VSCryptocurrency is associated with certain practices that are not good for the earth. But that’s not stopping many socially and environmentally conscious investors from investing in bitcoin, ether, and other digital assets.
96% of investors with ESG (Environmental, Social and Governance) assets in their portfolios are aware of the environmental concerns surrounding them cryptocurrencyaccording a new investigation from digital investment advisor Betterment. But that doesn’t stop them from buying it: 80% of those who hold ESG-themed investments hold cryptothe investigation revealed.
By comparison, only 22% of investors who do not hold ESG investments own crypto. The online survey was conducted in April among 1,000 US investors.
“Because we believe crypto as an asset class is here to stay, sustainability concerns around crypto, especially as it evolves, deserve to be taken seriously,” Boris wrote. Khentov, senior vice president of product strategy and sustainability investing at Betterment, in a report. that accompanied the survey.
In the meantime, ESG investors seem to be trying to have their cake and eat it too.
Boom in ESG investing and cryptocurrency
ESG investing is a term that describes investments that address environmental, social and governance factors (i.e. non-financial factors that are traditionally not considered when assessing the value of one Stock or surety). And it’s very popular right now.
The strategy has attracted many young investorswho, in the face of daunting problems such as climate change, seem want to support brands and businesses that prioritize concerns around the environment, diversity and more. Betterment’s survey found that 54% of Gen Z and Millennials respondents said they invest in ESG assets, compared to 25% of Gen Xers and 42% of Baby Boomers.
Investment in cryptocurrency has also exploded in recent years, with the value of the crypto market rising from $965 billion to $2.6 trillion in 2021. Cryptocurrency has suffered from a massive sale recently, but these digital assets don’t seem to be going away anytime soon.
However, the two types of investments do not exactly go together. Bitcoin mining, which involves computers solving complicated mathematical problems to create new bitcoins, has notably faced a ton of backlash for its negative environmental impact. The bitcoins grid electricity consumption is about the same as Washington State, the New York Times reported Last year.
Why do ESG investors also own cryptocurrencies?
There is no definitive answer as to why ESG investors own crypto. But one factor that could be at play is that ESG investors are not just interested in investing with their values. They may also like the idea of exposing their portfolios to innovative asset classes that, in some cases, are still in development — which is certainly the case with cryptocurrencies, Khentov told Money via email. mail.
Additionally, not all crypto assets have the same impact on the environment. Bitcoin mining notoriously uses a lot of energy through a process called proof of work. But proponents of proof-of-stake — an alternative process for creating new crypto tokens — say it uses far less energy. Ethereumthe network that powers ether (the second-largest cryptocurrency by market value after bitcoin), is shifting from proof-of-work to proof-of-stake.
Perhaps crypto investors who care about the environment do their research and decide to invest money in more environmentally friendly digital assets.
“These ESG investors are educated and intentional about their investments, spending time ensuring they align with their portfolio,” Khentov says. “It follows that they would apply this kind of due diligence and broader purpose to other asset classes as well, and be educated on the nuances of the technology.”
These investors may also be aware of sustainability challenges and interested in moving the space forward, Khentov adds. The survey found that 90% of those invested in crypto said it was important for major cryptocurrencies to become more environmentally friendly.
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