• Bitcoin mining firms relying on carbon credits rather than ESG-compliance have an impending doom, according to celebrity investor Kevin O’Leary.
• Investors should dump stakes in these companies, looking instead to those utilizing green energy sources, he adds.

Environmental, social, and governance (ESG) reporting is bound to catch up with the Bitcoin mining industry, Shark Tank star Kevin O’Leary, aka Mr. Wonderful has warned. ESG implies a set of metrics that define the extent of a company’s social responsibility. 

The recent focus has been the cryptocurrency’s price, including the recent dip followed through by the weekend’s gains. Differently, O’Leary is more concerned with the dangers that the crypto asset’s mining could pose to the market.

In a recent interview, the celebrity investor went after Bitcoin mining companies utilizing carbon-emitting energy sources. Such is unlikely to pass a carbon audit since carbon credit tracking is swarming with uncertainty. His opinions were a reaction to the annual investor letter by Larry Fink, CEO of the world’s largest asset manager ($10T AUM), BlackRock.

Bitcoin mining firms and ESG compliance

Companies utilizing carbon credits to paint a carbon-neutral picture may have a shaky financial future ahead. O’Leary says this is because more investors are seeking compliance with ESG directives, which have been increasingly attracting attention in recent times. Investors belonging to the millennial generation are making up a bigger portion of the total pool of investors. Even more, a survey by Morgan Stanley found that nearly 90 percent of millennial investors are interested in pursuing investments that align with their values, including environmental conservation and sustainability.

Many Bitcoin mining firms have survived on acquiring carbon credits, rather than investing in green energy sources. According to the entrepreneur, this is tainting their reputation and bringing operational trouble since governments are pursuing them aggressively. Such miners include Marathon and Riot, who O’Leary outrightly called put as a “scam.”

“Writing is on the wall for public Bitcoin mining companies that think they can fool investors by buying carbon credits to cover up their dirty, carbon-belching ways. They will never survive a carbon audit,” O’Leary said.

A word of advice to investors

Prospects are bleak for Bitcoin mining firms that rely on carbon credits, and investors who have a stake in them, O’Leary warns. Here, he notes that BlackRock was pressuring firms and investors to become ESG compliant. The multinational asset manager, according to its CEO, plans to sever ties with clients whose operations fail to implement ESG mandates.

O’Leary has advised fellow investors to look at the ESG profiles of Bitcoin mining firms to see if they pass the “ESG smell test.” He used himself as an example, saying:

I’ve sold off those positions, and now I’m investing in miners that are doing it off hydro, wind, and solar so I don’t get in trouble…from institutions who have those sustainability mandates.