An S&P Dow Jones Indices executive told Reuters on Wednesday that it had removed electric car maker Tesla Inc. from the widely followed S&P 500 ESG index because of problems with racial discrimination and crash claims associated with autopilot vehicles, and Tesla CEO Elon Musk reacted harshly. This includes “ESG is a scam.”
In its wake, effective May 2, the Sustainability Index soon added ক musk-controlled Twitter Inc. and oil refiner Philips 66 when Delta Air Lines and Chevron Corp. were dropped, according to an announcement.
The environmental, social and governance (ESG) issues behind the change in the index, a growing field of investment, reflect a broad debate about the metrics used to judge corporate performance.
Tesla has become one of the most valuable automotive companies in the world, pioneering EVs and expanding battery storage for electric grids and solar-powered systems.
In an interview, Margaret Dorn, head of the S&P Dow Jones index in North America, said one of the reasons for its exit from the index was the lack of published details about Tesla’s low carbon strategy or business code of conduct.
While Tesla’s products help reduce global warming emissions, Dorn said its other problems and lack of disclosure related to industry peers should raise concerns for investors seeking to judge the company by environmental, social and governance (ESG) standards.
“You can’t just take a company’s mission statement at face value, you have to look at their practices across all of those core dimensions,” he said.
Tesla’s representatives did not immediately respond to a request for comment. The company has previously called ESG procedures “fundamentally flawed.”
Musk tweeted https://twitter.com/elonmusk/status/1526958110023245829 that “Exxon has been rated the top ten in the world by the S&P 500 for Environment, Social and Governance (ESG), while Tesla did not make the list! ESG is a scandal. Fake social justice fighters have taken up arms. “
Asked about the tweets, a representative of the index provider said Musk could refer to a list of a company’s blog post https://www.indexologyblog.com/2022/05/17/the-rebalancing-act-of-the. After the removal of Tesla and others, the S&P 500 ESG Index has the top 10 component -sp-500-esg-index in terms of market cap. The list “does not rank the best companies by ESG score,” the representative said.
Exxon is now responsible for 1.443% of the weight of the index. Apple Inc was the largest at 9.657%.
Investors concerned about issues such as diversity and climate change have poured billions of dollars into ESG criteria for stock picking, sparking debate over whether the funds effectively promote change or whether they put too much pressure on companies to address issues that need to be addressed by government policy. By 6
S&P Dow Jones Indices Majority Owned by S&P Global Inc. Musk and others have complained that the firm and its rivals have combined ESG concerns into a total score, combining a number of problems.
For example, a fund based on the S&P 500 ESG index, the SPDR S&P 500 ESG ETF, received a low rating of “D” by climate activist research group As You Soo, which noted that despite its title and sustainable order, fossil fuels %.
In a company blog post reviewing the changes since April 22, Dorn of S&P said the index’s goal is to keep industries weighed in on the regular S&P 500 index “while improving the index’s overall stability profile.” In practice, this means it could keep oil companies away from big players like Facebook’s core meta platform and Wells Fargo & Co.
Dorn said Tesla’s ESG score is slightly lower than last year’s “22”. At the same time the average score among other automakers has improved, pushing Tesla out of the ESG index because there is a rule against including the lowest-quarter performers.
Dorn and others did not immediately elaborate on why other details such as Twitter or Philips 66 were added or other companies were excluded.
Among other major ESG rating agencies, MSCI Inc gives Tesla an “average” ESG rating, while Morningstar Inc’s Sustainalytics unit gives Tesla a “moderate risk” rating, according to the firm’s website.
A U.S. safety regulator on Wednesday launched a special crash investigation into a Tesla crash this month in California, with more than 30 crashes under investigation involving improved driver assistance systems.
In February, a California state agency filed a lawsuit against Tesla alleging black workers that the company tolerated racial discrimination at an assembly plant, adding to claims made in several other lawsuits. (Reporting by Ross Carber; Editing by Pete Henderson, Aurora Ellis and David Gregorio)