Why Tesla was kicked out of the ESG S&P 500 index

The S&P 500 excluded electric car maker Tesla from its ESG index during the annual rebalancing. Meanwhile, Apple, Microsoft, Amazon and even oil and gas transnational Exxon Mobile were included in the list.

The S&P 500 ESG uses environmental, social and government data to rank and effectively recommend companies to investors. Its criteria include hundreds of data points per company that relate to how businesses affect the planet and relate to stakeholders other than shareholders, including customers, employees, suppliers, partners and neighbors.

The changes to the index took effect on May 2, and a representative of the index explained why they were made in The blog post was published on Wednesday.

It said Tesla’s “lack of a low-carbon strategy” and “codes of conduct”, as well as the racism and poor working conditions reported at Tesla’s Fremont plant in California, affected the assessment. Tesla’s handling of the National Road Safety Board’s investigation also affected his score.

While Tesla’s stated mission is to accelerate the world’s transition to sustainable energy, in February this year she settled with the Environmental Protection Agency after several years of violating the Clean Air Act and ignoring tracking of its own emissions. Tesla ranked 22nd in the rankings last year Index of Poisonous 100 Air Pollutants, which is the annual U-Mass Amherst Political Economy Research Institute – worse than Exxon Mobil, which ranked 26th. (The index uses data for 2019, the latest available.)

In Tesla filing for the first quarter The company also said it was investigating waste management in California and that it had to pay a fine in Germany for failing to meet its obligations to return used batteries to the country.

Meanwhile, the California Department of Fair Employment and Housing has sued Tesla over harassment and discrimination against blacks at its car plant in Fremont. The agency says it has found evidence that Tesla regularly kept black workers in low positions in the company, giving them more difficult and dangerous jobs and taking revenge on them if they complained of racist insults.

Last year, National Labor Relations Council said Tesla was also involved in unscrupulous work practices.

“Although Tesla may be playing a role in removing off-road fuel vehicles, it has lagged behind its counterparts when viewed through a wider ESG lens,” a S&P spokesman wrote.

Tesla CEO Elon Musk spoke about the index on Wednesday morning on Twitter, where it has more than 90 million subscribers, saying that S&P Global Ratings “has lost its integrity.”

In an earlier tweet, Musk wrote, “I’m increasingly convinced that the corporate ESG is the epitome of the devil.”

In the following report on the company’s impact, Tesla wrote:

“Current Environmental, Social and Public Governance (ESG) reporting does not measure the extent of the positive impact on the world. Instead, it focuses on measuring the dollar value of risk / return. Individual investors who entrust their money to ESG large investment institutions may not know that their money can be used to buy shares of companies that aggravate rather than improve climate change. ”

In that report, Tesla argued that other automakers could achieve higher ESG ratings, even if they slightly reduce greenhouse gas emissions and continue to produce cars with internal combustion engines.

Tesla shares traded more than 7% at noon on Wednesday amid broad market sales. This year the company’s shares have fallen by more than 30%.