bitcoin is set to become much greener than traditional gold mining – and in many ways it already is so. Currently, the gold mining industry creates more than triple the carbon emissions than Bitcoin; plus, of course, during its operations the mining sector puts harmful toxins into the Earth.
Furthermore, Bitcoin mining could help incentivise more production of renewable energy, and move away from environmentally-unfriendly fossil fuels. Solar and wind may be attractive for their low cost and environmental attributes, but their sources are sometimes hit and miss.
Moreover, there isn’t enough storage capacity for when these sources generate excess energy. Bitcoin miners, who need huge amounts of energy, could act as a buyer of last resort, providing much-needed profit for investment and expansion, boosting supply in the renewables sector, which will bring down prices for consumers and, in turn, fuel demand.
Social
As for the ‘social’ bracket, Bitcoin and crypto is speeding up the advance of financial inclusion. It is providing access to payment services for millions of people who live in remote areas or who might normally not be able to use financial services because of the biases of traditional financial firms, which tend to offer services to wealthier cohorts.
For example, it allows for ultra-low cost/free money transfers to support families in international destinations who depend upon income from elsewhere. Helping individuals and companies successfully manage, save and invest their money will only result in a better society for us all.
Governance
As for governance, Bitcoin runs on blockchain technology, which is utterly transparent, unlike the opaqueness of traditional financial systems.
The ledger will always remain a permanent, indelible, and unalterable history of transactions. It permits anybody, anywhere, regardless of their political beliefs, nationality, ethnicity, religion, gender, or sexuality, the same level playing field.
It can’t discriminate. For these reasons, Bitcoin and crypto align with the environmental, social, and governance (ESG) investing growth trend. And will increasingly do so in the coming years.