The Finance World Magazine| Edition: November 2023

Blockchain technology, combined with digital
assets, represents a powerful tool for achieving
ESG goals and fostering a more sustainable future.
There is a pervasive belief that
cryptocurrencies, notably Bitcoin,
are environmentally harmful
due to their energy-intensive mining
processes. However, a recent study
by independent research consultant
James McKay provides a different
perspective. The research suggests
that Bitcoin’s energy consumption is
not disproportionately high relative to
its role in the global financial system,
and it relies on a significant proportion
of renewable energy sources. As
technology evolves, the adoption of
renewable energy in Bitcoin mining
is expected to further mitigate environmental
concerns.
Beyond cryptocurrency, blockchain
technology itself has the potential to
enhance trust and transparency in
sustainability efforts. Blockchain’s
immutable and transparent ledger
can be used to track and verify data
related to sustainable systems, helping
organisations achieve positive environmental
impacts. Let’s explore how
digital assets and blockchain are being
applied to ESG objectives.
Oxygen, a product developed by Zumo,
is designed to measure, mitigate, and
report Scope 3 emissions associated
with digital asset activities, such as
Bitcoin mining. As businesses strive to
meet their ESG mandates, mitigating
or offsetting energy consumption is a
significant part of their efforts. Oxygen
offers a flexible and transparent
solution for efficient procurement and
custody of real carbon credits, enabling
financial institutions to compensate
for the carbon impact of their digital
asset activities.
Efforts to green Bitcoin mining are
underway, with a focus on technologies
like proof of stake and proof of useful
work. These approaches are transparent
and verifiable, helping to minimise the
environmental impact of digital asset
processing. Furthermore, the incentivization
of energy producers to become
more cost-effective and eco-friendly
is changing the dynamics of energy
production and consumption.
Carbon registries currently operate
in isolation, resulting in issues like double-counting
and market fragmentation.
The solution involves transitioning to
digital on-chain registries and adopting
a multi-chain approach to improve
interoperability with multiple carbon
markets. Blockchain technology
can play a crucial role in enabling
cross-checking and verification across
carbon registries, preventing multiple
issuances on different platforms and
promoting trust in the market.
Zero13, led by GMEX, is at the forefront
of addressing these challenges.
Zero13 is an innovative initiative
that leverages automation, artificial
intelligence (AI), and blockchain
technology. Its primary objective is
to interconnect ESG (Environmental,
Social, and Governance) markets. One
of Zero13’s key missions is to restore
trust in carbon credit markets, combating
issues such as greenwashing,
which involves misleading claims about
environmental practices, and double
counting of carbon credits.
Another example is the World Bank’s
Partnership for Economic Inclusion and
Climate Action Data aims to create a
connected, data-driven ecosystem for
carbon credits. This enables end-to-end
traceability and validation of inventory
data across multiple markets, promoting
transparency and accountability.
Blockchain technology’s ability to
create time-stamped and immutable
records offers significant advantages
in reporting, authentication, and transparency.
This is particularly critical in
combating greenwashing and ensuring
trust in sustainability data. The end-to-end
trusted data retention and accessibility
capabilities of blockchain technology
are essential for maintaining integrity
in ESG efforts.
Blockchain’s decentralised nature
lends itself to supporting local markets
and projects that aim to create positive
social and environmental impacts. For
example, blockchain can be used to
ensure fair compensation for farmers
and labourers, track ethical standards,
and empower female entrepreneurs in
underserved regions.
The integration of traditional carbon
markets with digital technologies and
digital assets is gaining traction. ESG
teams are growing in influence and
increasingly report directly to boards,
making sustainability a core consideration
in financial operations.
The fusion of digital assets and blockchain
technology with ESG objectives
holds the promise of revolutionising
how companies approach sustainability,
accountability, and responsible
governance. While challenges such
as regulatory uncertainty and energy
consumption remain, the potential
benefits in terms of transparency,
traceability, and accountability are
undeniable.
As ESG objectives continue to evolve,
the integration of digital assets and
blockchain will likely play a pivotal
role in advancing sustainable and
responsible business practices.
November 2023 www.thefinanceworld.com 67