Crypto investments: a Trojan horse for ESG risk?


Most cryptocurrencies are just speculative investments and have little obvious utility, but some have had some success as real currencies, while others have seen breathtaking growth. This growth, they said, has been a driver of both the rise of companies exposed to crypto and the efforts of established companies to gain exposure to cryptocurrency.

Even stock investors with major doubts about cryptocurrencies can experience “creeping” exposure without realizing it, they said. Newly listed crypto companies can be added to indexes, or current index groups can announce strategies that include bitcoin or other cryptocurrencies.

Investors are expected to take on more ESG risk with this growing exposure, the researchers said. From an environmental perspective, crypto mining lends itself to greenhouse gas emissions from energy consumption, as well as the generation of electronic waste. Evidence suggests that Bitcoin, along with other proof-of-work cryptocurrencies, has a bigger impact than others.

“Identifying the location of the mining operation and the energy sources used is critical in assessing a room’s emissions profile,” the researchers said.

The social impact of cryptocurrency remains uncertain, although there are some risks associated with investor protection and education, as well as transaction litigation for companies that accept cryptocurrency as a medium. of payment. Boards of directors of companies exposed to crypto, the researchers added, may need to adapt existing risk management policies and practices to specific risks arising from cryptocurrencies.


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