Dozens of ‘ESG Companies’ Have 'Creeping Exposure' to Crypto
At least 52 companies that fall under the ESG (environmental, social and governance) umbrella of the major stock index provider MSCI have “creeping exposure to cryptocurrency,” an analysis by the firm has found.
Combined, the 52 companies make up about USD 7.1trn in market capitalization, or about 6.6% of the total market capitalization covered by MSCI ESG Research, with many of them gaining exposure “passively and unintentionally,” the analysts said.
They went on to say that some institutions may have more exposure to crypto risk “than they realize.”
“Equity investors – even those with significant reservations about the highly volatile asset class – may be faced with ‘creeping’ cryptocurrency exposure. This can occur when newly listed cryptocurrency companies get added to the indexes that guide their investments, or when companies in which they are already invested, directly or through indexes, announce strategies that include bitcoin or other cryptocurrencies,” the researchers wrote.
Further, they also warned both investors and company executives about the risks associated with crypto in an ESG perspective. Environmental risks from cryptocurrencies include greenhouse-gas emissions from energy usage and electronic waste, the researchers said, while suggesting that “identifying where mining occurs” for different cryptocurrencies can help alleviate this type of risk.
In terms of social risks, the MSCI researchers said that crypto’s “impact remain uncertain,” although it mentioned “transaction disputes” as a possible risk for companies that accept crypto as payment.
Lastly, the firm said governance risks could arise from issues related to cybersecurity and anti-money laundering (AML) practises, while noting that the way coins themselves are governed could also play a role for companies.
Among the non-crypto companies that have famously gained exposure to cryptocurrencies – although to a varying degree – are electric car maker Tesla and the software company MicroStrategy, both publicly listed companies in the US.
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