In a strange parallel universe, Tesla was kicked out of the S&P 500 Environmental, Social, and Governance (ESG) Index while oil companies were included. Oh wait, we’re in this parallel universe. CNN notes that both Exxon and Marathon Oil were added to the index at the same time Tesla was removed.
CNBC reported that these changes to the index went into effect on May 2, and according to a spokesperson, Tesla’s “lack of a low-carbon strategy” and “codes of business conduct” were cited as reasons.
According to the S&P spokesman, “While Tesla may be doing its part to help take fuel-powered cars off the road, it has fallen behind its peers when viewed through a broader ESG lens.”
Tesla CEO Elon Musk questioned the integrity of S&P Global Ratings, calling ESG a fraud armed by false social justice warriors. That might seem a bit extreme to some, but if you consider what I’ve noted in this article, it seems like more than just data drives ESG scores.
Exxon is ranked among the top ten environmental, social and governance (ESG) companies in the world by the S&P 500, while Tesla didn’t make the list!
ESG is a scam. It was armed by false social justice warriors.
— Elon Musk (@elonmusk) May 18, 2022
Reuters also reported on the matter and Elon Musk’s response. It featured an interview with Margaret Dorn, head of ESG indices for North America at S&P Dow Jones Indices. Dorn told Reuters that Tesla’s lack of published details regarding its low-carbon strategy or codes of business conduct were factors in the eventual ranking.
“You can’t just take a company’s mission statement at face value, you have to look at its practices in all these key dimensions.”
You may not be aware of Tesla’s Impact Report recently released by the company. When Reuters asked about Elon Musk’s tweet, another representative from the index provider said that the Tesla CEO may have referred to a list on the company blog that included the 10 largest constituents by market cap of the S&P 500 ESG Index, after Tesla and others removed. That list included Exxon but not Tesla.
Photo credit: S&P Dow Jones Indices LLC
In another blog, Dorn shared more details about why Tesla was banned.
“First and foremost, the GICS industry group in which Tesla is rated (Automobile & Components) saw an overall increase in their average S&P DJI ESG score. Although Tesla’s S&P DJI ESG Score has remained fairly stable year-over-year, it has been pushed further down relative to its global industry peers.4.
“Some of the factors that contributed to the 2021 S&P DJI ESG Score were a decrease in scores on criteria levels related to Tesla’s (lack of) low-carbon strategy5 and codes of conduct6. Additionally, a media and stakeholder analysis7, a process aimed at determining a company’s current and potential future exposure to risks arising from its involvement in a controversial incident, identified two separate events that relate to allegations of racial discrimination and poor working conditions at Tesla’s Fremont facility and its handling of the NHTSA investigation after multiple deaths and injuries were linked to its Autopilot vehicles.
“Both events negatively impacted the company’s S&P DJI ESG Score at the criteria level and subsequently its overall score. While Tesla may be doing its part to take fuel-powered cars off the road, it has fallen behind its peers when viewed through a broader ESG lens.”
Are ESG Ratings Legitimate?
… Some of the factors that contributed to his ESG score were a drop in criterion-level scores related to Tesla’s (lack of) low-carbon strategy…
And I thought pushing the entire industry towards electrification is a decent low-carbon strategy 🤣🤣 pic.twitter.com/PkvZnGxJ5P
– Martin Viecha (@MartinViecha) May 18, 2022
In 2013, Greenpeace shared a collage of photos from decades of Exxon oil spills and explosions. Although it’s been almost a decade since 2013, it hasn’t been that long since an event that sounded like an explosion to all of us, but according to official accounts was just a fireball, happened at the Exxon plant near me. Last year, the same Exxon facility near me was found to be producing 350 pounds of particulate matter per hour, according to an independent test conducted in January 2020. The Baton Rouge facility produces 517,000 barrels of oil per day and is about five miles from my home.
But Tesla will be kicked off the index while Exxon and other oil majors stay?
In this previous article, I identified other influences affecting Tesla’s ESG score. I also made a comparison between Tesla and some oil companies, including Exxon. As a reminder, ExxonMobil’s ESG score was worse than Tesla’s. So how can an oil company with a worse ESG score than Tesla stay in the S&P 500 ESG Index? Either we live in a parallel universe or maybe Elon Musk is right about ESG values.
pic.twitter.com/UZKs5s6BZJ
— Elon Musk (@elonmusk) May 19, 2022
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