Tesla CEO Elon Musk included FSG in his criticisms on Twitter that have lasted for weeks, touching many areas, from his Twitter acquisition bid to politics.
His attack on the FSG came after Tesla stock was kicked out of the S&P 500 ESG Index on Wednesday despite its focus on making electric vehicles, solar panels, and battery packs.
Insider reports that S&P Global executed its fourth annual rebalance of the sustainably focused, large-cap index this week, and the portfolio looks relatively similar to the plain-vanilla S&P 500 index. The S&P 500 ESG Index holds 308 stocks and counts Apple, Microsoft, Amazon, and Alphabet as its top four holdings.
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The report added that Tesla, which is the fifth largest holding in the S&P 500, was ineligible to be included in the ESG index due to its low S&P DJI ESG score, according to S&P Global. That score fell in the bottom 25% of its 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 the development. “Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list. ESG is a scam. It has been weaponised by phony social justice warriors,” Musk added.
Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list!
ESG is a scam. It has been weaponized by phony social justice warriors.
— Elon Musk (@elonmusk) May 18, 2022
Following Musk’s criticism, S&P Global explained why Tesla was removed from the index, citing many reasons. These reasons were said to have outweighed Tesla’s commitment to transitioning the world to cleaner energy, according to S&P Global.
“First and foremost, the GICS industry group in which Tesla is assessed experienced an overall increase in its average S&P DJI ESG score. So, while Tesla’s ESG score has remained fairly stable year-over-year, it was pushed further down the ranks relative to its global industry group peers,” S&P Global explained in a blog post.
As noted by Insider, the reason makes sense given that legacy automakers have turbocharged their efforts to jump into the electric vehicle space over the past year.
Other reasons for Tesla’s fallout from the index is its lack of a low-carbon strategy and codes of business conduct, and the company’s exposure to risks stemming from its involvement in controversial incidents.
“A media and stakeholder analysis identified two separate events centered around 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 and injuries were linked to its autopilot vehicles,” S&P Global said.
Those events led to a lower ESG score for Tesla, leading to its elimination from the index.
“While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” S&P Global concluded.
Tesla stock fell about 5% in Wednesday trades amid a broader market sell-off. The world-leading EV manufacturer is facing an uptick in competition as more auto companies, particularly in Europe, make a shift to environment-friendly vehicles.
Musk’s continuous controversial tweets have also continued to affect Tesla’s stock and his personal fortune. Tesla’s stock has sunk by 29% since Musk announced his Twitter acquisition bid. This has forced his net worth, which is largely tied to Tesla’s stock, to drop from $251 billion to $210 billion, or 16.3%.
But he appears not ready to stop. On Wednesday, Musk tweeted, following previous bashings of Democrats, that he will hence be switching his votes to the Republicans.
“In the past I voted Democrat, because they were (mostly) the kindness party. But they have become the party of division & hate, so I can no longer support them and will vote Republican. Now, watch their dirty tricks campaign against me unfold,” he wrote.
Musk’s unrelenting controversial tweets means that Tesla is likely going to take further hits.