Fidelity Investments, one of the world’s largest asset managers, is making it easier for workers to invest their retirement savings in bitcoin. But the move could make it harder to fight climate change, given the greenhouse gas emissions tied to the cryptocurrency.
Later this year, Fidelity will begin giving the 23,000 companies whose retirement programs it administers the option to add bitcoin investments to their 401(k) plans, the asset management giant announced earlier this week.
It’ll be the first major retirement plan administrator to offer cryptocurrency investments to customers. The value of a bitcoin has fallen nearly 43 percent since last November while the network’s annual energy consumption has grown to rival that of Thailand.
Fidelity’s move to promote bitcoin to investors raises questions about the credibility of the company’s climate goals, which include integrating sustainability “considerations across our products, services, and investment decisions.”
The new bitcoin offering “is just fundamentally incompatible” with Fidelity’s environmental aims, said Duke Law School professor Lee Reiners, the executive director of the Duke Global Financial Markets Center.
The bitcoin network’s annual emissions — estimated to top 114 million metric tons of CO2 — are a function of the way the cryptocurrency is secured. High-powered computers, known as mining rigs, race to solve a complex puzzle so they can add new transactions to a decentralized ledger called the blockchain. The miner who wins that competition receives a bitcoin reward.
Fidelity has been mining bitcoin since 2014 and launched a bitcoin fund for wealthy investors in 2020.
Fidelity signed onto the Task Force on Climate-related Financial Disclosures in 2017, but didn’t issue its first environmental report until last year. That report claimed a carbon footprint equivalent to 156,000 metric tons of carbon dioxide. It didn’t mention Fidelity’s bitcoin efforts or take into account emissions associated with the $4.5 trillion it manages on behalf of some 40 million people, as recommended by TCFD.
The asset manager discloses little information about its climate-related risks because it’s privately held.
Fidelity didn’t respond to a request for comment on its climate commitments.
It’s unclear how many Fidelity customers will make use of its new bitcoin offering, in part due to regulatory concerns. The only one that’s so far announced plans to do so is MicroStrategy Inc., a software firm that owns $5 billion worth of bitcoin, more than any other publicly traded company.
Last month, the Labor Department issued a compliance memo warning companies to “exercise extreme care before they consider adding a cryptocurrency option” to 401(k) plans.
The agency, which oversees retirement plans, has raised concerns about the speculative and volatile nature of cryptocurrencies and said it “expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products.”
But Fidelity suggested the looming regulatory scrutiny of cryptocurrency retirement options isn’t deterring some of its 401(k) clients.
“We continue to see increasing interest in this product,” said Mike Shamrell, a Fidelity spokesperson.
Correction: An earlier version of this story said Fidelity Investments had signed onto the Net Zero Asset Managers initiative, which commits companies to reach net-zero emissions in their portfolios by 2050. Fidelity International has endorsed the effort, not Fidelity Investments.