Tesla Shares Tumble 7% After ESG Index Exclusion Prompts Musk Rebuke

Shares of electric car maker Tesla tumbled 7% on Wednesday amid news that it was dropped from S&P Global's ESG Index for sustainable investing after falling short on carbon, racial and working standards, prompting the firm's chief executive Elon Musk to call the index a tool of "phony social justice warriors."

NEW YORK (UrduPoint News / Sputnik - 18th May, 2022) Shares of electric car maker Tesla tumbled 7% on Wednesday amid news that it was dropped from S&P Global's ESG Index for sustainable investing after falling short on carbon, racial and working standards, prompting the firm's chief executive Elon Musk to call the index a tool of "phony social justice warriors."

Tesla shares were down more than $52 to below $710 by 1:15 p.m. EST (17:15 GMT) after the downgrade.

"Exxon is rated top ten best in (the) world for environment, social & governance (ESG) by S&P 500, while Tesla didn't make the list!" Musk said, citing the oil and gas giant as a comparison, in the response he issued on Twitter. "ESG is a scam. It has been weaponized by phony social justice warriors."

Barrons, commenting on the Tesla exclusion from the ESG index, described it as a "call that is likely to surprise investors, with the potential for a modest impact on the stock price". That made Wednesday's 7% in Tesla's value somewhat excessive, though the company's shares are known for their volatility often due to Musk's public battles with regulators.

Margaret Dorn, senior director and head of ESG Indices for North America at S&P, in laying out the reasons for Tesla's exclusion from the index in a fairly-long explainer, said the decision was chiefly due to the company's low scores from a lack of low carbon strategy and codes of business conduct.

Further, ESG's Media and Stakeholder Analysis - 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, she said.

Another was the company's handling of the investigation by the National Highway Traffic Safety Administration into the "multiple deaths and injuries" linked to Tesla's autopilot vehicles, Dorn said, adding that all these led to a negative impact on the company's overall ESG scoring.

"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 said, adding that the door to inclusion was still open to Tesla in the future. "The beauty of the annual rebalance is that they will once again have an opportunity to be reviewed for inclusion in years to come."

Barrons, in its own rationale of the ESG decision, noted that driving an EV does not eliminate all carbon emissions because electricity can be generated by burning natural gas or coal. The United States, however, generates about 40% of its electricity from nuclear plants and renewable sources, and that percentage is going up over time.