Institutional investors are essential to the long-term fortunes of the crypto industry. That includes holding digital assets, embracing blockchain technologies and allocating to crypto-correlated equities. The crypto industry may lure more high-level investors by adopting environmental, social, and governance (ESG) standards.
That’s a primary takeaway from CoinDesk’s first Consensus Report, which includes some implications for exchange traded funds such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO) and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC).
The Consensus report points out that if blockchain companies want to attract more institutional investors, ESG isn’t a choice. Rather, it’s a necessity.
“While there are some in the crypto industry that want to dismiss ESG entirely as a contraption too difficult to work with, participants in a roundtable discussion at Consensus were optimistic, with the theme being how to embrace ESG and not hide from it,” according to the report.
Laying the Foundation for ESG in Crypto
Many people have discussed the intersection of ESG and crypto already. This is particularly true of crypto miners — including SATO member firms. That’s an energy-intensive industry and as such, has drawn regulatory scrutiny and criticism from environmental groups.
Point is whether it’s crypto mining or blockchain, companies in these spaces need to make their ESG intentions clear. They also must ensure such efforts are tangible, in order to catch the eyes of institutional investors.
“A winning narrative here begins with providing the means for corporations to hit their own ESG mandates, according to Consensus attendees. For the blockchain industry’s ESG endeavors to be noticed, it needs to support initiatives that have a ‘demonstrable impact that is realized at the point of decision,’ as one attendee with experience building blockchain traceability solutions put it,” noted CoinDesk in the report.
The good news for BLKC is that blockchain technology is far more expansive than crypto. The industry may already sport more ESG credibility than it’s given credit for, such as its applications in climate-relevant spaces.
“Another way blockchain could be useful for corporations is to provide a more efficient marketplace for trading carbon credits,” concluded the Consensus report. “These are assets that represent a company’s right to emit a certain amount of carbon dioxide, which can be traded or sold to offset greenhouse gas emissions elsewhere. Several companies have already launched both blockchain-based and non-crypto marketplaces for digitizing and trading these assets.”
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