Tesla Removed from ESG Index


May 18 (Reuters) — An S&P Dow Jones Indices executive told Reuters on Wednesday it has removed electric carmaker Tesla Inc from the widely followed S&P 500 ESG Index because of issues including claims of racial discrimination and crashes linked to its autopilot vehicles


If the average American were polled which large US company is most committed to fighting climate change, Tesla would almost certainly make the top of the list. It is perhaps curious then to find that Tesla was recently removed from the S&P 500 ESG Index, an ETF who’s explicit goal is to combat climate change and provide investors with profitable and sustainable opportunities.

Even with these enhancements, the S&P 500 ESG Index design still retains its main objective, which is to maintain similar overall industry group weights to the S&P 500 while enhancing the overall sustainability profile of the index.

- S&P 500 ESG Index

In theory, this should negatively affect Tesla’s stock price, since it means institutional investors who invest in ESG will no longer purchase Tesla shares. Nevertheless, the Nasdaq was down 5% yesterday, so it is unsurprising that Tesla was down over 7%, even if this news hadn’t broke.

Nevertheless, it is clear to me that this decision is political in nature and not based on investment strategy or genuine care for the environment. Why? Because Exxon Mobile made the ESG cut, while Tesla didn’t. Because Phillips 66 is on the list now, but Tesla was removed. JP Morgan? United Health? Procter and Gamble? Where’s Tesla?

However, one familiar name may stick out as being absent from that list: Tesla. 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. It joins Berkshire Hathaway, Johnson & Johnson and Meta, which have once again met the index methodology’s chopping block (see Exhibit 4).

- S&P 500 ESG Index

Okay, fair enough, so it’s global GICS DJI ESG Score fell to the bottom 25%. What was the alleged cause for this?

A few of the factors contributing to its 2021 S&P DJI ESG Score were a decline in criteria level scores related to Tesla’s (lack of) low carbon strategy5 and codes of business conduct.6 In addition, a Media and Stakeholder Analysis,7 a process that seeks to identify a company’s current and potential future exposure to risks stemming from its involvement in a controversial incident, 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 500 ESG Index

Oh, I see. Tesla clearly has no low carbon strategy… Because of battery packs? Why hasn’t this issue been raised in the past? I guess we’ll be stuck with fossil fuels forever, because you know, battery packs have carbon emissions. Doesn’t matter that they are 4x lower than an ICE vehicle over the course of a lifetime. Tesla doesn’t have a low carbon strategy, at least according to ESG.

So the ESG Index wants the public to audit all companies on their list for accusations of racial misconduct? I’m sure Tesla is the only company that has been accused of racism in the past year on their list, right? I’m not claiming that these incidents are without merit, but this seems more like a punishment against Musk, who has recently fallen out of favor with elites over his attempted Twitter purchase.

Autopilot deaths? Come on, what the hell does that have to do with sustainability?

The ESG Index is clearly subjective and political in nature. It is about rewarding companies that stay compliant with elite power. It is about trying to taint the name of a good company with accusations of racism because the founder is not politically correct enough.

I’ve been recently wondering. How much of the market movements are Musk manipulated? Perhaps more than even I suspected.

Originally published at https://toperator.substack.com on May 19, 2022.

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