Musk tweets his fury as Tesla cut from S&P 500 ESG Index

An S&P Dow Jones Indices executive told Reuters on Wednesday it has removed electric carmaker Tesla from the widely followed S&P 500 ESG Index because of issues including claims of racial discrimination and crashes linked to its autopilot vehicles, and Tesla CEO Elon Musk responded with harsh tweets including that “ESG is a scam”.

In it changes, effective May 2, the sustainability index also added soonto-be-Musk-controlled Twitter and oil refiner Phillips 66 while dropping Delta Air and Chevron, according to an announcement.

The back-and-forth over the index changes reflects a wider debate about the metrics used to judge corporate performance on environmental, social and governance (ESG) issues, a growing area of investing.

Tesla has become the most valuable auto industry company by pioneering EVs and expanding into battery storage for electric grids and solar-power systems.

Factors contributing to its departure from the index included Tesla’s lack of published details related to its low carbon strategy or business conduct codes, said Margaret Dorn, SP Dow Jones Indices’ head of ESG indices for North America, in an interview.

Even though Tesla’s products help cut planet-warming emissions,

Dorn said, its other issues and lack of disclosures relative to industry peers should raise concerns for investors looking to judge the company across environmental, social and governance (ESG) criteria.

“You can’t just take a company’s mission statement at face value, you have to look at their practices across all those key dimensions,” she said.

Tesla representatives did not immediately respond to questions. The company has previously called ESG methodologies “fundamentally flawed.”

Musk tweeted that “Exxon is rated top ten best in world for environment, social governance (ESG) by S&P 500, while Tesla didn’t make the list! ESG is a scam. It has been weaponized by phony social justice warriors.”

Asked about the tweet, a representative for the index provider said Musk may have been referring to a list on a company blog post of the largest 10 constituents by market cap of the SP 500 ESG Index after the removal of Tesla and others. The list is “not a ranking of best companies by ESG score,” the representative said.

Exxon now accounts for 1.443 percent of the weight of the index. Apple Inc was the largest at 9.657 percent.

Growing concerns

Investors concerned about issues like diversity and climate change have poured billions of dollars into funds using ESG criteria to pick stocks, prompting debate about how effectively the funds promote change or whether they push companies too much on issues that should be settled by government policy.

S&P Dow Jones Indices is majority-owned by S&P Global. Musk and others have complained the firm and its rivals conflate too many issues by bundling ESG concerns into one total score.

For instance a fund based on the S&P 500 ESG Index, the SPDR SP 500 ESG ETF, received the low rating “D” by climate activist research group As You Sow, which noted despite its title and sustainability mandate, fossil fuel stocks make up 6.5 percent of fund assets.