Tesla Was Removed From the S&P 500 ESG Index — Here’s Why

Tesla stock (TSLA) is no longer a part of the S&P 500 ESG Index. Here’s why and what it could mean for the stock. Elon Musk is fuming.

Rachel Curry - Author

May 19 2022, Published 1:23 p.m. ET

Tesla Inc. (TSLA) has officially been kicked out of the S&P 500 ESG Index, which tracks securities meeting sustainability criteria relating to environmental, social, and governance (ESG) markers. The index completed its annual rebalance and TSLA stock didn't make the cut.

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Naturally, Tesla CEO Elon Musk isn’t happy that his company, which makes electric vehicles, solar panels, and more, is no longer on the sustainability index. Here’s why the S&P 500 ESG Index gave Tesla the boot.

Tesla’s S&P 500 ESG Index removal traces back to key issues.

According to S&P Dow Jones, Tesla has been removed from the ESG Index for claims of racial discrimination and Tesla autopilot crashes.

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That isn't all. The index manager claims the company wasn't transparent with its low-carbon strategy and business codes of conduct.

This shows the S&P 500 ESG Index is focused on providing accurate securities tracking according to the index’s standards. ESG is more than just environmental sustainability. It also relates to the treatment of customers, employees, vendors, and other laborers. Through this impact investing modality, the planet and its people are equally crucial.

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The Head of ESG Indices at S&P Dow Jones Margaret Dorn wrote about the matter, “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.”

Dorn added, “Tesla was ineligible for index inclusion due to its low S&P DJI ESG Score, which fell in the bottom 25 [percent] of its global GICS® industry group peers. It joins Berkshire Hathaway, Johnson & Johnson, and Meta, which have once again met the index methodology’s chopping block.” Home Depot, Chevron, Costco, and Wells Fargo were also cut in the process.

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Elon Musk isn’t happy about Tesla getting kicked out of the index.

Musk responded to the news that Tesla was taken off the S&P 500 ESG Index through his most-used platform, Twitter. He wrote, “Exxon is rated top 10 best in the world for environmental, social, and 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.”

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Tesla faces lawsuits and more.

The National Highway Traffic Safety Administration (NHTSA) opened a probe into Tesla for self-driving accidents last year. More recently, the state of California opened a lawsuit against Tesla regarding reported racial discrimination in the workplace.

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Dorn said the index took these matters into consideration as part of the rebalancing strategy, citing “two separate events centered around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles.”

Tesla’s issues aren’t easily resolved, and it may take some maneuvering to get the company back on the S&P 500 ESG Index. In the meantime, TSLA stock is up 2.06 percent for the day by 12:40 p.m. EST on Wednesday, May 19. Still, the stock is part of a larger swatch of tech stocks in the red YTD, with TSLA shares down 39.62 percent during that period.


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