Could Bitcoin Be the Greatest ESG Investment of All Time?

Not only has Bitcoin generated outsized returns for investors, it could actually be a great ESG investment, despite widespread concerns about the cryptocurrency's energy usage.

AccessTimeIconApr 12, 2023 at 4:03 p.m. UTC
Updated May 9, 2023 at 4:12 a.m. UTC

If you have any traditional finance (TradFi) background, you know about ESG investing. ESG – which stands for environmental, social and governance – refers to a set of standards used by socially conscious investors to screen potential investments. Typically, people who invest in ESGs are as concerned about gains as they are about their investments having a positive impact on the world.

When you consider all these factors it stands to reason that bitcoin (BTC) could be one of the greatest ESG investments of all time. Not only has it generated outsized returns for investors (at the time of writing this, BTC is up 71% in 2023, 342% over the past three years and a whopping 44,404% over the past 10 years), it is having enormous positive impacts globally.

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    More bitcoin, less fossil fuels

    Bitcoin appears to be one of the few sectors, both in the U.S. and globally, that does not have coal as its primary energy source. A recent report found that because much of BTC mining relies so heavily on off-grid power sources, 52.2% of the Bitcoin network is powered by zero-emission energy. There are at least 29 mining companies that use 90%-100% zero-emission energy and another 12 that use emission-negative sources.

    Compare that to the main electrical grid in the U.S., in which only 36.7% comes from zero-emission sources. That means that nearly every other major industry within the U.S. relies on a grid that’s nearly two-thirds powered by fossil fuels.

    Bitcoin is also good for our energy grid. As a persistent buyer of electricity, bitcoin mining stabilizes the electrical grid by absorbing any excess energy created, thus improving the operational efficiency of power plants and lowering energy prices for consumers.

    More bitcoin, less fossil fuels

    Bitcoin appears to be one of the few sectors, both in the U.S. and globally, that does not have coal as its primary energy source. A recent report found that because much of BTC mining relies so heavily on off-grid power sources, 52.2% of the Bitcoin network is powered by zero-emission energy. There are at least 29 mining companies that use 90%-100% zero-emission energy and another 12 that use emission-negative sources.

    Compare that to the main electrical grid in the U.S., in which only 36.7% comes from zero-emission sources. That means that nearly every other major industry within the U.S. relies on a grid that’s nearly two-thirds powered by fossil fuels.

    Bitcoin Energy Sources

    Increased energy efficiency

    In addition to relying mostly on clean energy, the Bitcoin network is far more energy efficient than legacy financial systems. Bitcoin mining accounts for less than 0.2% of global energy usage and only 0.09% of the world’s carbon dioxide (CO2) emissions. Bitcoin, often compared to gold as a store of value, uses less energy than gold to mine and has none of the heavy metal pollutants caused by gold mining. Simply replacing gold or the legacy financial system with a bitcoin standard would be a huge net positive for the environment.

    Bitcoin is also good for our energy grid. As a persistent buyer of electricity, bitcoin mining stabilizes the electrical grid by absorbing any excess energy created, thus improving the operational efficiency of power plants and lowering energy prices for consumers.

    Bitcoin Carbon Emissions

    Incentivizing innovation

    Bitcoin’s biggest environmental impact is potentially that it incentivizes innovation and adoption of clean energy sources. Methane gas is about 25 times worse for the environment than carbon dioxide (CO2) and, according to the Climate and Clean Air Coalition, “cutting methane is the strongest lever we have to slow climate change over the next 25 years.” It turns out that two of the largest methane producers are oil fields and landfills – which bitcoin mining helps address.

    Bitcoin mining company Vespene has developed a method for converting the methane emitted from landfills into electricity to power bitcoin mining rigs in an environmentally friendly way, thus eliminating those methane emissions. Also, bitcoin mining using methane-vented power is far more effective at reducing carbon emissions than any other renewable energy source we have. In fact, mining bitcoin from vented methane removes 13 times more emissions from the environment than coal puts into it.

    It’s possible that in a few years, bitcoin mining might prevent more carbon from entering the atmosphere than the carbon emitted from creating the electricity it takes to power the network.

    To learn more about the ESG aspects of bitcoin, including social and governance, click here to read the full report.

    Edited by Nick Baker.

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    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Brett Munster

    Brett Munster is the Director of Research at Onramp.