The S&P 500 removed electric vehicle maker Tesla (NASDAQ:TSLA) from its ESG Index, with the changes taking effect on May 2. In a blog post published on Wednesday, a spokesperson for the index explained why they made the changes.
The S&P Dow Jones Indices stated that Tesla's ESG score, though "fairly stable," has slipped compared to global peers and expressed further concerns related to working conditions and deaths and injuries investigations related to its drive-assisted systems.
CEO Elon Musk responded, expressing his fury about the company's removal on Twitter in a series of tweets, saying:
"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."
The 2022 rebalance of the ESG Index by the S&P 500 uses environmental, social, and governance data to rank and effectively recommend companies to investors.
It reflects the balancing act of providing broad-based market exposure, but with meaningful and measurable sustainability-focused enhancements, according to Margaret Dorn, Senior Director and Head of ESG Indices.
Tesla's "lack of low-carbon strategy" and "codes of business conduct," along with racism and poor working conditions, clearly didn't meet the index criteria.
In a company report that followed the tweets, Tesla wrote that the ESG reporting does not measure the scope of the positive impact a company has on the world.
The company argues that other automakers could achieve higher ESG ratings even if they barely reduce their greenhouse gas emissions and continue manufacturing internal combustion engine vehicles.
A series of controversies and legal battles involving Tesla may have factored into S&P Dow Jones' recent decision. Meanwhile, expert hedge fund manager Cathie Wood said the decision is "Ridiculous. Not worthy of any other response."
PRICE ACTION: Tesla's stock price is down 1.7% in pre-open Thursday after sliding 6.8% yesterday.
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