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Bitcoin ESG | New ESG narrative may ignite Bitcoin bull market

2023-12-09 11:00
crypto story
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Bitcoin as an ESG asset is a concept whose time has come
Author: Daniel Batten
Translation: Luccy, BlockBeats

Editor's Note:
The ESG Investment Committee (ESG IC) refers to financial institutions that make responsible investments and consider environmental, social, and governance issues. In this narrative, Bitcoin is being viewed as an ESG asset.

Founder of CH4Capital, Daniel Batten, compares the ESG narrative to a spark and strong wind for the Bitcoin bull market. He analyzes the potential opportunities and challenges for Bitcoin in the ESG field and explains the potential impact of ESG on the Bitcoin market. He believes that Bitcoin has the potential to become the world's first industry to achieve negative greenhouse gas emissions without offsetting.

This article is sourced from a guest post by CH4Capital founder Daniel Batten on Bitcoin Magazine and will be compiled into a collection of Bitcoin ESG-related articles by BlockBeats. The collection will be continuously updated. The following is the translated version of the original article:

The bull market is like a wildfire, requiring a series of conditions to ignite.

Wildfires require prolonged periods of drought, high temperatures, and strong winds at the ignition point.

Yes, Bitcoin can help alleviate the worsening wildfire problem caused by record-breaking methane emissions, but that is not the focus of this article, it is just an analogy.

The halving has led to a decrease in the new supply of Bitcoin (equivalent to a lack of rainfall). They have caused an increase in interest in entering the Bitcoin market (equivalent to high temperatures). However, it still requires strong winds and a spark event.

Strong wind is the wind of change surrounding the environment, society, and corporate governance (ESG) narrative around Bitcoin.

The ignition event will be the first large-scale ESG investment committee to support Bitcoin for ESG reasons.

ESG Investor Surge Brings Challenges

By 2026, ESG-focused institutional investments will surge to $33.9 trillion. According to a report by PwC, this represents 1 out of every $5 managed in assets.

But the most important point of this report should raise the alert of current and future Bitcoin holders, which is that ESG investors are facing a problem: the demand for stable ESG investments exceeds the supply. ESG investors spend a long time searching for suitable ESG investment projects, and 30% of investors say they have difficulty finding attractive ESG investment opportunities.

Bitcoin now occupies a leading position in solving this problem. The reasons are as follows:

Bitcoin Opportunity

2023 marks a turning point for Bitcoin's ESG narrative.

Only five incidents occurred during the 53 peaceful days from August 1st to September 22nd this year, which helped to reverse the ESG narrative of Bitcoin:

KPMG report concludes the urgency of Bitcoin supporting ESG (August 1st).

A research on peer review supports the view that Bitcoin is beneficial to the environment (August 8th).

Cambridge acknowledges overestimation of Bitcoin energy consumption (August 30th)

Bloomberg Intelligence chart shows Bitcoin mining leading decarbonization (September 14th).

The Risk Management Association concludes that Bitcoin can help with the transition to renewable energy (September 22).

Editor's note: KPMG is a large international professional services network that focuses on accounting business. It is one of the Big Four international accounting firms and mainly provides audit, tax, management consulting, and legal services.

These reports and papers are independently produced by highly reputable researchers and organizations. Their conclusions go far beyond the belief that Bitcoin "has less impact on the environment than we thought" and instead arrive at a net positive conclusion for Bitcoin as an ESG asset.

This wave of change could be the strong wind needed in the series of conditions required for Bitcoin to complete its bull market.

This means what

Information is power, and there is currently an asymmetry of information. Narratives have changed based on new data, but most ESG investors do not yet have access to this data, at least not yet. Until they obtain this new data, they will continue to believe the old narrative that "Bitcoin has a net negative impact on the environment."

If we need evidence, this is a private message I received a few days ago from a fund manager.

Translation: I have an investor who does not plan to submit our fund to the investment committee because they require a sustainable development inclination.

These ESG investors are still unable to allocate a higher proportion of funds to Bitcoin because their ESG information on Bitcoin is outdated by several years and they are unaware of the five events that have changed the narrative.

Despite the generally negative views of ESG investment committee members towards Bitcoin, in my experience, their opinions are relatively lenient compared to environmental non-governmental organizations. Recently, while I was in Sydney, a young Australian enthusiastically approached me and said, "Dan, I used your chart to change our investment committee's perspective!"

So, what will happen when this information asymmetry is blown away by the strong wind of the new Bitcoin ESG narrative?

Thanks to Willy Woo's analysis, we can quantify the impact of ESG on Bitcoin market capitalization within a certain range.




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