Cryptocurrencies. Getty
According to MSCI, investors are increasingly exposed to cryptocurrency and the risks associated with digital assets.
Minimum 52 of the companies covered by MSCI ESG Research have cryptocurrency exposure.
These 26 companies are also included in the MSCI's flagship ACWI World Index.
According to MSCI, investors who are focused on governance, environmental and social issues are more vulnerable to "creeping exposure" to cryptocurrencies.
According to the ESG team's podcast, 52 of the public companies that are covered by MSCI ESG Research have exposures to cryptocurrencies. This amounts to approximately 6.6% of the total market cap.
MSCI ESG Research stated that although most cryptocurrency investments are speculation and have little utility, some have had limited success as genuine currencies and have shown impressive returns. "This growth has contributed both to the rise of cryptocurrency-exposed companies and efforts by established companies to gain cryptocurrency exposure."
A variety of companies are exposed, including Coinbase, a pure-play cryptocurrency exchange operator that went public in May. Facebook is another name. It does not make any revenue from digital coins, but it is looking for ways to monetize it. Nvidia, a chipmaker that has a dedicated graphics-processing unit designed for professional cryptocurrency miners, is another name.
According to MSCI, crypto exposure can occur when new listed cryptocurrency companies are added into indexes or when investors who already own the companies - either directly or through indexes-, venture into activities that involve bitcoin or other cryptocurrencies.
26 companies that are crypto-exposed include 26 members of the MSCI ACWI Index. This is the company's flagship equity index, which measures the performance of large- and medium-cap stocks in 23 developed markets and 27 emerging ones. This index has more than 2,900 constituents from 11 sectors.
Investors with crypto exposure could be running contrary to their ESG goals.
The environmental risks associated with cryptocurrencies include the emission of greenhouse gases from energy use and electronic waste. Governance risks include boards of cryptocurrency-exposed companies needing to adapt risk-management policies to issues such as cybersecurity and anti-money laundering practices.
