ESG is an abbreviation for environmental, social, and governance factors. It’s a concept gaining popularity in the investment world as an alternative to purely financial metrics like price-earnings ratios.
ESG factors include climate change risk and gender diversity on boards of directors. But, in cryptocurrency investment, ESG isn’t just about environmental sustainability. It’s also about how crypto projects affect people worldwide by providing access to financial services and jobs or fostering innovation.
Crypto and ESG come together
ESG is a new topic in cryptocurrency, but it’s taking off as more public figures, companies, and institutions invest in digital assets.
ESGs are essential to investors and companies because they want to ensure they invest their money in good practices that meet their values.
ESG is also essential to employees who want to work for an organization that shares their values.
Finally, these efforts ensure underserved communities have access to financial resources to help with their livelihoods.
What About Bitcoin?
Bitcoin requires miners to expend massive energy to secure the network, but that doesn’t mean bitcoin isn’t sustainable. On the contrary, its energy-intensive proof-of-work system is one of the features that make bitcoin so secure.
Bitcoin is a decentralized network that relies on thousands of computers worldwide working together to validate transactions and add new blocks to its public ledger in return for rewards in cryptocurrency. This process requires immense amounts of computing power and electricity. Each block contains all past transactions up until its point in time. A reference number links it back to earlier blocks on the chain (hence “blockchain”).
The proof-of-work system ensures that adding new blocks requires lots of computation power. As a result, attacking Bitcoin’s blockchain is computationally infeasible. It would take several years, even if an attacker could harness enough processing power from traditional supercomputers or their own mining rigs. Moreover, it ensures no one person can control too much mining capacity by distributing rewards among many miners instead.
Energy consumption is just one ESG factor to consider. Others include access to financial services and the ability to use cryptocurrencies instead of fiat currencies.
Accommodating ESG Expectations
Roughly two-thirds of global cryptocurrency investors view ESGs as essential.
ESG is vital to investors, employees, and companies alike.
- Investors want to know that their investments are well-placed and will grow over time.
- Employees want their employers to be ethical. They also want organizations that reflect their values.
- Companies need a clear vision of how they will be successful in the long term. ESG can help them achieve that vision by focusing on what’s best for humanity and business success.
Employees want their companies to be ethical and sustainable
As many crypto companies begin to adopt ESG policies, it is essential to note that employees also want their companies to be ethical and sustainable. According to PwC, investors view ESGs as essential when considering whether or not an organization will succeed.
Investors are increasingly interested in how companies address environmental and social issues. Those include gender equality, diversity and inclusion, climate change resilience, supply chain ethics; human rights protection; anti-corruption strategies; health, safety & wellbeing initiatives: and community investment programs. All these factors affect their long-term success.
Crypto Projects Take Notice
Some crypto projects have been instrumental in promoting financial inclusion by helping the underserved access cryptocurrency markets or making it easier for people to buy bitcoin.
For example, Unocoin is a Bangalore-based company that offers an online platform for buying and selling cryptocurrencies. It also operates a network of Bitcoin ATMs across India and plans to expand this service further.
Another example is Monexo, which provides an easy-to-use mobile app. Users in Latin America and Africa can buy bitcoin using their smartphones via SMS or social media accounts. They don’t need a bank account or pay high fees.
Considering ESG factors when investing in cryptocurrency is becoming more common
The role of ESG factors in investing is becoming increasingly important. As a result, investors are becoming more aware of environmental, social, and governance-related risks when investing in cryptocurrencies.
Investors are also starting to pay attention to how companies’ ESG performance impacts their decision-making process.
For example, some investors may avoid investing in a cryptocurrency because Greenpeace has criticized its environmental impact. Another example is a founder who doesn’t believe in gender equality in the crypto space.
The ESG community is growing and taking cryptocurrency seriously.
We’re excited to see how this trend continues to develop in the coming years as more investors become aware of the need for sustainable investment practices in this fast-growing asset class.
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