Due to the energy-intensive nature of the bitcoin mining process, many consider miners and the digital currency itself detractors to environmental, social, and governance (ESG) and sustainability objectives.
Those criticisms can affect bitcoin mining equities and the exchange traded funds that hold those stocks, including the Invesco Alerian Galaxy Crypto Economy ETF (SATO). Fortunately, some experts are optimistic that the Bitcoin mining industry is cognizant of the need to be a better environmental steward. There is also optimism that it sees long-term benefits in boosting the adoption of renewable energy.
The current proof-of-stake mining system contributes to air pollution and climate change. Indeed, the ASIC hardware used to mine Bitcoin results in a process that produces Scope 1 emissions. This indicates that some SATO member firms would do well to increase the adoption of green energy.
As noted by KPMG, bitcoin mining requiring a lot of energy isn’t so much the problem as is the use of fossil fuels in the mining process. Bitcoin miners’ consumption of fossil fuels creates harmful emissions, and that weighs on the industry’s ESG credentials.
Bitcoin Miners Have Advantages
SATO member firms can locate mining farms nearly anywhere they choose. This is advantageous when dealing with some reliability issues tied to renewables.
“Renewable energy facilities are incentivized to produce at their maximum capacity to deliver electricity in a manner consistent with their contractual agreements,” observed KPMG. “This can leave utilities with an excess supply of electricity, which if coupled with a supply and demand mismatch, can lead to low, and even negative, electricity prices.”