After the US Securities and Exchange Commission (SEC) approved Bitcoin exchange-traded funds (ETFs), the number of crypto fund products with significant carbon footprint grew dramatically.
In light of this, Zumo, the B2B digital assets infrastructure prioritising compliance and sustainability, is joining forces with the Crypto Carbon Ratings Institute (CCRI), which provides data on the carbon exposure of investments and business activities related to blockchain, to help financial institutions better measure, mitigate, and report on the carbon footprint of their crypto activities.
Research from Zumo and CCRI highlighted that as of March 2024, the annualised carbon footprint of all physically backed Bitcoin fund products stood at 4487.93 kilotonnes of carbon dioxide (ktCO2). To put this into context, this is equivalent to a person flying from London to New York and back over 1.5 million times.
The environmental impact of blockchain also stands to get worse, with the London Stock Exchange (LSE) and the Hong Kong Securities and Futures Commission (SFC) now also accepting crypto fund products.
Furthermore, the annualised carbon footprint of the US ETF cohort that went live in January 2024 following approval by the SEC was 2056.86 ktCO2, meaning it had captured 45.8 per cent of the market share and carbon footprint – for physically-backed Bitcoin funds within just a couple of months.
CCRI will now provide the data and methodologies to enable Zumo to further develop its Oxygen solution. The first of its kind, Oxygen uses blockchain technology and strategically sourced market instruments, including renewable energy certificates (RECs), to enable financial institutions to measure, mitigate, and report on the carbon footprint of their digital asset activities.
Embedding sustainability ‘at the heart’ of digital assets
Nick Jones, founder and CEO of Zumo, commented: “As providers’ share of crypto holdings increases, so must their responsibility when it comes to ESG considerations. We’re proud to be partnering with CCRI, which is recognised as the gold standard for sustainability data in our sector.
“Together, we can help responsible financial institutions embed sustainability at the heart of their digital asset propositions, in line with investors’ growing ESG awareness and new regulations, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), which requires companies to report Scope 3 emissions.”
Last year, Zumo helped Jacobi Asset Management deliver Europe’s first ESG-aligned Bitcoin spot ETF, listed on Euronext Amsterdam. Zumo will now work in partnership with CCRI to help more financial institutions address the carbon footprint of the new wave of Bitcoin ETFs and other financial instruments coming to the global market.
Christian Stoll, co-founder of CCRI, also added: “Transparency and data are key to measuring and managing environmental impacts linked to financial products. Unfortunately, most funds are still not measuring or reporting on the carbon footprint of their crypto activities. We are happy that Zumo builds on our dataset and leverages our complementary capabilities to provide an end-to-end solution to help financial institutions understand and mitigate their crypto-related carbon exposure.”
