The electric automaker was taken off the ESG index by S&P Dow Jones Indices due to Tesla’s ongoing issues of racial discrimination claims from employees and how it has dealt with a National Highway Traffic Safety Administration (NHTSA), a government investigation after several crashes were connected to its autopilot vehicles.
The changes are retroactive: they are effective May 2 and a May 17 S&P Dow Jones Indices blog post described the rationale. This is the fourth annual rebalance by the index company.
“Tesla was ineligible for index inclusion due to its low S&P DJI ESG Score,3 which fell in the bottom 25% of its global GICS® industry group peers,” wrote Margaret Dorn, senior director, head of ESG Indices, North America S&P Dow Jones Indices.
Other companies, including Berkshire Hathaway ( (BRK.A) – Get Berkshire Hathaway Inc. Class A Report), Johnson & Johnson ( (JNJ) – Get Johnson & Johnson Report) and Meta ( (FB) – Get Meta Platforms Inc. Class A Report) also were eliminated and “have once again met the index methodology’s chopping block,” she wrote.
Even though Tesla has a “self-declared mission” to “accelerate the world’s transition to sustainable energy,” the company was eliminated because its ESG score fell in comparison to other auto companies, Dorn wrote.
Several factors contributed to Tesla’s lower ESG score, including a “decline in criteria level scores related to Tesla’s (lack of) low carbon strategy and codes of business conduct,” she wrote.
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Additional analysis also showed that there were “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,” Dorn wrote.
These two events resulted in a negative impact on the company’s S&P DJI ESG Score at the criteria level and also its overall score.
“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,” she wrote.
Musk retorted on Twitter that Tesla is doing the opposite and helping the environment.
He compared Tesla to oil producer Exxon (XOM) and said he believes that ESG is a “scam” due to “phony social justice warriors.”
Musk also blamed S&P Global Ratings and said that ESG is a “scam” even though the investment industry adopted ESG metrics several years ago as investors seek improvements in lower carbon goals, greater diversity in the workforce and more corporate governance.
The billionaire has regularly voiced his displeasures out on Twitter (TWTR) – Get Twitter, Inc. Report, a company he sought to acquire with a $44 billion offer to privatize the social media company in April. He has recently challenged Twitter’s board of directors and management and said on May 17 that he wants the microblogging website to verify its data on the number of spam accounts and challenged them by stating the takeover deal is no longer on the table.
“My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does,” Musk said.
Twitter’s board stood up to his challenge and said they would “close the transaction and enforce the merger agreement.”