In a move towards sustainability and in the face of increasing environmental, social and governance (ESG) concerns, Solana recently topped the charts as the second highest ranked ESG asset according to the first institutional-grade crypto ESG ranking. Ethereum leads the list, with Solana and Cardano following suit, while Bitcoin trails due to its extensive energy usage. The ranking, published by the Crypto Carbon Ratings Institute (CCRI) and CCData, scrutinizes 40 of the most liquid digital assets, taking into account parameters like decentralization, security, and climate impact.
ESG Mandates: A Rising Concern in Investments
The prominence of ESG mandates in investments has been growing, particularly among institutional investors and large asset management firms. Assets under ESG-related management are projected to reach $33.9 trillion by 2026, equating to one fifth of all global investments, according to a PricewaterhouseCoopers (PwC) report. To seize the opportunities this significant shift offers, crypto needs to embrace ESG, not shy away from it, as stated in the Consensus @ Consensus report from CoinDesk's Consensus conference.
BlackRock, a leading proponent of ESG-focused investments and an asset management giant spearheading the initiative to register a spot Bitcoin ETF, has amplified the importance of ESG in the financial world.
The ESG Benchmark: A Crypto-focused Scoring Framework
To address the surge in demand for ESG compliant investments, CCData devised a novel crypto-focused scoring framework known as the ESG Benchmark. "The ESG Benchmark is a crucial first step towards improving the resilience of the industry in the face of ESG challenges and criticisms from regulators, policymakers, and media, who consider ESG requirements a top priority," said the report.
The benchmark gauges the ESG risks and opportunities of digital assets using a spectrum of metrics, such as decentralization, energy consumption, and community engagement. These metrics' points are then aggregated and weighted to reach an overall score of up to 100 points, forming the final grade that ranges from AA (best) to E (worst). Digital assets that achieve a BB or better grade were considered top-tier in the report.
Solana: The Second Highest ESG Asset
Solana, along with Cardano and Polkadot, earned an 'A' grade for their excellence in decentralization, placing them in the top-tier category. Ethereum, with its recent transition to proof-of-stake technology that significantly cut energy consumption and eliminated miners, was the only blockchain to score an 'AA' grade.
Bitcoin, on the other hand, achieved a 'B' grade due to its high social and governance scores but was penalized for its hefty energy consumption and hardware needs.
Importantly, this grading system does not imply overall superiority. Instead, it ranks digital assets based on ESG parameters, providing investors with the necessary tools to make informed decisions and allocate resources to assets boasting strong ESG scores. With Solana securing the second highest ESG rank, it showcases the potential of this digital asset to provide both profitable and sustainable opportunities for investors in an increasingly ESG-conscious investment landscape.