An S&P Dow Jones Indices executive told Reuters on Wednesday that electric carmaker Tesla Inc had been removed from the widely publicized S&P 500 ESG index over issues including allegations of racial profiling and accidents involving its autopilot vehicles, and Tesla CEO Elon Musk responded with harsh tweets including that "ESG is a scam."
As of May 2, the sustainability index also added Twitter Inc and the Phillips 66 oil refinery, soon to be controlled by Musk, according to an announcement, while Delta Air Lines and Chevron Corp were removed.
The back-and-forth in changes to the index reflects a broader debate about the metrics used to assess companies' performance on environmental, social and governance (ESG) issues, a growing investment area.
Tesla has become the most valuable company in the auto industry by pioneering electric vehicles and expanding into solar power systems and on-grid battery storage.
Contributing factors to Tesla's exit from the index included Tesla's lack of published details about its low-carbon strategy or codes of business conduct, Margaret Dorn, head of North American ESG indices at S&P Dow Jones Indices, said in an email. an interview.
Although Tesla's products help reduce global warming emissions, the other issues and lack of disclosure compared to industry peers should raise concerns among investors who follow the company on environmental criteria, community and community organizations. government (ESG) want to judge, Dorn said.
“You can't just take a company's mission statement at face value, you have to look at their practices on all of these key dimensions,” she said.
Tesla representatives did not immediately respond to questions. The company has previously described ESG methods as "fundamentally flawed."
Musk tweeted https://twitter.com/elonmusk/status/1526958110023245829 that "The S&P 500 ranked Exxon in the top 10 globally for Environment, Social and Governance (ESG), while Tesla did not make the list. ESG is a scam. I was armed with fake social justice warriors."
When asked about the tweet, a representative for the index provider said Musk may have been referring to a list in a company blog post of the top 10 constituents by market capitalization of the S&P 500 ESG Index after the removal of Tesla and others. The list “is not a ranking of the best companies by ESG score,” the representative said.
Exxon now accounts for 1.443% of the index weight. Apple Inc was the largest with 9,657%.
Investors concerned about issues like diversity and climate change have poured billions of dollars into funds that use ESG criteria to pick stocks, prompting debate about whether the funds are effective in promoting change or making companies push too hard on issues that need to be addressed. by government policy.
S&P Dow Jones Indices is majority-owned by S&P Global Inc. Musk and others have complained that the company and its peers confuse too many issues by lumping ESG concerns into a single aggregate score.
For example, one fund based on the S&P 500 ESG index, the SPDR S&P 500 ESG ETF, received a low "D" rating from climate activist research group As You Sow, which found that fossil fuel stocks account for 6.5 to despite its title and durability. mandate % of fund assets.
In the company's blog post reviewing the changes on April 22, S&P's Dorn said the index aims to keep industry weights the same as the regular S&P 500, "while improving the sustainability profile overview of the index. In practice, that means oil companies can be owned while big players like Meta Platforms, the parent company of Facebook and Wells Fargo & Co. are left out.
Dorn said Tesla's ESG score had declined slightly from the "22" it received last year. At the same time the average score among other automakers improved, pushing Tesla out of the ESG index because of a rule against including lowest-quartile performers.
Dorn and others did not immediately describe other details such as the reasons Twitter or Phillips 66 were added or other companies dropped.
Among other big ESG ratings agencies, MSCI Inc gives Tesla an "average" ESG rating, while the Sustainalytics unit of Morningstar Inc gives Tesla a "medium risk" rating, according to the firms' websites.
On Wednesday a U.S. safety regulator opened a special crash investigation into a Tesla crash this month in California, among more than 30 crashes under investigation involving advanced driver assistance systems.
In February, a California state agency sued Tesla over allegations by Black workers that the company tolerated racial discrimination at an assembly plant, adding to claims made in several other lawsuits.
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