Crypto May Undermine Investors’ ESG Goals – ECB 

The European Central Bank (ECB) has warned that the “explosive growth” of crypto assets since the end of 2020 could pose risks to investors’ ESG objectives. The ECB highlighted the “disproportionate amount of energy” used to make particular crypto-assets function, thus clashing with public and private environmental policies and ESG objectives. The bank has called on financial institutions, public authorities and investors to decide if the “outsized carbon footprint” of certain crypto-assets undermines their green transition commitments, ESG objectives, and climate strategy. The ECB said: “Climate transition risks are expected to increase in line with the increasing exposure of the financial sector to crypto-assets. These range from a risk-sensitive approach in the form of risk-weighted add-ons to a capital deduction approach for all new exposures to crypto-assets with a significant carbon footprint.” 

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