A few weeks ago, Europe introduced its inaugural physical Bitcoin exchange-traded fund (ETF) on the Euronext Amsterdam exchange, using the ticker symbol BCOIN. The company responsible for launching this pioneering ETF, Jacobi Asset Management, waited for over a year before finally unveiling this investment option. Back in 2022, the company had cited that the timing was not appropriate for the launch. However, the reception for the ETF introduction in 2023 was positive within the community.
Jacobi has now associated an ESG (Environmental, Social, and Governance) label with their ETF. This label serves to increase transparency concerning sustainable investment products. Moreover, asset managers, pension funds, and insurance companies are striving to prevent misleading green marketing practices and enhance investor confidence in relation to sustainability. Martin Bednall, CEO of Jacobi, asserted that the ETF is designed to be “completely decarbonized.” Information tracked by Bloomberg revealed that this ETF, primarily intended for speculative investment in Bitcoin’s value, is the first instance of the EU’s rules on environmental, social, and governance investing being applied to such a vehicle.
Further justifying the ETF’s classification, Bednall stated that the fund will redirect investments towards Renewable Energy Certificates (RECs). Through the acquisition of these certificates, Jacobi aims to support sufficient renewable energy initiatives to offset the greenhouse gas emissions resulting from the energy consumption associated with the Bitcoin mining activities that the ETF tracks.
Nonetheless, those concerned about the environment remain doubtful. It’s an established fact that the process of Bitcoin mining consumes a substantial amount of energy. As per data from the Cambridge Center for Alternative Finance, merely 38% of Bitcoin mining operations utilize sustainable energy sources. Anders Bjørn, who authored a 2022 article on Renewable Energy Certificates (RECs) featured in the journal Nature Climate Change, commented,
“The assertion of achieving decarbonization holds merit only if Jacobi Asset Management can substantiate that their procurement of RECs genuinely leads to the generation of an equivalent volume of renewable energy. This seems highly improbable, given that the company acquires unbundled RECs to align with the electricity consumption associated with bitcoin mining.”
ESG Labeling: A Fit for Bitcoin Funds?
Additionally, Matthew Brander, a Senior Lecturer specializing in Carbon Accounting at the University of Edinburgh Business School, underscored the lack of credibility in utilizing Renewable Energy Certificates (RECs) to achieve a decarbonization strategy. He highlighted that procuring RECs does not establish any tangible real-world connection between digital assets and renewable energy sources. Despite these reservations, Bednall acknowledged being well-informed about the potential drawbacks. However, the company consciously chose the path of utilizing RECs after thoroughly considering other available alternatives. He further explained,
“We opted for RECs over offsets, as the most significant portion of our carbon emissions is attributed to the electricity consumption of the Bitcoin network.”
Recent research conducted by MorningStar uncovered that almost a quarter (23%) of funds claiming to “promote” sustainability according to European regulations do not genuinely warrant an ESG designation. Nevertheless, a sense of optimism remains. A separate study projected that the global value of ESG assets could reach a substantial $50 trillion by the year 2025.