Sustainability and ESG Crypto Connectedness

Abstract

This thesis examines the intersection of sustainable finance and digital assets, focusing on the dynamic linkages between Environmental, Social, and Governance (ESG) instruments and cryptocurrencies. Using a combination of time-varying connectedness models, spillover analyses, and environmental impact assessments, the research explores how shocks propagate between ESG asset classes and both mainstream and so-called “green” cryptocurrencies.

The study integrates environmental footprint estimates of blockchain protocols, contrasting energy-intensive Proof-of-Work systems with more sustainable consensus mechanisms such as Proof-of-Stake and Federated Byzantine Agreement. It also considers market microstructure frictions, including cross-venue segmentation and liquidity constraints, that affect the integration of cryptoassets into sustainable portfolios.

The findings contribute to the design of a policy-aligned allocation framework for sustainable cryptoasset exposure. This framework balances financial performance with ESG compliance, incorporates regime-dependent hedging strategies, and aligns with evolving disclosure standards such as ESRS, ISSB, and GRI. By bridging sustainable finance principles with the realities of the digital asset ecosystem, the thesis offers practical insights for institutional investors, policymakers, and asset managers navigating the emerging field of sustainable crypto finance.