IFAs are concerned and nervous about Tesla’s foray into Bitcoin and what it may mean for the ESG credentials of the car maker.
Tesla announced last Monday that it had invested $1.5bn (£1.1bn) in Bitcoin and would start accepting the cryptocurrency as payment in a filing to the Securities and Exchange Commission, making it the first car manufacturer to accept cryptocurrency. The move pushed Bitcoin up $2,000 and towards the $50,000 mark within a few days of the announcement.
Many commentators reacted positively, and there is no doubt it was a great decision for existing holders of Bitcoin. But a rise in Bitcoin’s value is itself a concern for ethical and impact investment specialists because this boosts its appeal so more people mine it. This in turn increases energy consumption and Bitcoin’s carbon footprint because of how its blockchain distributed ledger works. Bitcoin now consumes more electricity than Argentina, according to analysis by Cambridge University reported by the BBC.
This poses environmental questions for ESG funds which hold the stock.
Darren Lloyd Thomas, managing director of Welsh IFA Thomas and Thomas which has specialist ESG portfolios, said: ‘We are a bit freaked out by cryptocurrency. We are worried because it is so hard to regulate and quantify. It could blow up at any point. We are worried because it could be coming in via the back door of funds through stocks like Tesla.
‘We are living in dramatic times with Reddit [and its users’ push to invest in GameStop] and Robinhood [a commission-free stock trading app] proving there is a real push for a power to the people. It is a rage against the machine, against traditionally-regulated investments.’
He also raised concerns over the general transparency of all cryptocurrencies and how to identify whether or not the funds have been generated illegally, including via the dark web.
As a result, he said he would be ‘looking to offload funds that Tesla is in’ because of its holding in Bitcoin.
Lloyd Thomas added: ‘We have been getting a bit twitchy about Tesla anyway because of production issues and it has expanded at a furious rate. I think people have got a bit carried away with this and it is misplaced enthusiasm.’
Lloyd Thomas’ worries over Tesla are not unique, Scottish Mortgage, the UK’s largest investment trust, recently halved the size of its position in Tesla – although fund manager James Anderson has told The Times he is not ‘unduly bothered’ over Tesla’s Bitcoin purchases.
Chris Welsford, managing director of IFA Ayres Punchard, said that with Tesla, as with any company, the approach to anything from human rights and labour rights all the way through to its impact on climate change comes down the culture of the company, something that is hard to pin down.
‘Culture is the most important thing, what [a company] really wants or what they really do,’ he said.
Welsford’s firm does significant research into…