Tesla removed from S&P 500's ESG index; Musk responds

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Despite its mission to "accelerate the world’s transition to sustainable energy," Tesla has been removed from the S&P 500's ESG index following its latest rebalancing.

The changes to the index took effect on May 2. 

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S&P Dow Jones Indices' senior director and head of ESG indices Margaret Dorn said in a blog post on Tuesday that Tesla was ineligible for inclusion in the index due to its low S&P DJI ESG score, which fell in the bottom 25% of its global industry group peers despite remaining "fairly stable" year over year.

"While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens," Dorn said. 

TickerSecurityLastChangeChange %
TSLATESLA INC.709.81-51.80-6.80%

Factors that contributed to Tesla's lower score include its lack of "low carbon energy and codes of business conduct." 

An analysis that seeks to identify a company’s current and potential future exposure to risks stemming from its involvement in controversial incidents also found two separate events centered around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of a National Highway Traffic Safety Administration investigation into 17 injuries and one death linked to crashes involving its vehicles' Autopilot feature.

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Out of the 308 constituents that were selected for inclusion in the S&P 500 ESG index, the top 10 largest by weight include Apple, Microsoft, Amazon, Alphabet, Nvidia, UnitedHealth Group, Procter & Gamble, ExxonMobil, and JPMorgan Chase.  

TickerSecurityLastChangeChange %
AAPLAPPLE INC.140.82-8.42-5.64%
MSFTMICROSOFT CORP.254.08-12.12-4.55%
AMZNAMAZON.COM INC.2,142.25-165.12-7.16%
GOOGLALPHABET INC.2,237.99-91.47-3.93%
NVDANVIDIA CORP.169.38-12.39-6.82%
UNHUNITEDHEALTH GROUP INC.471.87-20.71-4.20%
PGPROCTER & GAMBLE CO.145.04-9.64-6.23%
XOMEXXON MOBIL CORP.90.67-1.38-1.49%
JPMJPMORGAN CHASE & CO.120.09-2.09-1.71%

"Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list!," Musk tweeted on Wednesday. "ESG is a scam. It has been weaponized by phony social justice warriors. @SPGlobalRatings has lost their integrity."

Musk has previously criticized ESG, arguing that its investing rules have been "twisted to insanity". In an April tweet, Musk said he was "increasingly convinced corporate ESG is the Devil Incarnate."

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In Tesla's 2021 Impact report, the company said current ESG reporting focuses on measuring "the dollar value of risk/return" rather than "the scope of positive impact on the world" and that individual investors may be unaware that their money may be used to buy shares in companies that make climate change worse. 

"As long as a company continues to slightly decrease emissions of its manufacturing operations while churning out gas-guzzlers, its ESG ratings are likely to go up," Tesla added. "We need to create a system that measures and scrutinizes actual positive impact on our planet, so unsuspecting individual investors can choose to support companies that can make and prioritize positive change."

In addition, the report said it is "essential" that a company treats their employees well with a system in place to prevent discrimination. 

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Dorn emphasized that the index is rebalanced annually and that Tesla would have other opportunities to be included in the future. 

TickerSecurityLastChangeChange %
BRK.ABERKSHIRE HATHAWAY INC.461,000.00-10,670.00-2.26%
JNJJOHNSON & JOHNSON175.59-3.29-1.84%
FBMETA PLATFORMS INC.192.24-10.38-5.12%
HDTHE HOME DEPOT INC.284.63-16.37-5.44%
CVXCHEVRON CORP.168.19-4.42-2.56%
COSTCOSTCO WHOLESALE CORP.429.40-61.07-12.45%
AVGOBROADCOM INC.570.57-37.58-6.18%
ACNACCENTURE PLC274.10-17.08-5.87%
WFCWELLS FARGO & CO.42.18-1.56-3.57%

Berkshire Hathaway, Johnson & Johnson, Meta, Home Depot, Chevron, Costco, Broadcom, Accenture PLC and Wells Fargo were also excluded from the S&P 500's ESG index. 

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