CCData and CCRI, leaders in digital asset data and Environmental, Social, and Governance (ESG) analysis, have created the first-ever institutional-grade Digital Asset ESG Benchmark and data solutions. The report revealed that Bitcoin accounts for 90% of the annual electricity consumed by the top forty coins in the crypto industry.
CCData and CCRI Release Digital Asset ESG Benchmark
On Thursday, CCData and Crypto Carbon Ratings Institute published their ESG benchmark. The benchmark provides a framework for assessing the ESG risks and opportunities associated with the top forty coins in the crypto industry.
The report uses qualitative and quantitative metrics to offer a unique lens through which digital assets can be evaluated for ESG exposure. The benchmark covers 11 core evaluation categories, including fundamentals, electricity consumption, climate impact, transparency, and community engagement.
Each asset is assigned a grade ranging from AA to E based on ESG compliance. Top-tier assets, graded AA to BB, meet minimum thresholds for ESG risk, while those graded B to E fall into the lower tier. The scores and grades are comparable across all assets, providing investors with a reliable means of ranking digital assets according to ESG parameters.
ESG Benchmark Slams Bitcoin For Excessive Energy Usage
One of the key findings of the benchmark is the significant energy consumption of Bitcoin. The report revealed that Bitcoin accounts for 90% of the energy consumed by the top forty coins. Furthermore, the leading cryptocurrency consumes more than 100 TWh per year.
“Although Bitcoin ranks second in Social, and fourth in Governance, it ranks last in Environmental due to heavy electricity consumption and the carbon intensity of the electricity it utilizes, amongst other environmental externalities.”
All in all, Bitcoin received a B grade. On the other hand, Ethereum topped the ESG ranking, followed by Solana and Cardano. Ethereum was the only cryptocurrency that received an AA grade. Eight other cryptocurrencies, including Solana, Cardano, and Binance Coin, got an A.
The report also highlighted the positive strides made by some digital assets in terms of energy efficiency. It noted that 34 out of the top 40 assets rely on consensus mechanisms such as Proof-of-Stake, which have much lower electricity consumption, typically not exceeding 10 GWh annually.
Digital Asset ESG Benchmark Assesses More Parameters
In addition to energy consumption, the benchmark assessed other ESG parameters. It revealed that only a few assets require specialized and single-purposed hardware, which lowers overall e-waste.
Moreover, most assets have carbon intensities of electricity generation below the world average. Proof-of-Work-based assets are performing worse due to using cheap electricity sources like natural gas and subsidized coal power.
Transparency is another crucial aspect evaluated by the benchmark. Notably, only 7 of the top 40 assets provide comprehensive, high-quality information on their sustainability performance. The report emphasized the need for more disclosure, third-party audits, and live data to ensure transparency and enable informed investment decisions.
“ESG is emerging as a critical aspect of the digital asset landscape, driven by increasing institutional adoption and the demand for sustainable investment practices,” the report said. “As the ecosystem expands, so does the need for a comprehensive ESG benchmark tailored specifically to the digital asset space.”
The report comes at a time when the role of ESG in investments is becoming increasingly prevalent, especially among institutional investors and extensive asset management firms. ESG-related assets under management could reach 33.9 trillion by 2026, a fifth of all investments globally, PwC said in a report last year.
This article originally appeared on The Tokenist
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