What is Bitcoin and is it an ethical investment?

Bitcoin is the talk of the town right now, mostly because it’s value has risen almost 500% in 2017 alone.   So no surprise, someone asked me the other day if at Goodments we see it as an ethical investment.

Now although we don’t pretend to be the authority on what is and isn’t ethical, as an app that matches you to shares based on your values, we take a lot of interest in the area.

Generally, when talking about a currency, people don’t consider ethics of the currency itself.  They might have a view on the country and if it aligns to their values and morals. But rarely would they look so closely at the currency in isolation.  In the case of Bitcoin though because it’s more than just a currency, we can consider it on its own.  Not least because it crosses borders and is a disruptive technology that impacts the world we live.

What is Bitcoin really?

Simply put, Bitcoin is a digital currency which can be used for payments and as a store of value. It operates outside of existing financial systems and offers the ability to instantly transfer money and property at very low costs.  Other digital currencies include Ethereum, Litecoin and Monero.

There are no physical bitcoins and as a result all balances are kept on a public ledger in the cloud. All Bitcoin transactions are verified by a massive amount of computing power.  New ‘coins’ enter circulation using additional computing power, based on developing code to release new coins.  Known as Bitcoin mining, this involves solving a computationally difficult puzzle to discover a new block, which is added to the blockchain, and receiving a reward in the form of few bitcoins.  It’s supremely geeky stuff.

Is it an Ethical investment?

At Goodments, we know that ethics and sustainability are in the eye of the beholder.  What one person thinks is ethical or sustainable may be different to someone else.

That said, sustainable investing can be assessed against 3 key criteria; Environment,  Social and Governance (also termed as ethics or transparency).  Ultimately, for investors looking to make an ethical investment, will this share have a positive (or neutral) benefit to the environment and/or society.  So we’ve considered Bitcoin through that lens.

  1. Environment

As we look at Bitcoin, right now there are some significant negative environmental impacts.

Wired recently reported that each bitcoin transaction requires the same amount of energy used to power nine homes in the US for one day. And miners are constantly installing more and faster computers. The total energy use of this web of hardware is huge—an estimated 31 terawatt-hours per year. More than 150 individual countries in the world consume less energy than this amount annually! 1

Some argue that although this is significant, it is less than the banking sector.  However, at this stage Bitcoin is a counter currency, new to the market and should be starting out on a better footing with greater efficiency.

  1. Social

Assessing the social impacts of Bitcoin is challenging as there is little data available.  What it is doing is helping to equalise wealth, making a great deal of new and young investors incredibly wealthy.  According to Bitpay, Bitcoin is supporting less developed economies with Latin America showing the fastest growth in transactions. 2 Depending on which side of the fence you sit, there is an argument that the anonymity that Bitcoin transactions bring are a benefit to heavily surveillance societies.   But at this stage it isn’t clear if Bitcoin is just creating a new wealth gap, present across a younger tech-savvy generation.

  1. Governance

Governance is commonly understood to be a measure of transparency, control and accountability.  Today, Bitcoin is inherently secretive and protective of providers and users, it’s unregulated and control sits with few secretive independent ‘miners’.  There is also a lack of protection for people who get hacked or lose their money.  In many ways, it operates on the black market (or dark web) which doesn’t help it rate well on the governance front.

So….

On balance, Bitcoin today probably can’t be seen as an ethical or responsible investment. But what about in the future?

The future of Bitcoin

Today, we are not even truly sure if Bitcoin and cryptocurrencies as we know them will be around in 5 years, or if they will be replaced by something completely different and as yet unknown.

Brian Forde, former White House Senior Advisor and current Director of Digital Currency at the MIT Media Lab compares the infancy of bitcoin and cryptocurrency to the early days of the internet and the introduction of email.  Which we now know was the tip of the iceberg.

There is much commentary about the opportunity for Bitcoin to be a game-changer when it comes to wealth distribution.   If Governments were to embrace it, as secondary to their national currency, and experiment with its use to distribute wealth (e.g. as a source of universal income or benefits) it could be used and regulated to lift huge portions of society out of poverty.  Its digital nature brings with it the possibility of regulating and monitoring it.  Allowing Governments to keep it in the hands that need it and on the goods they need without risks of it being corrupted – in the way an untraceable physical currency can.

In conclusion 

Goodments doesn’t yet enable our investors to invest in Bitcoin on our platform.  Today, it’s draining on our environment and lack of regulation make it an unlikely candidate for Ethical Investment of the Year.  But if as Bitcoin could be used in a more positive way in the future, it is something we look forward to seeing unfold.

