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Tesla cut from S&P 500 ESG Index, and Elon Musk tweets his fury

Published 05/18/2022, 11:17 AM
Updated 05/19/2022, 12:12 PM
© Reuters. FILE PHOTO: The logo of car manufacturer Tesla is seen at a dealership in London, Britain, May 14, 2021. REUTERS/Matthew Childs/File Photo/File Photo

© Reuters. FILE PHOTO: The logo of car manufacturer Tesla is seen at a dealership in London, Britain, May 14, 2021. REUTERS/Matthew Childs/File Photo/File Photo

By Ross Kerber and Hyunjoo Jin

(Reuters) -An S&P Dow Jones Indices executive told Reuters on Wednesday it has removed electric carmaker Tesla (NASDAQ:TSLA) Inc from the widely followed S&P 500 ESG Index because of issues including claims of racial discrimination and crashes linked to its autopilot vehicles, and Tesla CEO Elon Musk responded with harsh tweets including that "ESG is a scam".

In it changes, effective May 2, the sustainability index also added soon-to-be-Musk-controlled Twitter Inc (NYSE:TWTR) and oil refiner Phillips 66 (NYSE:PSX) while dropping Delta Air Lines (NYSE:DAL) and Chevron Corp (NYSE:CVX), according to an announcement.

The back-and-forth over the index changes reflects a wider debate about the metrics used to judge corporate performance on environmental, social and governance (ESG) issues, a growing area of investing.

Tesla has become the most valuable auto industry company by pioneering EVs and expanding into battery storage for electric grids and solar-power systems.

Factors contributing to its departure from the index included Tesla's lack of published details related to its low carbon strategy or business conduct codes, said Margaret Dorn, S&P Dow Jones Indices' head of ESG indices for North America, in an interview.

Even though Tesla's products help cut planet-warming emissions, Dorn said, its other issues and lack of disclosures relative to industry peers should raise concerns for investors looking to judge the company across environmental, social and governance (ESG) criteria.

"You can't just take a company's mission statement at face value, you have to look at their practices across all those key dimensions," she said.

Tesla representatives did not immediately respond to questions. The company has previously called ESG methodologies "fundamentally flawed."

Musk tweeted https://twitter.com/elonmusk/status/1526958110023245829 that "Exxon (NYSE:XOM) is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list! ESG is a scam. It has been weaponized by phony social justice warriors."

Asked about the tweet, a representative for the index provider said Musk may have been referring to a list on a company blog post https://www.indexologyblog.com/2022/05/17/the-rebalancing-act-of-the-sp-500-esg-index of the largest 10 constituents by market cap of the S&P 500 ESG Index after the removal of Tesla and others. The list is "not a ranking of best companies by ESG score," the representative said.

Exxon now accounts for 1.443% of the weight of the index. Apple Inc (NASDAQ:AAPL) was the largest at 9.657%.

GROWING CONCERNS

Investors concerned about issues like diversity and climate change have poured billions of dollars into funds using ESG criteria to pick stocks, prompting debate about how effectively the funds promote change or whether they push companies too much on issues that should be settled by government policy.

S&P Dow Jones Indices is majority-owned by S&P Global (NYSE:SPGI) Inc. Musk and others have complained the firm and its rivals conflate too many issues by bundling ESG concerns into one total score.

For instance a fund based on the S&P 500 ESG Index, the SPDR S&P 500 (NYSE:SPY) ESG ETF, received the low rating "D" by climate activist research group As You Sow, which noted despite its title and sustainability mandate, fossil fuel stocks make up 6.5% of fund assets.

In the company blog post reviewing changes from April 22, S&P's Dorn said the index aims to keep industries weighted the same as they are in the regular S&P 500 index "while enhancing the overall sustainability profile of the index." In practice that means it can keep oil companies while leaving out big players like Facebook (NASDAQ:FB) parent Meta Platforms and Wells Fargo (NYSE:WFC) & Co.

Dorn said Tesla's ESG score had declined slightly from the "22" it received last year. At the same time the average score among other automakers improved, pushing Tesla out of the ESG index because of a rule against including lowest-quartile performers.

Dorn and others did not immediately describe other details such as the reasons Twitter or Phillips 66 were added or other companies dropped.

Among other big ESG ratings agencies, MSCI Inc gives Tesla an "average" ESG rating, while the Sustainalytics unit of Morningstar Inc gives Tesla a "medium risk" rating, according to the firms' websites.

