Musk decries Tesla’s de-listing from S&P 500 ESG Index; wider ESG pushback drawing attention
Elon Musk is not happy about Tesla being delisted from S&P Global’s ESG index, and he has taken to Twitter to complain.
ESG, which stands for Environment, Social, and Governance principles and behaviors, has become one of the hottest new ways to assess companies’ risks and prospects based on ESG behaviors and not just on traditional profit measures.
Andrew Ross Sorkin in the New York Times Dealbook newsletter tracks the growing backlash against ESG. And it’s not just from Elon Musk. Companies naturally do not want a negative ESG spotlight, and the very idea of ESG ratings strikes some pundits and politicians as counter to the interests of capitalism and employees who need jobs.
The S&P 500 ESG Index dropped Tesla last month, and it provided rationale just recently. The Index’s self-titled “(Re)balancing Act” explained that its Tesla decision related to “two separate events centered around claims of racial discrimination and poor working conditions at Tesla’s Fremont (Calif.) factory, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles.”
Core concepts of ESG repugnant to some
Musk in his complaints has emphasized the irony of Exxon Mobile receiving high marks on the index while his own electric-vehicle company was de-listed. Musk also excoriated the very idea of an ESG Index as “weaponized” by “phony social justice warriors.”
Former Vice President Mike Pence and others have echoed the line that ESG is a left-wing movement to harm upstanding businesses and hurt employees. But a lot of other funders and analysts have emphasized the importance of recognizing the risks to companies and investors when ESG behaviors draw scrutiny or censure.
Sorkin in his Dealbook analysis digs more deeply into the challenges and opportunities related to ESG considerations. And he notes that various players are trying to turn the relatively new concept of ESG to their own ends in an environment where ESG details are still in development. The Tesla example is a case in point: Electric cars avoid use of gasoline, but there have been complaints about labor practices at a manufacturing plant and about product safety generally.
Sorkin contrasts current ESG ideas with old-school “so-called socially-responsible” investing. In that earlier model, funders identified tobacco companies, gun manufactures, and similar as morally problematic.
Sorkin describes how ESG is different: “The E.S.G. approach, by contrast, is less focused on whether a company’s products are good for society. A core principle is that businesses whose managers care broadly about issues like the environment and diversity will produce solid investment returns.”
The Culture War battles on both sides have tried to leverage ESG rhetoric for their own purposes. And with Musk weighing in on his Twitter feed, that heavily politicized angle as applies to ESG can only be expected to escalate.
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