Tesla kicked out of ESG’s S&P 500 index despite focus on clean energy

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

Tesla stock was expelled from the S&P 500 ESG Index on Wednesday despite its focus on making electric cars, solar panels and battery packs.

S&P Global carried out its fourth annual rebalancing of a large corporate index with a sustainable focus this week, and the portfolio looks relatively similar to the regular S&P 500 index. The S&P 500 ESG Index contains 308 stocks and counts Apple, Microsoft, Amazon and Alphabet as the top four companies.

But Tesla, the fifth-largest holding company in the S&P 500, did not qualify for inclusion in the ESG index due to the low S&P DJI ESG score, S&P Global said. This score fell in the lowest 25% of its peers in the industrial group. Tesla joins Berkshire Hathaway, Johnson & Johnson and Meta Platforms as the top major companies left out of the index.

“ESG is a heinous scam! Shame on S&P Global,” Elon Musk, CEO of Tesla, chirp response to evolution. “Exxon has been ranked as the world’s top ten ESG by the S&P 500, while Tesla did not make the list. ESG is a scam. It has been weaponized by pseudo-social justice warriors,” Musk added.

S&P Global said that when digging deeper, there were multiple reasons for excluding Tesla stock from the index despite its commitment to transforming the world into cleaner energy.

“First of all, the GICS industry in which Tesla is rated saw an overall increase in the average S&P DJI ESG score. So, while Tesla’s ESG score has remained fairly stable throughout the year, it has been pushed down ranking relative to its peers in the global industry group,” S&P Global explained in a blog post.

This makes sense given that old-fashioned automakers have supercharged their efforts to jump into the electric vehicle space over the past year.

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

“Media and stakeholder analysis identified two separate events centered around allegations of racial discrimination and poor working conditions at Tesla’s Fremont plant, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles,” S&P Global said.

These events lowered Tesla’s ESG score, which in turn led to its exclusion from the index.

S&P Global concluded that “while Tesla may play its part in taking fuel-fueled cars off the road, it has lagged behind its peers when examined through a wider ESG lens.”

Tesla stock fell about 5% in Wednesday’s trading amid a broad market sell-off.

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