In May, electric-vehicle maker Tesla was delisted from the S&P 500’s ESG index. In response, CEO Elon Musk tweeted that ESG was “a scam” that was “weaponized by fake Social Justice Warriors.”
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Tesla According to the CEO of Clarity AI, a tech firm specializing in the provision of software to assess sustainability, chief Elon Musk may have misunderstood the meaning behind ESG (environmental, social and governance).
In an interview with CNBC last month”Squawk Box Europe“Rebecca Minguela talks about the confusion about what ESG actually means.
“Many investors believe it may just be focused on climate impact,” she said. “Not just ‘many investors’ – even Elon Musk tweeted about it.”
In May, electric-vehicle maker Tesla was delisted from the S&P 500’s ESG index. In reply, Musk tweeted That ESG was “a scam” that was “weaponized by fake Social Justice Warriors.”
The same tweet also noted that ExxonMobil Was rated the “Top Ten Best in the World for Environment, Social and Governance (ESG) by the S&P 500, while Tesla did not make the list!” The oil and gas supermajor is listed as one of “Top 10 Components by Index Weight.”
Like its CEO, Tesla has weighed in on the fast-charging debate over ESG. In its impact report for 2021, It said: “Current ESG assessment methods are fundamentally flawed. To achieve much-needed change, ESGs need to evolve to measure real-world impact.”
“Current environmental, social and governance (ESG) reporting does not measure the scope of the positive impact on the world,” it added. “Instead, it focuses on measuring the dollar value of risk/return.”
“Individual investors – who entrust their money to the ESG funds of large investment institutions – are probably unaware that their money can be used to buy shares of companies that make climate change worse, not better. “
beyond climate
During his interview with CNBC, Clarity AI’s Minguela argued that Musk’s response pointed to a wider issue surrounding people’s views on what ESG really is.
“Elon Musk would have thought the ESG was measuring climate impact,” she said. “And that’s why he was concerned about Tesla’s ESG Sustainability Index and Exxon being on that index.”
“But it’s a good sign [of] …How come Elon Musk doesn’t understand what ESG means…and he’s an incredibly smart person, isn’t he? So I think if it happens to them, it happens to a lot of other investors as well.”
“That’s why it’s so important that they have the tools and a better understanding of what ESG really means and what the different frameworks are trying to measure.”
Tesla did not respond to CNBC’s request for comment on Minguela’s comments prior to publication.
The definitions of what ESG actually means are wide and varied. While much attention is paid to the “environmental” aspect, both the social and governance aspects are also important.
For example, the government-owned British Business Bank called ESG “the impact of the business on the environment and society, as well as how strong and transparent its governance is in terms of company leadership, executive pay, audits, internal word” as described. control, and shareholder rights.”
green washing
Discussions about ESG and sustainability have attracted publicity in the light of growing concerns over social issues and the environment.
Corporations around the world are trying burn their sustainability credentials By announcing net-zero goals and plans to reduce the environmental footprint of its operations.
In some quarters, however, there is significant skepticism about many of the sustainability-related claims businesses make, given that concrete details are often hard to come by and the dates for achieving these goals are sometimes decades away.
This often leads to accusations of greenwashing, a term environmental campaign group Greenpeace UK calls a “PR strategy” used to “make a company or product more environmentally friendly without meaningfully reducing its environmental impact”. is done.