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Elon Musk called ESG a scam — did Tesla’s chief show favor to investors?

Investment usually uses a combination of head, heart, and intestines, even if not envisioned. And perhaps there is no market theme that stirs up “every feel” like ESG.

This week, the big move to reduce Tesla from closely followed environmental, social and governance (ESG) indexes has brought about equal anger and relief.

The rebellion from Standard & Poor’s, which rejected Tesla from the ESG index, was on display.I got a nuisance from Tesla
TSLA,
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Investor, Including renowned asset management companies and Tesla Bull Cathie Wood.. There was also a breathtaking snapback from Elon Musk.

Sustainable investment: The ESG ratings and Net Zero pledges that are widely adopted today are of little value, says two pioneers of sustainable investment.

In most cases, when what many see as an anti-gasoline rebel is no longer justified, a new wave of confusion has emerged about what constitutes an “ESG.”

S & P 500 ESG Index Excludes Mask Tesla from Lineup As part of the annual rebalancing.. But mainly because it’s supposed to track the wider S & P500.
SPX,
+ 0.01%
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While adding the ESG layer, the index maintained the oil giant ExxonMobil,
XOM,
+ 0.79%

With that top ESG mix. Included: JP Morgan Chase and Company.
JPM,
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It has been criticized by environmental groups as the primary lender of oil patches.

“ESG is a scam. It was armed by a fake social justice warrior,” Musk tweeted. Lament that ExxonMobil has broken through Tesla..

“Stupid” was Wood’s brief reaction to Tesla’s dismissal.

Margaret Dawn, Senior Director and Head of S & P’s North American ESG Index, said: Dow Jones Index, In a blog post..

read: EVs can store electricity for our homes and grids: why “vehicle to everything” technology must follow investment themes

Specifically, it was the “S” and “G” that made Tesla’s “E” sour, S & P’s report shows. Tesla was marked down for racism and poor working conditions claims at its factory in Fremont, California.Automakers were also called on the handling of NHTSA surveys After multiple casualties It was linked to an autopilot vehicle.

Just Capital, an ESG-oriented investor, has the same criticism as S & P. According to investment companies, Tesla has historically scored in the bottom 10% of Just Capital’s annual sustainability rankings, primarily by paying and treating workers. Broadly speaking, Tesla works well on environmental issues, customer treatment and job creation in the United States, but “pays a fair living wage”, “protects the health and safety of workers”, diversity, Discrimination debate related to fairness and inclusiveness (DEI).

Paul Watchman, an industry consultant who wrote an ingenious report that helped get the ESG investment on track in the mid-2000s, said Tesla should be part of the ESG index. “Not all ESG violations are the same. This rating shows how distorted the S & P rating is.” He told Bloomberg..

It is only this disagreement that most confuses investors.

“The majority of investment managers applying ESG pay data providers to convey the benefits of ESG,” said Tony Tursich of the Calamos Global Sustainable Equities Fund. In an interview with MarketWatch..

ESG ratings differ from the scores given by credit rating agencies that have an agreement on creditworthiness standards. In ESG, there is no standard definition so far.

Dimensional Fund Advisors also say they are also challenging ESG ratings. They said the correlation between ESG scores from different providers was estimated to be 0.54. By comparison, the credit rating correlation assigned by Moody’s and S & P is 0.99.

MSCI Inc., a leading provider of ESG ratings, still includes Tesla and Exxon in its more widely tracked ESG-focused index, but it is even more confusing about what ESG really means. I am. The methodology used by MSCI and S & P for ESG indexes is very similar.

On the S & P side, Exxon Inclusion remains representative of the energy sector in line with a wide range of goals.

But that raises the question of why ESG is confused with other priorities. Others lament all possible exceptions to ESG pledges and the listing of shares in ESG indexes, ETFs and mutual funds.

Stubborn environmental groups also usually have problems including traditional oil companies under the ESG label. Andrew Behar, CEO of As You Sow, said:

But other energy industry watchers say that including them may have different implications. The transition to cleaner options at an established traditional energy company is most effective given its size, multinational range, and investment. By practice such as carbon recovery.. They argue that ESG-lite maintains pressure on evolution.

Trust is of utmost importance to investors, regardless of which part of the ESG is more important to them.

In fact, some ESG watchers say Tesla isn’t environmentally clean, as its hyperfocus shows. This essentially means that a company’s ESG promises cannot be accepted solely by their benefits.Tesla was recently tagged by AsYouSow Report ranking 55 companies About their “green” progress after the pledge was made.Tesla It was badly evaluated for not sharing emission data publicly.

“Part of [Tesla’s] The problem is the lack of disclosure. For those who are free-speech, masks can do a better job of transparency at Tesla, “said Martin Whittaker, Founding CEO of Just Capital.

read: What does “free speech” really mean?Twitter does not censor speeches, despite what many users think of as Elon Musk

Increasing sustainability information for a wider range of companies beyond the environment, especially greenhouse gas emissions and data, could present challenges, said Will Collins-Dean, Senior Portfolio Manager at Dimensional Fund Advisors, and Senior Investment Strategist. Eric Geffroy said in a comment.

For example, a company’s sustainability report runs 100 pages long and varies widely from company to company and may not contain all the information that investors are interested in.

Securities and Exchange Commission Approaching unified climate change risk reporting rules, And considered a broader ESG pledge. The Ministry of Labor is also considering including ESGs in 401 (k), including how transparent the addition should be. For now, the company’s actions are voluntary.

If an individual company misses the ESG mark. The money to scoop up those names can be just as confusing.

A Report InfluenceMap, a London-based non-profit organization, has evaluated 593 equity funds with total net worth of over $ 256 billion, and the screener used by InfluenceMap, “421 of which have a negative portfolio parliamentary score.” I found. This means that most of the list is not on track for the global warm-up hit of 2 degrees Celsius (ideally 1.5 degrees Celsius) set by the voluntary Paris Agreement. Companies may promise a more environmentally friendly future, but far fewer offer.

The key to a healthier ESG investment is to narrow expectations.

“Rather than using a general ESG rating, investors must first identify which particular ESG considerations are most important to them, and then choose an investment strategy accordingly.” Collins-Dean and Geffroy said.

“One example might be to reduce exposure to companies with high emission intensity,” they said. The wider the set of goals, the more difficult it can be to manage the interactions between them. A “kitchen sink” approach that integrates dozens of variables can make it difficult for investors to understand portfolio allocations and have unintended consequences. “

Elon Musk called ESG a scam — did Tesla’s chief show favor to investors?

Source link Elon Musk called ESG a scam — did Tesla’s chief show favor to investors?

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