Legal Considerations
in Responsible Investment

White House Releases Report Addressing the Intersection Between Cryptocurrency and Climate Change

In September 2022, the White House issued a report addressing the impact of crypto asset activities on the environment as well as how to mitigate their negative externalities in order to make the crypto industry more ESG friendly.

The rise in popularity of cryptocurrency has drawn attention from the ESG community because generating cryptocurrencies and maintaining their ledgers, or blockchains, uses an enormous amount of energy. Many cryptocurrency transactions are accounted for under a “Proof of Work” (PoW) mechanism, which consumes a tremendous amount of computing power, and accounts for approximately 0.4% to 0.9% of total global electricity usage, exceeding the entire annual electricity usage in certain countries such as Australia and Argentina. In the U.S., total crypto-asset operations comprise approximately 1.7% of electricity usage, equaling that used to power all residential lighting in the country.

The Biden Administration has been studying the effects of the rise of cryptocurrencies on energy usage. On March 9, 2022, President Biden signed Executive Order 14067: “Ensuring Responsible Development of Digital Assets,” which directs the White House Office of Science and Technology Policy to examine how cryptocurrency technologies impact climate change both domestically and abroad. More recently, the White House has been examining the intersection between crypto-assets and climate change and collected its findings in a report titled: “Climate and Energy Implications of Crypto-Assets in the United States” (the “Report”), which it published on September 8, 2022. The Report discusses the considerable levels of energy used to power crypto “asset generation, ownership, and exchange,” and suggests potential remedies for the adverse effects crypto’s high energy usage.

For instance, the Report found that crypto mining contributes to green-house gas emissions, pollution, and noise, and many of these effects disproportionately affect communities of color, low-income communities, and Indigenous communities. Crypto mining operations also produce substantial electronic waste of natural resources such as cobalt, indium, and gold, for which there exists no accepted standard governing their proper disposal. To counter these adverse externalities and pave the way for crypto operations to align with the country’s goal of achieving net-zero emissions by 2050, the Report suggests means by which to recycle the electronic byproducts of natural resources involved in crypto operations, for instance, by using “certified electronics recyclers,” which are designed to maximize reuse and recycling and reduce dangers presented to human health and the environment. The Report further recommends powering crypto-asset operations with renewable energy sources like hydroelectric, solar, and wind power, which would replace the likes of coal and fossil fuels.

Read the White House Report.

The Grant & Eisenhofer ESG Institute will continue to closely monitor the efforts undertaken to make crypto-assets more ESG-friendly.

Background on the Grant & Eisenhofer ESG Institute

Global investor interest in sustainable and responsible investment continues to accelerate at a rapid pace. Responsible investment strategies take into consideration environmental, social and governance (ESG) factors in portfolio selection criteria and management, with the belief that better corporate ESG profiles result in fewer disasters or corporate scandals, and better long-term returns. As one example of investor enthusiasm for ESG funds, London-based ETFGI reported in December 2021 that assets invested in ESG ETFs and ETPs listed globally had reached a record $371 billion.*  Responsible Investment currently represents approximately 36% of all professionally managed assets worldwide.**  Investment policies that integrate ESG criteria tend to express investor values specific to weapons, carbon emissions, fossil fuel reserves, labor conditions, human rights, corporate governance, executive compensation, #metoo and other social and environmental issues. Corporate engagement and shareholder activism are additional approaches investors are increasingly using to influence corporate behavior in furtherance of ESG principles.

With a quarter century of actively protecting and promoting the rights of institutional investors and public entities, Grant & Eisenhofer has built a legacy in corporate governance with an unwavering commitment to responsible investment. The Firm has cemented this history with an initiative expressly designed to address the increasing dialogue on ESG within the institutional investor community – the Grant & Eisenhofer ESG Institute. The ESG Institute is a non-profit organization formed in 2017 with the mission of harnessing its members’ legal skills to work with investors to further a wide array of ESG goals. To this end, the Institute pursues select matters exclusively to promote legal issues related to ESG considerations, and offers thought leadership in the discipline. The Institute also aims to address, on an ongoing basis, the legal issues that decision-makers and stakeholders in the investment community grapple with in implementing responsible investment criteria.

Some of the legal issues the ESG Institute focuses on include:

  • Sustainability and Fiduciary Duty
  • Climate Change and Securities Law
  • Corporate Legal Responsibility for Activity in Developing Countries
  • Legal Challenges to Limit Compensation

The ESG Institute is led by G&E's Caitlin Moyna in the U.S. and Nadia Klein in the UK. It is also guided by an Advisory Board comprised of a diverse range of investors with global experience spanning asset managers, public pension funds and nonprofits, all of whom have a demonstrated track record of commitment to ESG causes.

View examples of G&E's ESG-Related Cases

Proportion of Global SRI Assets by Region

  * Source: ETFGI Press Release – December 17, 2021
** Source: Global Sustainable Investment Review 2020 © Global Sustainable Investment Alliance 2021

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