Elon Musk’s decision to prevent accepting bitcoin as payment over environmental concerns has been well-received by a number of Tesla Inc’s (TSLA.O) investors, offering a warning to corporate peers mulling a dabble with the cryptocurrency.
The Tesla boss’ tweets, which had helped drive a number of the gains in bitcoin in recent months, within the week triggered a 17% slide in the value of the cryptocurrency when he said his company’s customers would not be ready to use bitcoin to shop for its cars. read more
Driving the choice, Musk said, was concern over the quantity of energy it takes to “mine” bitcoin, with much of it wiped out China using cheap, climate-destroying thermal coal. Tesla could revisit the choice if things changes, he added.
Bitcoin is made when high-powered computers compete against other machines to unravel complex mathematical puzzles, an energy-intensive process. read more
More than half a dozen investors within the electric vehicle maker contacted by Reuters said they were proud of Musk’s decision on bitcoin.
“The energy waste should be avoided no matter it’s color. And Tesla should specialise in its core business. Drop the bitcoin position and advance,” said APG Asset Management Chief Investment Officer Peter Branner, a Tesla investor.
Bitcoin mining uses about an equivalent amount of energy annually because the Netherlands did in 2019, data from the University of Cambridge and therefore the International Energy Agency showed, generating between 22 million and 22.9 million metric plenty of CO2 emissions a year, consistent with a 2019 study in scientific journal Joule. read more
Guillaume Mascotte, head of ESG and Investment Stewardship at American Century Investments, a top-40 Tesla investor consistent with Refinitiv, said any enter bitcoin by a corporation would impact the way they were viewed.
“It would affect our ESG risk views on payment companies and other firms taking large positions in crypto especially if it contributes to ‘engineering’ their bottom-lines as we saw with Tesla,” he said.
A UK-based investor, who declined to be named, said Musk’s reversal showed the power of consumer and investor discontent to erupt change, raising broader recognition of the carbon footprint embedded in cryptocurrencies.
“Tesla decided to form an enormous statement about bitcoin in February and it didn’t pan out that well, so this is often a warning shot to those that could be considering integrating some cryptocurrency into their strategy,” the investor said.
Several investors pointed to the necessity for ESG rating agencies to try to more to spotlight the risks related to cryptocurrencies.
The UK-based investor said leading agency MSCI had given Tesla a robust 9.3 erase of a maximum 10 for environmental risk and mentioned the bitcoin foray as only a minor controversy during a February report. MSCI declined to comment when contacted by Reuters.
Jennifer Bishop, senior portfolio manager at UK-based Coal Pension Trustee Services, said she would also like more insight from the rating agencies.
“What would be most helpful in ensuring use of digital currency gets picked up by the likes of MSCI and Sustainalytics in emissions intensity,” she said, pertaining to a measure of emissions produced per unit of revenue.
David Sneyd, vice chairman within the Responsible Investment team at BMO Global Asset Management, said that overall, the firm viewed bitcoin and other currencies as “net negative from an ESG standpoint”.
“As it currently stands, the positive potential of bitcoin remains unproven, but the negatives are very real and present,” he said, citing the environmental concerns also as those over the utilization of the currency in financing crime.
Criminals increasingly demand payment via untraceable electronic means to avoid detection. On Friday, as an example, Bloomberg News reported Colonial Pipeline (COLPI.UL) paid hackers a ransom of nearly $5 million in cryptocurrency. read more
For Miranda Beacham, head of ESG – Equity and Multi-Asset Group at Aegon Asset Management, which recently sold out of Tesla, accepting bitcoin raises governance risks given its speculative, volatile nature and lack of regulation.
“I think tons of investors have picked abreast of the environmental side … but I personally don’t think that is the biggest problem. i feel that the governance and therefore the risk surrounding cryptocurrency is way higher.”
“There’s tons of shareholders that have really focused in on ‘how dare Tesla, the darling of the ESG world suddenly start dabbling in something as dirty as cryptocurrency.’ i feel that’s a red herring.”