Environmental, social and corporate governance (ESG) and cryptocurrencies are among the hottest global investment trends right now – and they’re not necessarily diametrically opposed.
The most used anti-crypto narrative is that the likes of Bitcoin are environmentally unsound because of the high amounts of energy and other resources it takes to mine and transact with other cryptocurrencies.
I’m not buying this argument. Indeed, I think it’s flawed and shortsighted.
The term “digital gold” is often used to describe Bitcoin because of its shared inherent characteristics with the precious metal, namely it is a medium of exchange, a unit of account, non-sovereign, scarce, and a store of value.
But the world’s largest digital currency is in many ways already more environmentally friendly than the traditional gold-mining industry, which creates more than triple the carbon emissions of Bitcoin. In addition, the mining puts harmful toxins into the ground – which has serious far-reaching consequences.
Another, often overlooked, point is that Bitcoin mining could speed up the transition from fossil fuels to renewables.
Clearly, clean energy is the way forward, but their sources are sometimes irregular and there’s not enough storage capacity for when these sources generate excess energy.
Bitcoin miners, who need huge amounts of energy, could act as major buyers of last resort, providing substantial profit for investment and expansion. This would then enhance the renewables supply, which would go on to bring down prices for consumers and further drive demand.
In terms of the “social” aspect of the ESG umbrella, cryptocurrencies are helping advance financial inclusion around the world.
They’re giving access to money and payment services for millions of people who live in remote areas and/or who might normally not be able to use financial services because of the biases of legacy financial firms, which tend to offer services mainly to wealthier communities.
Bitcoin runs on blockchain technology, which is completely transparent and accountable on a global unbiased network, unlike most old-school financial systems.
The distributed ledger will always remain a permanent, indelible, and unalterable history of transactions. It cannot discriminate, so it gives anybody, anywhere, regardless of political beliefs, nationality, ethnicity, religion, gender, or sexuality, the same access.
For these reasons, the likes of Bitcoin serve the “governance” bracket.
Bitcoin and crypto align with the environmental, social, and governance (ESG) investing growth trend, and it will increasingly do so in the years to come.
While no monetary system or investment is perfect, and the crypto ecosystem can still improve in many ways, the argument that digital currencies cannot necessarily form part of an investment portfolio doesn’t stand up to scrutiny.
Nigel Green is founder and CEO of deVere. Follow him on Twitter @nigeljgreen