EElectric car maker Tesla, led by lon Musk, lost its place in this month’s S&P 500 Index, which recognizes companies that excel in environmental, social and governance (ESG) issues. Thirty-four other companies have also been removed from the index since their annual reshuffle, but this one is focused on environmentally conscious transportation.
in blog post Margaret Dorn, head of North American ESG indices for S&P Dow Jones Indices, issued May 17, said Tesla’s ESG score remained relatively “stable” year-over-year, but outperformed its global industry peers. The index provider cited several factors that contributed to this change, including a racist incident at one of the company’s factories, citing the California Department of Fair Employment and Housing. lawsuit Against Tesla. In a February 2022 statement, the company strongly opposes discrimination and harassment in all its forms and said the lawsuit was “unfair and counterproductive, especially because it focuses on events from many years ago.”
Tesla’s CEO Musk Tweet Complaints about the index reshuffle were: “@SPGlobalRatings has lost its integrity. [sic]”. The richest man in the world complained about the oil company Exxon Mobil. Claims of climate denial— He made it into the ESG top 10, but his electric car company was completely removed from the list.
Why Tesla Lost Its S&P 500 ESG Index And How It Affects The Company:
What is the S&P 500 ESG Index and what types of companies are included?
released in 2019, S&P 500 ESG Index It measures the value of stocks of some of the largest companies by their U.S. publicly traded market caps that meet certain sustainability criteria. The scope is similar to the original S&P 500 index, but aims to help investors select companies based on their commitment to strong ESG targets.
Components of the index are filtered for participation. specific industry Scored according to the United Nations Global Compact, a global framework for corporate social responsibility that is considered counter to ESG goals such as tobacco and controversial arms manufacturing. Finally, companies with the lowest scores relative to their peers are excluded from the index.
Read more: Thinking of investing in green funds? Many people don’t keep their promises, a new report claims.
The ESG index is intended to be a more accurate representation of a company’s commitment to corporate responsibility than a company claims on its website. “You can’t take a company’s mission statement at face value,” Dorn said. “You have to look at your company’s practices at all key levels.” Reuters.
More than 300 companies included in the original S&P 500 index function in ESG rankings, including Apple, Nvidia, JP Morgan Chase and Exxon Mobil. Social media giant Meta, pharmaceutical company Johnson & Johnson, and automaker Chevron were all removed from the list along with Tesla at the annual rebalancing on May 2nd. Meanwhile, Musk’s Twitter acquisition target and refiner Philips 66 were added.
Why was Tesla removed?
her 17th of May blog post, Dorn said Tesla fell out of the rankings after downgrading the index relative to its global industry peers. She commented on this decline because the automaker’s lack of a low-carbon strategy and code of business conduct; Racism And poor working conditions In one of the factories, the company handles dead And injury It is connected to the driver assistance system.
Tesla did not respond to requests for comment in time for the publication of this article. Earlier, a company official guardian Tesla is aiming for “as close to zero injury as possible To become the safest factory in the global automotive industry.” Tesla and Musk said that autopilot systems in cars make cars safer. According to New York times.
“Tesla is playing a role in taking fuel-powered cars off the road, but when we looked through a wider ESG lens, it lagged behind its competitors,” Dorn said. said.
Elon Musk’s reaction?
Tesla’s CEO tweeted about his frustration over news that the company slipped off the S&P 500 ESG index. “ESG is a scam. It has been weaponized by fake social justice fighters,” Musk said. wrote.
In a series of additional posts, tech titans shared memes mocking them for including: 6 oil companies A good “ESG score” in the index is claimed to correspond to a company’s compliance. “The Left Agenda.”
The concept of ESG faces skepticism, mainly in certain sectors that allow businesses and investors to avoid scrutiny of socially irresponsible activities or investments. According to BloombergThe world’s largest ESG-focused exchange-traded fund has invested nearly 3.1% of its assets in the oil and gas sector.
its 2021 Impact ReportTesla said “current ESG assessment methodology” is “fundamentally flawed” because it lacks a focus on the company’s “real world impact” on society and the environment.
“Current ratings often overestimate the reduction of negative impacts while ignoring positive ones,” Tesla board member Hiro Mizuno tweeted.
What does this mean for Tesla?
Not all investors will agree with Tesla’s index ban, but it could affect the company’s stock price. Fen Munster, a former technology analyst at venture capital firm Loup Ventures, said: Bloomberg “Funds based on the ESG index cannot currently hold stocks,” so it could force some investors to sell their holdings.
Adding to investor concerns, Musk took a hit. opinion In recent weeks, his proposed $44 billion Twitter takeover has drawn attention to the electric car maker. Musk’s plans to finance the deal he acquired surprised some Tesla investors. $6.25 billion A loan secured by Tesla stock. he already sold More than $8.5 billion in Tesla stock contributes to the sale.
Other investors are committed to Tesla. John Streur, president of Calvert Research and Management at Morgan Stanley, said: told Reuters After the S&P decision, Tesla was still included in the company’s ESG index, and we believed Tesla had embraced the essential principles of ESG.
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