Tesla was kicked out of the S&P 500 ESG index despite focus on clean energy

  • Tesla has been kicked out of the S&P 500 ESG Index despite its focus on making products with zero emissions.
  • “ESG is an outrageous scam! Shame on S&P Global,” Tesla CEO Elon Musk tweeted in response.
  • This is why Tesla was kicked out of the sustainability-focused stock index this week.

Tesla shares were pushed out of the S&P 500 ESG index on Wednesday despite its focus on making electric vehicles, solar panels and batteries.

S&P Global ran its fourth annual sustainability-focused large-cap index rebalancing this week, and the portfolio looks relatively similar to the plain vanilla S&P 500 Index. The S&P 500 ESG index has 308 stocks and counts Apple, Microsoft, Amazon and Alphabet as its top four holdings.

But Tesla, which is the fifth largest holding in the S&P 500, was not eligible to be included in the ESG index due to its low S&P DJI ESG score, according to S&P Global. That score fell into the bottom 25% of their industry group peers. Tesla joins Berkshire Hathaway, Johnson & Johnson and Meta Platforms as the top mega-cap companies that have been excluded from the index.

“ESG is an outrageous scam! Shame on S&P Global,” Tesla CEO Elon Musk tweeted in response to development. “Exxon is ranked in the top ten in the world for environment, social and governance (ESG) by S&P 500, while Tesla is not on the list. ESG is a scam. It has been used as a weapon by fake social justice warriors” Musk added.

Digging deeper, there were multiple reasons why Tesla shares were excluded from the index despite its commitment to the world’s transition to cleaner energy, according to S&P Global.

“First, the GICS industry group in which Tesla is evaluated saw an overall increase in its average S&P DJI ESG score. Therefore, while Tesla’s ESG score has remained fairly stable year over year, was pushed lower in the rankings relative to its global industry group peers,” S&P Global explained in a blog post.

That makes sense given that legacy automakers have accelerated their efforts to jump into the electric vehicle space over the past year.

Tesla’s lack of a low-carbon strategy and codes of business conduct also contributed to the index’s fallout, as did the company’s exposure to risks stemming from its involvement in controversial incidents.

“A media and stakeholder analysis identified two separate events centered on claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of the NHTSA investigation after multiple deaths were linked. and injuries with their autopilot vehicles,” S&P Global said. .

Those events led to a lower ESG score for Tesla, leading to its removal from the index.

“While Tesla may be playing its part in phasing out fuel-powered cars, it has fallen behind its peers when examined through a broader ESG lens,” S&P Global concluded.

Shares of Tesla fell about 5% in trading on Wednesday amid a market sell-off.

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