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

BOSTON (REUTERS) – S&P Dow Jones Indices has removed electric carmaker Tesla from its widely-followed S&P 500 ESG Index, citing issues including racial discrimination claims and crashes linked to its autopilot vehicles.

Tesla chief executive Elon Musk responded with harsh tweets, including that "ESG is a scam".

Other contributing factors to the changes, effective May 2, included Tesla's lack of published details related to its low carbon strategy or business conduct codes, said Ms Margaret Dorn, the organisation's head of environmental, social, and governance (ESG) indexes for North America, in an interview.

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

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

Even though Tesla's products help cut planet-warming emissions, Ms Dorn said, its other issues and lack of disclosures relative to industry peers should raise concerns for investors looking to judge the company across ESG criteria.

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"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".

Mr Musk tweeted: "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 Mr Musk may have been referring to a list on a company blog post of the largest 10 constituents by market cap of the S&P 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 per cent of the weight of the index.

Apple was the largest at 9.657 per cent.

Growing concerns

Investors concerned about issues such as 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.

Mr Musk and others have complained that the firm and its rivals conflate too many issues by bundling ESG concerns into one total score.

Artmotion Asia

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