Blockchain funds face ESG risks in data privacy, security, human capital: report

Singapore

DATA privacy and security, human capital, and business ethics are among the material ESG (environmental, social and governance) risks that investors should watch out for in the growing blockchain ETF (exchange-traded fund) market, Morningstar Sustainalytics said in a recent report, which also highlighted financial and technology sectors as "highly exposed" to these issues.

Nearly half, or 22 of the 46 companies in the financial sector analysed have relatively high unmanaged risk scores in relation to product governance and business ethics, reflecting potential gaps in their preparedness to deal with risks related to blockchain and crypto, the report said. Forty one per cent of the financial companies studied have also experienced significant to severe business ethics controversies, while a third have faced significant product quality and safety events.