[Asia Economy Reporter Jeong Hyunjin] Tesla, the world's largest electric vehicle company, has been excluded from the S&P 500 ESG index, which measures and discloses the ESG (Environmental, Social, and Governance) performance of U.S.-listed companies. As criticisms have continued that evaluation results vary depending on the survey items or information levels of different rating agencies regarding corporate ESG activities, Tesla CEO Elon Musk has strongly opposed this by calling it a "scam," and it is expected that controversy over ESG evaluation methods will intensify.
According to CNBC and others on the 18th (local time), U.S. stock index provider S&P Dow Jones announced that Tesla was excluded from the S&P 500 ESG index on that day. S&P applied this change starting from the 2nd and announced the update on this day.
The S&P ESG index ranks listed companies based on data related to environmental and social responsibilities and governance, providing this information to investors. Currently, companies such as Apple, Microsoft (MS), Amazon, Alphabet, Nvidia, and ExxonMobil are included, while Tesla, Berkshire Hathaway, Johnson & Johnson, Meta, and Chevron have been excluded from this index.
S&P cited reasons for Tesla's exclusion from the index, including poor working conditions at its Fremont, California plant, reports of racial discrimination, lack of a low-carbon strategy, and absence of a business code of conduct. CNBC also reported that Tesla's response to the U.S. National Highway Traffic Safety Administration (NHTSA) investigation was a factor that lowered its score.
Margaret Don, head of ESG for North America at S&P, explained, "While Tesla electric vehicles contribute to reducing emissions on the road, from a broader ESG perspective, their efforts lag behind other competitors." She emphasized, "We cannot take corporate declarations about ESG efforts at face value and must examine the company's practices across all dimensions."
Although Tesla contributes to accelerating the transition to sustainable energy, incidents far from ESG standards have occurred in management. In February, Tesla reached a related agreement with the U.S. Environmental Protection Agency due to years of violations of the Clean Air Act and inadequate tracking of its own carbon dioxide emissions. According to one research agency, Tesla's toxic gas emission ranking in 2019 was higher compared to ExxonMobil.
Following the S&P announcement, Musk strongly opposed it. He tweeted, "ESG is a scam," and claimed, "ESG has been weaponized by warriors who talk about fake social justice." Earlier, Tesla argued in its annual report last month that the ESG index is fundamentally flawed, and Musk also strongly criticized it the same month, calling "corporate ESG the devil incarnate." S&P rebutted Musk's claim that ExxonMobil ranked in the top 10 by stating that the ranking is based solely on market capitalization and is not the ranking of top companies by ESG scores.
The ESG index has been a subject of controversy. Various rating agencies such as Morgan Stanley Capital International (MSCI), Dow Jones Sustainability Index (DJSI), Sustainalytics, and Korea Corporate Governance Service (KCGS) have been criticized for setting different standards and making evaluations without proper information. Bloomberg pointed out in December last year, referring to the representative MSCI ESG index, that it evaluates the impact of the world on companies and shareholders rather than the impact of companies on the earth and society. Japan's Nihon Keizai Shimbun reported, "Tesla's exclusion from the index may throw a stone into discussions surrounding ESG calculation methods."
Tesla's stock price fell to its lowest level this year. On the day of the ESG index exclusion and amid a sharp decline in tech stocks due to inflation concerns, Tesla closed at $709.81, down 6.80% from the previous day. Bloomberg reported that the world's richest person Musk's assets have decreased by $60.4 billion this year to $209.9 billion.
Meanwhile, Musk tweeted on the same day, "I used to support the Democratic Party, but now my thoughts have changed," adding, "They have become a party of division and hatred, and I can no longer support them. I will vote for the Republican Party."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
