Tesla’s Absurd Removal from the S&P 500 ESG Index Puts the Climate Fight in Reverse

A leader in electric vehicles and renewable energy storage solutions, a company, whose entire activity and efforts are aimed at the transition of the world to sustainable energy, the most environmentally friendly manufacturer in the world, Tesla, has been kicked out of the S&P 500 ESG Index. The absurd decision, backed up by untenable excuses, points to deep problems with the index and gives rise to complete distrust of it.

S&P Dow Jones Indices reported that Tesla's Environmental, Social, and Governance (ESG) score has remained fairly stable over the past year, but it is down from the improvement in global peers. The index provider also cited concerns about working conditions and the company's investigation into deaths and injuries related to its driver assistance systems. In addition, a lack of low-carbon strategy and codes of business was cited as the reason for the decision.

The index provider also did not miss a chance to downplay the manufacturer's exceptional achievements, reducing them to a passing mention, with negative wording: “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,” Margaret Dorn, senior director and head of ESG indexes for S&P Dow Jones in North America said in a Tuesday blog post. A person who does not understand the issue at stake, can easily take in this ESG Index information, not understanding the absurdity of the situation. However, we will try to sort it out.

ESG criteria appeared as a response to environmental degradation, global warming, and growing economic inequality between rich and poor countries, which created an additional ground for the emergence and development of new financial instruments and criteria. At some point, society began to impose additional requirements on the activities of companies and, in addition to financial reporting, began to evaluate them in terms of investing in sustainable development. This is how the ESG index appeared, which became a kind of business philosophy that stakeholders followed.

ESG criteria:

• Environmental criteria determine how much a company cares about the environment. This includes issues such as greenhouse gas emissions, environmental pollution and use of natural resources, and compliance with environmental laws. An effective ESG strategy involves combating operating costs, such as the consumption of raw materials, water, or carbon emission.
• Social criteria reflect the company's attitude towards staff, suppliers, customers and partners. This also includes the health and safety of employees, the use of child and forced labor, the professional development of employees, harmful working conditions, respect for human rights, and responsibility to customers for the quality of goods.
• Management criteria or corporate governance criteria are related to the effectiveness of management, the reasonableness of the compensation of managers, the rights of shareholders, the quality of the audit, fraud and corruption.

Obviously, the most important criterion that the index should track (since this is in line with its original purpose of creation) is the environmental criterion. However, according to the behind-the-scenes decision of the index, this criterion, obviously, has become completely unimportant. This is confirmed not only by the fact that Tesla, the company that has the greatest achievements among all existing in the world in this area, was excluded from the index, but also by the fact that such an oil and gas giant polluter as Exxon Mobile is still on the list, ranking 8th.

Tesla reduces the impact of its production on the environment every year by developing and applying the latest processes in the manufacturing of its products, as well as eliminating those that are the most polluting. The company closely monitors its supply chain, partnering only with those suppliers who mine/manufacture in an environmentally friendly way, and also does not allow the use of child or forced labor and human trafficking. Tesla provides unique working conditions, decent pay, and gives good prospects for career development and growth, for which it is the second most desirable company for employment for graduate engineers, after SpaceX.

However, the most important thing to note is that Tesla makes products that have a positive impact on the environment. The company has created an entire ecosystem via the use of which consumers critically reduce their carbon footprint. Customers using solar energy can power their homes and charge their cars, all without producing carbon emissions in the process.

Realizing the absurdity of the decision to exclude Tesla from the ESG, there are legitimate doubts about the reliability of the index. Now the moment has come when one of the main reasons why ESG was created is no longer considered. Now investors are being told to believe oil and gas giant Exxon Mobile is greener than Tesla. It should be kept in mind that, apart from this blatant deception, by such actions the index also promotes the development of polluting companies, while not advising to invest in those that truly deserve investment, for their real achievements. Once again, people become victims of the selfish motives of powerful people.

© 2022, Eva Fox | Tesmanian. All rights reserved.

_____________________________

We appreciate your readership! Please share your thoughts in the comment section below. 

Article edited by @SmokeyShorts, you can follow him on Twitter

Follow @EvaFoxU