CCData’s new ESG Benchmark ranks Ethereum highest for sustainability, with Bitcoin lagging due to its energy-intensive operations.
In a groundbreaking move, crypto data analytics powerhouse CCData unveiled its debut institutional-level scoring system. This unique approach evaluates digital currencies based on their environmental, social, and governance (ESG) footprint. Ethereum emerged as the top contender, leaving Bitcoin trailing due to its high energy consumption.
Crypto Space Embraces ESG Criteria
The innovative ESG Benchmark by CCData was born out of a partnership with the Crypto Carbon Ratings Institute (CCRI). They put 40 of the most widely-traded digital currencies under the microscope, examining factors such as security, decentralization, and environmental impact.
The spotlight on ESG elements in investment strategies is becoming brighter. This trend is particularly noticeable among heavyweight institutional investors and sizeable asset management firms. Global accounting juggernaut PricewaterhouseCooper (PwC) predicts that by 2026, ESG-related assets under management could make up one-fifth of all investments worldwide, amounting to a staggering $33.9 trillion.
In a recent conference, the consensus among participants was clear: if cryptocurrencies aim to reel in more institutional capital, they need to embrace ESG norms rather than sidestep them. Leading the charge for ESG-friendly investments is BlackRock, an asset management titan currently pushing for a spot bitcoin ETF.
CCData’s ESG Benchmark: A New Measure for Crypto
In response to the rising ESG tide, CCData developed a specialized scoring system exclusively for the crypto market. The ESG Benchmark is designed to enhance the industry’s resilience and help it tackle ESG criticisms head-on. It’s aimed at regulators, policymakers, and media outlets, all of whom see ESG compliance as a critical issue.
CCData’s ESG Benchmark evaluates the ESG risks and potential of digital currencies by considering a wide array of factors. These include their level of decentralization, the amount of energy they consume, and their community engagement activities. These criteria are each assigned points, which are then compiled and weighed to provide a total score out of 100. Assets are rated from AA, the highest, to E, the lowest. In this system, any digital asset with a BB rating or better is classified as top-tier.
Ethereum Excels, Bitcoin Lags Behind
In the ESG Benchmark, Ethereum was the only digital currency to clinch an AA rating. It scored highly on all three ESG factors. The switch to proof-of-stake technology played a crucial role in Ethereum’s high rank as it led to a significant reduction in energy use and negated the need for miners.
Solana, Cardano, and Polkadot also made a strong impression by scoring an A grade. Their high level of decentralization secured them a place in the top-tier.
Bitcoin, however, only managed to secure a B grade. While it performed well in terms of social and governance aspects, its high energy use and demand for hardware dragged its rating down. Still, the energy usage in Bitcoin mining declined dramatically when compared to previous years.
CCData made it clear in the report that these grades are not an indication of overall superiority. They are a method to rank digital currencies based on ESG factors. This system provides investors with the insights they need to make informed decisions and allocate their resources to assets that demonstrate strong ESG performance.