- CEO Elon Musk’s focus on the environment can’t keep Tesla (NASDAQ:TSLA) stock on the S&P 500 ESG Index
- Elon Musk did not respond well to the removal news
- TSLA stock slipped today amid the decision and multiple analyst downgrades
Tesla (NASDAQ:TSLA) stock fell back into the red today after receiving some bad news: The company’s electric vehicle (EV) innovations are no longer enough to keep it on the S&P 500 ESG Index. The news broke this morning, in part causing TSLA stock to close down nearly 7%.
This isn’t the only negative catalyst for Tesla today. But it’s certainly the one Elon Musk seems most concerned about.
TSLA Stock Cut From the S&P 500 ESG Index
Per Refinitiv, the S&P 500 ESG Index tracks the “performance of companies with superior ESG index ratings for environmental, social, and governance practices.” Apparently, though, that definition no longer applies to Tesla. Earlier today, the index deemed the company ineligible for inclusion “due to its low S&P DJI ESG Score” which “fell in the bottom 25%” among industry peers.
In its statement, the index acknowledged Tesla’s sustainable energy mission. It then broke down the reasons for its decision, citing “a decline in criteria level scores related to Tesla’s (lack of) low carbon strategy” and business conduct codes. The statement continued:
“While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens.”
Elon Musk Responds
Tesla CEO Elon Musk quickly reacted to this news, calling ESG a “scam.”
.@SPGlobalRatings has lost their integrity
— Elon Musk (@elonmusk) May 18, 2022
Musk’s initial tweet is worth a closer look. For one, Exxon Mobil (NYSE:XOM) is still part of the index, which is odd given the company’s history with fracking and other environmentally unfriendly practices. In addition to that fact, Musk is also likely frustrated that some of Tesla’s big tech peers — including Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) — still make the list.
Following his initial response, Elon Musk predicted that political attacks against him would escalate. The CEO then posted another meme about the decision.
Despite Tesla doing more for the environment than any company ever! pic.twitter.com/ImxrhnRepj
— Elon Musk (@elonmusk) May 18, 2022
The Road Ahead for Tesla
The good news for Tesla is that it can return to the index next year. As the post states, “the beauty of the annual rebalance is that they will once again have an opportunity to be reviewed for inclusion in years to come.” However, Elon Musk’s reaction to the decision may not help Tesla’s cause.
TSLA stock’s performance today may be due more to multiple analyst downgrades. However, it’s not good for Tesla to be dropped from a major index, either. Given Tesla’s status as a leader in sustainable innovation, it would behoove the company to reprioritize its ESG scores.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
