May 20

What Elon Musk Gets Right and Wrong About ESG

By Tim McDonnell

Elon Musk has a vendetta against ESG investing. On May 18, the Tesla CEO and potential future owner of Twitter tweeted a tirade against the ratings firm S&P after Tesla was dropped from S&P’s index of companies with top environmental, social, and governance ratings. The firm has “lost [its] integrity” and turned ESG ratings into a “scam,” he said, by allowing them to be “weaponized by phony social justice warriors.” As evidence, he cited the fact that oil major ExxonMobil remains in the index.

Musk is right that ESG needs an overhaul—but not, as he said, because it only measures “how compliant your business is with the leftist agenda.”

ESG funds have counterintuitive rules

In booting Tesla from the list (along with Chevron, Wells Fargo, Berkshire Hathaway, and several others), S&P’s head of ESG indices Margaret Dorn cited Tesla’s “lack of low carbon strategy” and non-environmental issues related to safety and working conditions at Tesla factories. The first charge is counterintuitive, given that Tesla has arguably done more than any company to popularize electric vehicles and thus take gas-fueled engines off the road. Exxon, by contrast, is increasing its investment in oil and gas drilling and has a climate plan that blows well past the goals of the Paris Agreement.

Source: Quartz Africa (link opens in a new window)

electric vehicles, ESG, impact investing