Transparency Is Coming to Bitcoin Mining as Institutions Eyeball ESG

Environmental impacts stemming from the big business of bitcoin mining are getting a dose of transparency that’s welcome to 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 it’s “encouraged” by programs by Energy Web and others to bring transparency to sustainable energy usage 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 reaffirmed 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; do not be investing in things that are belching carbon into the atmosphere,’” Morris said. “We have been in conversation with a lot of 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 shout-out. EWT, down 67% in the last 12 months, is up roughly 105% from two weeks ago.

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

England-based financial services company Hargreaves Lansdown reported Monday that its clients holding ESG ETFs had grown nearly 708% between January 2017 to 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 last week in a filing its 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, used 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 roughly 60%, the organization said — about a 6% year-over-year increase.

Proving miners are as sustainable as they say 

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

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

“They’ll have Powerpoints and PDFs that they issue that say, ‘Don’t worry, we are 60% renewable,’ or, ‘Don’t worry, we are 100% renewable,’” Morris said of miners. “What we’re trying to do with this Green Proofs for Bitcoin initiative is actually help people verify those claims.”

Energy Web has completed its initial certification criteria draft and is currently applying that to roughly a dozen hosting companies, publicly traded bitcoin miners, as well as smaller miners, Morris said.  

Through the certification process, bitcoin miners share data on their location, electricity use, the number of renewables they’ve purchased, and how they purchased them — such as if they bought unbundled certificates or invested directly in a renewable energy facility. The information is then used to create a net-impact score.

After making the initial batch of certifications public in the fall, Energy Web will look to rate more miners.

“Ideally institutions like BlackRock can use those credentials how they see fit, but also any other institutional investor and any other company seeking to understand how green these different miners are,” Morris said.

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