The role of environmental, social and governance (ESG) mandates in investments is becoming increasingly prevalent, especially among institutional investors and large asset management firms. ESG-related assets under management could reach 33.9 trillion by 2026, a fifth of all investments globally, global accounting firm PricewaterhouseCooper (PwC) forecasted in a report late last year.
Attendees at CoinDesk’s Consensus conference said that if crypto wants to capture new institutional money, it should also embrace ESG instead of hiding from it, the Consensus @ Consensus report found. Notably, asset management giant BlackRock, which is at the forefront of the push to register a spot bitcoin ETF, is a large proponent of ESG-focused investments.
CCData created the new crypto-focused scoring framework to cater to this increased demand.
“The ESG Benchmark is a critical first step toward improving the resilience of the industry in the face of ESG challenges and criticisms from regulators, policymakers and media, who consider ESG requirements a top priority,” the report said.
The benchmark measured environmental, social and governance risks for and opportunities of digital assets, taking into account a range of metrics including decentralization, energy consumption, community engagement. Then, the points for each metric were aggregated and weighted for an overall score of maximum 100 points, making up the final grade from AA (best) and E (worst).
Assets with a BB or better grade were considered top-tier in the report.
Ethereum was the only blockchain that earned an AA grade, performing well in all three ESG factors. This is partly attributed to the network’s recent transition to proof-of-stake technology, according to the report, which slashed energy consumption and made miners obsolete.
Solana, Cardano and Polkadot excelled in decentralization, granting them a top-tier A grade.
Bitcoin received a B grade, earning high scores in social and governance aspects but slammed for its heavy energy consumption and hardware need.
“This grading does not connote overall superiority, instead it represents a means of ranking digital assets according to ESG parameters,” the report said. “[It] equips investors with the tools needed to make informed decisions and allocate resources to assets which hold strong ESG scores.
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