ESG investing is 'a complete fraud': Venture capitalist Chamath Palihapitiya

Chamath Palihapitiya, chairman of Virgin Galactic and founder of investment firm Social Capital, explained to CNBC's "Squawk Box" crew why he says ESG investing is "a complete fraud."

“Complete fraud,” “joke,” “jargon,” “so ridiculous,” were among the choice words Social Capital founder and CEO Chamath Palihapitiya used to describe the growing ESG movement.

“These are useful statements. It’s great marketing. But again it’s a lot of sizzle, no steak,” he said Wednesday on CNBC’s “Squawk Box.”

The increasingly popular ESG investing style evaluates a company’s environmental, social and governance factors alongside traditional financial metrics. It’s become a buzzword on the Street as companies face growing pressure from governing bodies and investors alike to provide more transparency around their operations.

But as ESG’s popularity grows so, too, do its critics, not least because scoring a company on these metrics is inherently subjective.

Palihapitiya said that while certain elements of the movement have been helpful, such as companies taking a sharper look at their governing practices, it does not necessarily encourage best practices, nor does it move the ball forward on things like the climate crisis.

The Social Capital chief said that in some cases it can be used as a marketing ploy and a way for companies to get free money. “If you paint yourself as ESG in Europe, you can essentially borrow money from the ECB at negative rates,” he said.

On Tuesday, JPMorgan announced a number of new climate-change related policies, such as restricting financing for companies drilling in the Arctic, joining other financial giants like Goldman Sachs and BlackRock, both of which have recently announced new initiatives.

“JPMorgan, by saying what they said, will be able to borrow billions of dollars from the ECB at negative rates ... it doesn’t have to work, they don’t need to do anything, they are now getting free money from Europe for basically being able to say this,” he said.

Palihapitiya said that not only do ESG ratings not, in the end, inspire meaningful change, they can cloud a company’s true environmental impact.

“If you really believe in climate change you need to do a lot of work now,” he argued. “It’s going to be very important for you to really be able to diligence the supply chain, all the way down to the supplier and supplier’s supplier, and that’s a very hard thing,” he said.

“I think what we need to do is invest in actual companies that can go and count, and can legitimize the actual impact that companies have, so that you can do the right amount of carbon offsets. And then you have to have a legitimate exchange where you can actually trade them.”



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[martinedwin]

Why have a guest on and then constantly interrupt them?

[dserenity]

Man that host is annoying! Interrupting the guest every 5 seconds.

[peter]

I hate how much these guys interrupt their guests. So unprofessional

[JJ-uqys]

the hosts were particularly obnoxious during this segment

[chicagojunk]

ESG: A way to make poor performing companies look like good investments.

[alexanderleo]

Just want to let you know I’m here 100% here for the guest and care 0% about you cnbc hosts, it would be better if he just read questions of a card.

[Dee-er]

Chamath: *makes great points*

Sorkin: *ridicules*

Smh

[j]

I think that host just thought Chamath was bashing green investing. But he wasn’t, he just thinks ESG investing is the wrong strategy.

[xxxs]

He is right, one banker was telling me it's all marketing to sell new funds

[tanner]

I respect the CNBC team to not just agree to everything but to ask questions like why even if it makes them look stupid

[doctorcameltoe]

that guy has smarts about him, with some people you can just tell they know wtf they talking about... fact that he's a billionaire also helps

[bananarepublic]

I completely agree with Chamath. To add, ESG is also being used as a political tool to direct investments whichever way is favorable to "developed" countries and industries.

[btw-]

Within the first 30 seconds, they already interrupt him. 🤦🏾‍♂️🤦🏾‍♂️

[metascopeinitiatives]

A lot of sizzle, no steak... 🤣🤣I love that expression.

[seanmcdonald]

CNBC must screen their hosts based on how well they can talk over guests

[marlonsandoval]

Chamath is literally too smart to be on this show talking to this people. The look he gave the host at the very end when he asked him about Virgin Galactic, reminded me the scene of the hang over when Stu tells Alan..”you’re literally too stupid to insult” and Alan answers him with a big “thank you” 😂 🤦‍♂️

[thewhopper]

It's now July 2023, 3 years later. This aged well. Chamath Palihapitiya was 100% right about everything.

[robinarora]

The hosts are so rude to the guest when they talk over him and only stop when he says “hold on”

[NekeishaLewis]

Worst interview ever. They barely allowed Chamath to answer the question so I can learn something from him.

[Brizandeer]

1) incredibly annoying hosts not letting their guest finish their point. Why invite them at all
2) why show a thumbnail of TSLA for this video when he doesnt even talk about Tesla?

Disgusting journalism if I can even call it that! Media should have to disclose vested interest.