Why Tesla was excluded from the S&P 500 ESG Index


An aerial view of the Tesla Fremont factory on May 13, 2020 in Fremont, California.

Justin Sullivan | Getty Images

The S&P 500 kicked electric vehicle maker Tesla off its ESG index as part of an annual list update. Meanwhile, Apple, Microsoft, Amazon and even oil and gas multinational Exxon Mobil were still on the list.

The S&P 500 ESG Index uses environmental, social and governance data to effectively rank and recommend companies to investors. Its criteria includes hundreds of data points per company that relate to how companies affect the planet and treat stakeholders beyond shareholders – including customers, employees, suppliers, partners and neighbors. .

The changes to the index went into effect May 2, and an index spokesperson explained why they were made in a blog post published on Wednesday.

He said Tesla’s “lack of a low-carbon strategy” and “codes of business conduct,” as well as reported racism and poor working conditions at Tesla’s factory in Fremont, California , affected the score. Tesla’s handling of a National Highway Transportation Safety Administration investigation also weighed on its score.

While Tesla’s stated mission is to accelerate the global transition to sustainable energy, in February this year it reached a settlement with the Environmental Protection Agency after years of Clean Air violations. Act and neglecting to follow its own shows. Tesla ranked 22nd on last year’s Toxic 100 Air Polluters Index, compiled annually by the U-Mass Amherst Political Economy Research Institute — worse than Exxon Mobil, which came in at 26th. (The index uses 2019 data, the most recent available.)

In Tesla’s first quarter filing, the company also revealed that it was under investigation for its waste management in the state of California and had to pay a fine in Germany for non-compliance. take-back obligations in the country for used batteries. .

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Meanwhile, the California Department of Fair Employment and Housing sued Tesla for anti-Black harassment and discrimination at its Fremont auto plant. The agency says it found evidence that Tesla routinely kept black workers in low-level roles at the company, gave them more physically demanding and dangerous jobs, and retaliated against them when they complained about racial slurs.

Last year, the National Labor Relations Board said Tesla also engaged in unfair labor practices.

“While Tesla may be playing its part in taking gas-powered cars off the road, it has lagged behind its peers when examined through a broader ESG lens,” the spokesperson wrote. S&P.

Tesla CEO Elon Musk took to the index Wednesday morning on Twitter, where he has more than 90 million followers, saying S&P Global Ratings had “lost its integrity.”

In an earlier tweet about Musk, he wrote, “I’m growing to believe that corporate ESG is the devil incarnate.”

In a subsequent business impact report, Tesla wrote:

“Current environmental, social and governance (ESG) reports do not measure the extent of positive impact on the world. Instead, they focus on measuring the dollar value of risk/return. individual investors — who entrust their money to ESG funds at major investment institutions — may be unaware that their money can be used to buy shares of companies that are making climate change worse, not better.”

In that report, Tesla claimed that other automakers could achieve higher ESG ratings even if they barely cut greenhouse gas emissions and continued to manufacture internal combustion engine vehicles.

Shares of Tesla closed more than 6% on Wednesday amid a broad sell-off in the market. Shares of the company have fallen more than 30% this year.

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