The Great Crypto-ESG Debate

The Great Crypto-ESG Debate

In my 13 years of finance, I’ve never quite encountered anything like this current trading environment. That’s taking into account a global financial crisis, a European debt crisis, a “flash crash”, and various other bits of absolute market turmoil and panic. Specialising in ESG investing has allowed me to strengthen my investment management craft in a way I have not been able to previously. It has been riveting to see the extent to which sustainability issues have affected the market’s views on different securities. As exciting as ESG considerations are, they seem relatively boring in comparison to cryptocurrency issues. As fate would have it, the two have recently become juxtaposed, and this provides an opportunity for some interesting views on where ESG and Cryptocurrency issues go from here.

So, what is cryptocurrency?

Cryptocurrency (as I understand it) is a decentralised vehicle for conducting various financial transactions, similar to the way money works, but in a much less conventional sense. What is untraditional about cryptocurrencies is that they operate through blockchain technology (BCT) rather than more orthodox mediums such as banks. This BCT is supposed to enable greater transparency and safety for the transacting parties. The creators of cryptocurrencies, also known as miners, use computational powers to solve complex algorithms and produce tokens. These tokens can then be bought, sold, and traded as needed.

ESG takes into account environmental, social and good governance factors in business decision making. At Leading Point, we have recently published our ESG Rationale and Action plan; read about them here.

The issue

One of the tenets of ESG is environmental sustainability. In recent years, there has been a monumental move in thinking towards climate change and the overall impact on human life. As a result, there has been a concurrent shift in businesses becoming more sustainable. This dynamic shift in thinking is unlikely to reverse.

One of the criticisms of the cryptocurrency mining process is that it tends to use a staggering amount of energy. For example, Cambridge University suggests that generating Bitcoin requires more power annually than powering Argentina. Higher electricity usage translates to higher CO2 production, which naturally is a big no-no in the ESG space. Of course, in a cruel twist of irony, there have been reports that the production of conventional forms of fiat currency (e.g. gold and copper) surpasses Bitcoin. Still, this has not slowed down the most recent criticism of cryptocurrencies. Many have argued that we cannot achieve greater efficiency in sustainability and increased cryptocurrency dominance at the same time.

The role that technology is playing in transforming the ESG market is well-documented. Meanwhile, BCT has seen higher usability across several sectors. So, the question is; where do we go from here in the great ESG vs Crypto debate?

There will be a sharper focus on the sustainability of cryptocurrency mining.

From its peak (at the time of writing), Bitcoin has fallen by more than 40% after Elon Musk (long time Bitcoin advocate and environmentalist) announced that Tesla would no longer be accepting Bitcoin as payment due to environmental concerns about its heavy energy use. Cardano, regarded as a much more sustainably mined cryptocurrency, has increased roughly 70% between May 2nd and May 16th as its executives have made moves to have Tesla replace Bitcoin with its offering. At Leading Point, we expect investors to continue to weigh sustainability and efficiency vs the popularity of various types of cryptocurrencies. As an asset class, cryptocurrencies will invariably come under greater regulatory scrutiny.

There will be increased volatility in the cryptocurrency market.

Investor discernment over sustainability will lead to higher volatility in cryptocurrency markets. This scrutiny adds to a trading dynamic that is already highly volatile.

ESG will continue to present moral and ethical dilemmas

If you’ve ever spoken to a very opinionated climate change activist, they may have been the type of person who wants to shut down fossil fuel production worldwide. While this would have immediate environmental benefits, there would be substantial human costs. No more fossil fuels would immediately put thousands out of work. At the same time, we’d also need massive infrastructural investment across the globe to ready ourselves thoroughly for new energy inputs. As one can imagine, there are numerous considerations.

As the world moves towards a more sustainable and responsible future, we view businesses as active participants rather than judging them as being “good or bad” in an ESG sense. At Leading Point, we have committed to using our expertise across many industries to help organisations address their stewardship needs. My most recent article talks on this in detail, exploring stewardship and ESG solutions, and why it will always matter, especially in 2021, read more here.


ESG vs Cryptocurrency is a debate that is growing in importance. We expect that this will reflect increased volatility and greater regulatory scrutiny.

Stewardship Always Matters: 3 reasons why ESG is here to stay

It’s difficult to imagine a world without ESG. It certainly feels like it’s all anyone talks about now. It seems like everyone is covering it. Here’s Matthew, who has just become an ESG Consultant. There’s Annie, who completed her CFA Level 4 ESG-Investing certificate. And Jason, who has a daily blog post covering the top 10 largest US companies’ efforts concerning ESG.

It’s understandable that some of us are experiencing a level of “ESG-fatigue” as we continue to be washed in news, updates, regulations and content. But none of this is without good reason. All this is to preserve our quality of life as a species, and it will take herculean efforts spanning all across the globe in EVERY industry.

ESG is a relatively new term (reportedly coined in the early to mid-2000s after the now famous ‘Who Cares Wins’ conference). However, “stewardship” is not. The word ‘steward’ is derived from an old English saying describing an estate’s guardian; charged with ensuring the safety of the estate’s asset.

ESG factors can be traced as far back as the 17th and 18th century; when Methodists and Quakers set out guidelines for their followers about which companies they should invest in (this is the first recording “exclusionary screen”). Via advancements such as the Sullivan Principles in the 1970s (two guidelines that sought to bring economic pressure on ending apartheid in South Africa) and the growth of impact/social investing through the 1980s and 2000s, we find ourselves at a tipping point of what can overall be categorised as a stewardship revolution. But what makes this more than just another passing cloud?

1. Greater political and regulatory commitment

In April of this year, the US President, Joe Biden, hosted a virtual two-day summit where both the US and the EU pledged to cut carbon emissions by 50% by 2030. In the UK, the Task Force for Climate-Related Financial Disclosures (TCFD), has engaged in consultation to bring all large UK firms into regulation. This is regarding their governance, strategy, risk management and metrics and targets, as they relate to carbon emission reductions. It comes into effect by 2022. Japan has been steadily trying to incorporate higher diversity, inclusion and ESG into corporate governance codes. Similar efforts are being made in China and Korea.

It’s clear that there is already a buy-in from “the top”. We predict stricter ESG regulatory frameworks going forward, affecting both smaller and larger companies alike. We believe businesses should prepare for this eventuality sooner rather than later.

2. Greater efforts to standardise disclosures

One of the pain points in the ESG market is that data is often incomparable. The levels of disclosure differ by company, industry and geography. Additionally, among ESG research companies, there are differing views of levels of materiality (a crucial aspect of ESG incorporation) which has led to differing opinions on firms’ ESG readiness. It is widely accepted that industry ESG scores correlate somewhere between 0.3 and 0.5. Recently, The International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) announced a 2021 merge into a unified organisation, The Value Reporting Foundation. This is intended to simplify sustainability reporting disclosures for companies and investors alike.

We think this represents a turning point in how companies and investors will be able to assess risk and opportunities; opening the doors for greater global collaboration on solving complex yet common ESG issues.

3. Technology opening new doors

Blockchain technology has a range of applications in the ESG market, e.g. enabling companies to more quickly identify instances of money laundering and bribery (higher governance); to playing a major part in data security and privacy. There has been a higher use of AI and other forms of technology to aid the ESG-data integration process. While there is some discrepancy as to the view of how intense technology exacerbates the climate change issue, there is a range of applications that technology can play in improving our current, and future quality of life.

We expect to see soaring use of tech in the ESG landscape going forward, as companies explore ways of becoming more efficient in executing their stewardship frameworks and action plans.


There always was and continues to be room for stewardship in every business model. In that vein,