Transparency Comes to Bitcoin Mining as Institutions Eyeball ESG

Environmental impacts stemming from the big business of bitcoin mining are getting a welcome dose of transparency at the world’s largest asset manager.

Energy Web, which focuses on mechanisms to decarbonize the global economy, is set to publish “sustainability scores” for miners in the coming months – an effort highlighted by BlackRock.

BlackRock said in a statement earlier this month that it is “encouraged” by programs from Energy Web and others to bring transparency to sustainable energy use in bitcoin mining. The fund group partnered with Coinbase to offer institutional clients of its Aladdin platform access to bitcoin earlier this month and launched a private bitcoin trust a week later.

Energy Web CEO Jesse Morris told Blockworks that Blackrock’s stance confirmed that institutional investors looking to dial up crypto exposures will demand greater ESG disclosures.

“Their boards are saying, ‘Show us how you’re doing your part to decarbonize the global economy; don’t invest in things that burp carbon into the atmosphere,” Morris said. “We have been in conversation with many different institutional investors and also financial organizations that are trying to build products around bitcoin – but are very nervous about the ESG black eye that the asset has.”

Energy Web’s token (EWT) has seen a big boost since BlackRock’s call. EWT, down 67% over the past 12 months, is up about 105% from two weeks ago.

Interest in ESG investments – made with environmental, social and governance issues in mind – has grown in recent years within traditional finance.

English-based financial firm Hargreaves Lansdown reported on Monday that its clients with ESG ETFs had grown almost 708% between January 2017 and June 2022 – from 0.13% to 1.05%.

ESG ETFs represented 42% of total European ETF flows during the second quarter, according to the firm.

Morgan Stanley said in a filing last week that the first ETFs would be ESG-focused.

The Bitcoin Mining Council said last month that respondents to its latest survey, representing more than half of the global bitcoin network, were using electricity with a 66.8% sustainable power mix, as of June 30. It is estimated that the mining industry’s sustainable electricity mix is ​​now about 60%, the organization said – about a 6% increase year-on-year.

Proving that miners are as sustainable as they say

Energy Web’s Green Proofs for Bitcoin program is a way for bitcoin miners to prove that they use renewable electricity.

Marathon Digital, for example, said in April that it was moving bitcoin miners from its facility in Montana to new locations with more sustainable power sources. The company expects that mining operations will be carbon neutral by the end of this year.

“They want Powerpoints and PDFs that they put out that say, ‘Don’t worry, we’re 60% renewable,’ or ‘Don’t worry, we’re 100% renewable,'” Morris said of miners. “What we’re trying to doing with this Green Proofs for Bitcoin initiative is actually helping people verify these claims.”

Energy Web has completed its first draft of certification criteria and is currently applying it to about a dozen host companies, publicly traded bitcoin miners, as well as smaller miners, Morris said.

Through the certification process, bitcoin miners share data about their location, power usage, the number of renewable energy sources they have purchased and how they purchased them — for example, if they purchased unbundled certificates or invested directly in a renewable energy facility. The information is then used to create a net impact score.

After releasing the first batch of certifications this fall, Energy Web will look to evaluate more miners.

“Ideally, institutions like BlackRock can use these credentials as they see fit, but so can any other institutional investors and other companies that want to understand how green these different miners are,” Morris said.

Get today’s best crypto news and insights delivered to your inbox every night. Subscribe to Blockworks’ free newsletter now.