Microsoft co-founder Bill Gates on Tuesday addressed the issue of businesses that exaggerate environmental, social and governance credentials, arguing that though corporate sustainability credentialsare often controversial, they are still critical for assessing whether to invest in a company.

"The part that I believe in is where you accelerate the innovation. To me, it's not so much who you don't invest in but who you do invest in," Gates said during an interview with CNBC's Diana Olick.

The comments come after the Securities and Exchange Commission earlier this year proposed new rules that wouldprevent misleading or deceptive claimsby U.S. funds on their ESG qualifications andincrease disclosure requirementsfor those funds.

Gates, who is also the founder ofBreakthrough Energy Ventures, a leading climate technology investment company, said there is a modest number of companies that will drive down the cost of choosing clean technology over alternatives that emit more planet-warming greenhouse gases.

"I give people strong points where they're making those investments and becoming customers of those green technologies," Gates said. "The 'E' part lot of controversy, but there is a way to measure it, and it should be one of the factors people look at when they invest in companies."

Global ESG funds received a record $649 billion in investments in 2021 through Nov. 30, up from $542 billion in 2020 and $285 billion in 2019, according to financial services firm Refinitiv Lipper. Definitions of ESG often vary and difficult to measure, creating issues for businesses looking to boast their sustainability credentials to investors.

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Bill Gates says investment in innovation is the important part of ESG - CNBC