© Reuters. FILE PHOTO: The logo of car manufacturer Tesla is seen at a dealership in London, Britain, May 14, 2021. REUTERS/Matthew Childs/File Photo/File Photo

On Wednesday a U.S. safety regulator opened a special crash investigation into a Tesla crash this month in California, among more than 30 crashes under investigation involving advanced driver assistance systems. [nL2N2XA2CY]

In February, a California state agency sued Tesla over allegations by Black workers that the company tolerated racial discrimination at an assembly plant, adding to claims made in several other lawsuits.

Latest comments

it's ESG not just E
Worried about climate change? Plant some trees!
ESG is big brother overreach that will creep into everyday citizens’ lives, simikar to what China is doing to their own people. If you dont cower down to whatever theyre pedaling they can freeze bank accounts and your credit msking you a homeless outcast. This needs to stop immediately within the US. Clearly none of our politicians are doing anything about it. Elon is right, it is a scam of power, control and overreach.
Elon Musk is furious that some hidden things are becoming public. he has always been a Republikan but Republicans don't buy Teslas so he tried to hide that. now that it is obvious that he is Trump (with far better investment returns) the left will stop buying Teslas and his volume and wealth will crater. and his remaining billions will still be taxed. double bummer for billionaires
so many elon bootlickers in this thread
so many on this website. crypto and the #gqp court the same folks because both succeed when people believe what they've been told and can't evaluate it themselves analytically
Communists being communists is all the ESG is about and all a person needs to know about it . SCAM
can you even define communist jeff? or fascist or nazi? or do you just say it because your heard it on Fox. ESG supports private ownership. that is still 100% capitalism and not communist at all. it is fine to not like it or have your opinion but lying about is actually fascist propaganda. ESG wants better capitalism not communism.
let's go Jeff! #bebetter
the regulators charge that tesla lack of published details of its mission statement? isn't that's what he is accusing twitter of? what a hypocrite, worst than trump.
so, Elon tolerates racial discrimination at his assembly plants. is he a racist? why is he so loved by republicans? oh birds of a feather fly together!
He's from South Africa. You can figure it out.
Elon's a good man, glad he pointed out what a scam this index is! Glad his companies hire based on merit, as should all ! No company needs dead weight based on worthless federal government quotas! Regulation has destroyed this once great nation as well!
the republican regressive backward policies are ruining this country. they love putin over biden , can you imagine?
I am sure you say donald is a good man too and the Charlottesville racists were fine people too, you must be another gullible republican.
Minority workers = dead weight, says the racist.
The ESG index is destined to underperform all other indexes. I hope someone creates an ETF tracking fund so we all can use it to spread trade and sell short.
F150 electric for only 40K will ********Tesla. Also, other cheaper and better electric cars in the pipeline. That's really what's behind this.
Lmao, Tesla is being annoying but habing Exxon on that list is really really stupid.
I think it’s about carbon emission in manufacturing process not related to environment rating of product (i.e. Car in this instance). Typical electric car manufacturing process emission for electric car is about 30-40% higher than combustion (because of battery component) . Any electric car is true carbon neutral only from 4th year assuming 12-15K per year usage. In this instance from what I read Tesla hasn’t been as transparent to report carbon emission during manufacturing process. There are may expert articles on this I am just relaying what I read.
start your own index or exchange. problem solved Elon.
esg was die before elon, i never care about this leftist argument
Great News👏👏👏
why are u black?
Hey, be sure to tell your kids at dinner tonight about how you dropped a little racism into the world today. They'll be very proud of you some day.
New ESG at work to control your political opponent using investor money. More to come.
Nobody cares about ESG, racial equality or any other of that woke silliness. It's just nonsense for social media and clicks.
but I thought electric cars are the future ? ohh wait Musk is critical of the Left and is white. what a joke and so childish.
Not everyone is the enemy that overthrows you. Not everyone is a friend who pulls you out of the dung. Sit warm - don't *****:-)
Every time the right is caught in a lie or is called out for their stupidity or incompetence they call it a "witch hunt". Pathetic.
Let's say that true. What about the left? Or are they perfect? Typical left leaning hypocrisy. Both sides are trash and anyone who follows them is a child who needs mommy and daddy to tell them how to think and feel.
The left is losing there minds
talking to yourself will soon be banned
Witch hunt.
unfortunately for them, people in the stock market are more informed than the average person. This story sounds flat out idiotic and it's a clear witch hunt on Elon.
ESG Index "Widely followed" 🤣🤣🤣
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