Elon Musk blasts ESG as ‘the devil’ after tobacco stocks beat Tesla in sustainability indexes (2024)
Christiaan Hetzner
·3 min read
When it comes to ethical investing, tobacco companies selling a lifestyle product proven to cause cancer are leaving Elon Musk’s Tesla behind in a cloud of smoke, and it has left the entrepreneur steaming.
Reportedly thanks to a clever embrace of diversity, equity, and inclusion policies—which Musk calls “woke”—it has earned a higher score when it comes to environmental, social, and governance (ESG) criteria in recent sustainability indexes.
The article cited Tesla’s poor score upon reentering the S&P 500 sustainability index, receiving only 37 out of a maximum 100 points, versus the 84 achieved by cigarette merchant Philip Morris International.
Companies like PMI and Altria, which split up the rights to sell Marlboro in the spinoff of PMI from Altria, are responsible for an estimated 8 million cancer-related deaths worldwide every year and would not seem obvious candidates for ESG investment.
Yet the right-leaning publication reported the two companies have bumped up their score in various sustainability indexes including by emphasizing diversity in their boards, the funding of minority businesses, and other inclusive measures in an attempt to win back deep-pocketed asset managers.
The CEO of PMI told the Financial Timeslate last month he believed the cigarette seller could be classified as ethical again under ESG criteria by increasing the share of sales from products like smokeless tobacco.
Sure, you all wanted to know, right? @SPGlobalRatings do you have any credibility left? 🤮 And how come you didn't make the same hoopla this year (on April 21st) when you included Tesla back into the S&P 500 ESG index? Much more catchy last year, right? This time tiptoeing… pic.twitter.com/aUEUIVGidK
— 💙 Alexandra Merz (@TeslaBoomerMama) May 31, 2023
Greenwashing has undermined credibility
The idea of ethical investing quickly caught on in Europe, where companies can be (and have been) sued for failing to meet their net-zero commitments.
In the United States, however, Republicans have successfully branded ESG “woke capitalism” and dispute the core thesis that those companies act in the best interest of their investors by serving what they argue are progressive causes.
They have been aided in their argument by rampant abuse of the system—known as “greenwashing”—which has undermined credibility in ESG, even among its proponents.
In Europe, for example, political horse-trading threatens to turn a crackdown on greenwashing into a farce as member states squabble over the impact a harmonized set of criteria would have on their respective domestic industries.
Even Norges Bank, which has long enjoyed its reputation as a responsible investor, finds itself repeatedly under attack for its treatment of fossil fuels. While it is not permitted by law to invest in coal, it is free to invest in Exxon Mobil and BP, whose negligence caused the Valdez and Deepwater Horizon environmental disasters.
Musk himself became a vocal critic of ESG ever since Tesla was first booted from the S&P 500’ssustainability indexa year ago.
After Fortune reported some two weeks later about allegations over fraudulent ESG investing by Deutsche Bank, Musk claimed all ESG lists were suddenly fraudulent.
I have yet to see an ESG list that *isn’t* fraudulent
“ESG is the devil,” wrote Musk on Wednesday in response to a report published in the Washington Free Beacon. The article cited Tesla's poor score upon reentering the S&P 500 sustainability index, receiving only 37 out of a maximum 100 points, versus the 84 achieved by cigarette merchant Philip Morris International.
On Twitter, Tesla CEO Elon Musk made critical comments as he shared an article which showed that tobacco companies like Philip Morris had higher ESG scores than the electric vehicle pioneer. Tesla was given an ESG score of 37 out of 100, while Philip Morris was scored an 84.
It said that Tesla's “lack of a low-carbon strategy” and “codes of business conduct,” along with racism and poor working conditions reported at Tesla's factory in Fremont, California, affected the score. Tesla CEO Elon Musk has called ESG metrics the “Devil Incarnate.”
BAT received a rating of A (on a scale of AAA to CCC) in the MSCI ESG Ratings assessment. BAT received an ESG Risk Rating of 33 from Sustainalytics and was assessed to be at high risk of experiencing material financial impacts from ESG factors.
S&P Global puts Tesla's disclosure practices in the Medium category. It puts disclosure practices from cigarette maker Philip Morris International (PMI) in the Very High category. That might be one reason Philip Morris' total ESG score is 84 and its E score is 87.
S&P Global decided to boot the automaker from the sustainable version of its flagship S&P 500 index, citing the company's weak handling of a federal investigation into multiple deaths linked to its self-driving cars and claims of racial discrimination and poor working conditions at its Fremont, California, factory.
Numerous tobacco companies in recent years have focused on vaping and other “smoke-free” nicotine products, claiming that those cigarette alternatives are less harmful to consumers. Companies also appear to have focused more on diversity, equity and inclusion, which in some cases has helped their ESG scores.
Critics of ESG — such as a group of Republican states that banned Blackrock and other “ESG friendly” asset managers from their state pension plans — argue that considering environmental and social factors violates the fiduciary duty that asset managers have towards their clients.
The ESG movement, originally driven by good intentions, has been co-opted by lobbyists, special interest groups and various NGOs, and recent reviews have revealed its lackluster performance in creating meaningful environmental change and have highlighted chronic abuse of flawed methodologies.
Green finance is primarily concerned with providing financial support to sustainable projects and technologies. ESG is more focused on evaluating companies based on their corporate sustainability practices and governance structures.
No amount of sustainability strategies, reports and commitments can detract from the harms of Big Tobacco. The focus for the 2023 World No Tobacco Day campaign is “grow food, not tobacco”. According to the campaign page, “tobacco growing harms our health, the health of farmers and the planet's health”.
The term ESG first came to prominence in a 2004 report titled "Who Cares Wins", which was a joint initiative of financial institutions at the invitation of the United Nations (UN).
A 2004 report from the United Nations – titled Who Cares Wins – carried what is widely considered the first mainstream mention of ESG in the modern context. This report leaned in heavily, encouraging all business stakeholders to embrace ESG long-term.
Despite leading in electric vehicle innovation, Tesla's ESG score lags behind Shell's. Examining the three dimensions — Environmental, Social, and Governance — reveals surprising disparities.
Tesla ESG fell off the S&P 500 index of firms that excel at environmental, social, and governance (ESG) issues. Even though 34 other companies were removed from the index as part of its annual reshuffle, the company stands out for its emphasis on environmentally friendly transportation.
Environmental, social, and governance (ESG) scores are an essential tool for investors to assess a company's sustainability and ethical performance. These scores typically range from 0 to 100, with a score of less than 50 considered relatively poor and more than 70 considered good.
Introduction: My name is Corie Satterfield, I am a fancy, perfect, spotless, quaint, fantastic, funny, lucky person who loves writing and wants to share my knowledge and understanding with you.
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