Ethical investors looking to invest on their terms.

Ethical investing, otherwise know as sustainable or responsible investing is on the rise. Some reports put the growth rates at 86% year on year for the last 3 years,  with billions of dollars now invested ethically around the world.

But where is the growth coming from? We at Goodments, a new invetsment app that matches investors to shares based on their environmental, social and ethical values, believe its coming from millennials.

We’ve has conducted a number of pieces of research over the last 6 months and the following are a collection of our findings:

The number of young australians who identify with ethical investing .             Goodments Survey (1200 online  Australians) 

We are always surprised at the maturity and foresight, particularly of our younger supporters, when it comes to both their responsibility to live their in a sustainable way, but also to manage and grow their money with the same mindset. We’ve met people in their final year of university who are signing up to Goodments as they want to be prepared for when they enter the workforce. As well as people who are a few years into their careers with savings accounts of $40k +, who are now starting to look at alternatives to cash savings, to help them grow their wealth in a sustainable way and allow them to get ahead.

Whats interesting, is that when it comes to the balance of financial performance and sustainability performance, these more ethically minded investors are willing to accept slightly lower financial returns for good environmental, social and ethical performance.

The importance sustainability performance when it comes to investing. Survey of Goodments customers
 

Luckily, this could be a mute point, with plenty of research now suggesting that investments in sustainable companies, outperform investments in their less sustainable peers.

There are commonalities in personality traits of those want to invest ethically. The strongest and most common traits focus on empathy, thoughtfulness, imagination and a desire to overcome challenges. These traits tend to manifest themselves in the ability for people to accept uncertainty and process abstract information. All key strengths when it comes to thinking about taking action on sustainability issues and to process the often disparate information sources to form a view of a company to invest in.

Key personality traits found in ethical investors. Survey of Goodments customers. (Personality research completed in partnership with Veebit). 

Although there are common personality traits between sustainable investors, there are differences in what causes each person holds closest to their heart. These preferences influence what business practices different people want to support.

Common causes ethical investors want to support and promote. Survey of Goodments customers. All designs owned and reserved by Goodments.

Likewise, there are key differences in what each person deems to be unacceptable when it comes to investing in companies.

Business practices that ethical investors choose to exclude. Survey of Goodments customer. All designs owned and reserved by Goodments.

Overall ethical investors are looking to invest on their terms. This means that increasingly they are looking for a more complete picture of a company’s performance, which includes not only financial performance but also environmental, social and ethical performance.  When making their choices in which companies to follow and which to exclude, the decision becomes very personal.

Author: Tom Culver, Goodments CEO and Co-founder.

Join the waitlist: http://www.goodments.com

Image: Martin Reisch

Adieu Paris. Business leaders putting their hands up to take responsibility. 

This weekend we saw Donald Trump make the decision to opt the US out of the Paris climate accord. A global, non-binding,  agreement to limit the increase in global temperatures to 2 degrees, aiming to safeguarding the future of the plant for today’s and future generations.  It initially took America under the leadership of Barak Obama to get all but two countries to sign the agreement.  The US now joins Syria and Nicaragua as the 3 countries who wont commit to the cause.

Trump’s reason for opting out;

  • The agreement “disadvantages” the US.
  • The deal left “American workers, who I love, and taxpayers to absorb the cost in terms of lost jobs, lower wages, shuttered factories and vastly diminished economic production.”

The CEOs and leaders of many big American companies have different views, committing to pursue the goals laid out in the Paris agreement, as well as their own initiatives.  Why? Because as global corporations,  they understand the influence they can have at a global scale. These leaders also see the opportunity to invent new technologies and advance the way the world does business in order to change the world extraordinary ways.

Facebook:

Screen Shot 2017-06-03 at 3.25.03 PM

 

Google:

General Electric:

Microsoft:

It also led to the CEO of Disney, along with Elon Musk to leave the president’s business council:

It wasn’t only business leaders,  the states and citizens Trump believes he made this decision for also rejected his reasoning.

“I was elected to represent the citizens of Pittsburgh, not Paris,” Trump told the world. Never mind that the good folks of Pittsburgh are citizens of the United States.  The response:

“So we’re getting out,” Trump explained in his announcement.  Thankfully this decisions doesn’t seem to matter to a number of the world most influence business leaders.

It could not be all over…….According to the experts it will take 4 years for the US to exit the agreement. That just so happens to be the day after Trumps last day in office (assuming he makes it to the end of his term and doesn’t get a second one!).

You might also be interested in Corporations not Government lead to a sustainable future.

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