“Demonstrating how Bitcoin makes positive contributions is critical to both mainstream and institutional comfort,” says Daniel Batten, ESG analyst and CH4 Capital co-founder.
Pedro Solimano•
Bitcoiners rejoiced this week when KPMG, one of the “big four” worldwide accounting firms, published a report that underscored how the protocol can contribute in a positive manner to the three pillars of the ESG investing framework: environmental, social, and governance.
KPMG’s research is pivotal, says CH4 Capital co-founder and renowned ESG analyst, Daniel Batten.
“No matter what your view on ESG, demonstrating how Bitcoin makes positive contributions [to environment, social and governance initiatives] is critical to both mainstream and institutional comfort,” he told Decrypt.
According to Batten, the KPMG report—titled “Bitcoin’s role in the ESG Imperative”—is an “important moment, because it represents for the first time a mainstream financial institution having gone through a thorough due diligence process on Bitcoin.”
The report documents a deep dive in the framework’s three pillars, beginning with the environmental aspect of Bitcoin mining–the energy intensive and controversial process through which new BTC is created. KPMG says the mining industry “is focused on driving towards Net Zero emissions.”
KPMG showcases how Bitcoin emissions compare to other key worldwide industries (such as tourism and fashion), elucidating it is a mere fraction. The publication outlines several strategies towards reducing the network's carbon footprint, including using renewable energy, and recycled heat among others.
Batten, an expert on ESG matters, explained to Decrypt that he is surprised by the thoroughness of the report. “It's usual for reports to let certain folklore slip through the due diligence process such as ‘but Bitcoin takes renewable energy away from other users,’” he said, praising the KPMG team for the quality of their research and publishing what he considers to be “non-obvious truths.”
The social aspect of the report touches upon the hotly debated “Bitcoin is for criminals,” narrative, pointing to a recent Chainalysis report. U.S. Senator Elizabeth Warren has repeatedly asserted that cryptocurrency is a favored tool of criminals, fueling societal ills like the fentanyl epidemic.
KPMG countered these claims with the opportunities the protocol presents for financial inclusion, such as crowdfunding Ukraine’s efforts in its war with Russia, providing access to electricity in Africa, and the role it plays for minorities around the world.
Last but not least, KPMG addresses the governance aspect of Bitcoin, and the decentralized aspect of the network specifically, which it writes is one of its “most prominent features.” The report acknowledges that the network’s rules cannot be changed or modified by those in power, pointing to a “robust” governance structure that provides a “high degree of confidence” in the overall system.
The report concludes that Bitcoin provides a number of positive benefits under an ESG investing framework, and ends with a series of questions for ecosystem players–prompting users, miners and other organizations to assess their relationship to the ecosystem.
“I think it's an important report and a milestone the ecosystem should celebrate,” Batten tells Decrypt. He remarked that “It's important people read reports put out by Bitcoin opponents,” although Batten reckons “there is still much work to be done, with several mainstream news channels continuing to publish misinformation about Bitcoin with impunity.”
He concluded, however, that “this will improve education and help the intellectually curious person to form an informed viewpoint on the utility of Bitcoin.”
