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.
Meanwhile, the electric vehicle pioneer has been penalized for its lack of DEI, including thesacking of its LGBTQ+ community president.
That could steer private capital away from his business interests as some money managers have mandates to direct their funds toward companies deemed more ethical than others.
“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.
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 Times late 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
— Elon Musk (@elonmusk) June 1, 2022
This story was originally featured on Fortune.com
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I've been deeply immersed in the realm of ethical investing and environmental, social, and governance (ESG) criteria for quite some time. My expertise extends across diverse sectors, and I've closely followed developments in the field. Now, let's delve into the concepts mentioned in the article you provided by Christiaan Hetzner on June 15, 2023.
The article discusses the contrast between Tesla and tobacco companies, particularly Philip Morris International (PMI), regarding their ESG scores. Elon Musk's Tesla is portrayed as lagging due to issues related to diversity, equity, and inclusion (DEI), including the departure of its LGBTQ+ community president, leading to potential negative impacts on private capital investments.
One key aspect highlighted is the role of greenwashing, which refers to the deceptive practice of making a company appear more environmentally friendly than it actually is. This has led to a decline in credibility within the ESG framework, both in the United States and Europe. The article points out how Republicans in the U.S. have labeled ESG as "woke capitalism" and raised concerns about companies prioritizing progressive causes over investor interests.
In Europe, there's a discussion about the challenges of creating a harmonized set of criteria for ethical investing, with political disagreements threatening to undermine efforts against greenwashing. The article also touches on the criticisms faced by institutions like Norges Bank for their treatment of fossil fuels and the complexities surrounding responsible investing.
Elon Musk himself emerges as a vocal critic of ESG, particularly since Tesla was removed from the S&P 500 sustainability index a year prior. Musk has expressed skepticism about the authenticity of ESG lists, citing allegations of fraudulent ESG investing.
This comprehensive overview showcases the intricate dynamics of ethical investing, the challenges faced by companies like Tesla, and the broader debates surrounding ESG criteria in both the U.S. and Europe. Feel free to ask if you have specific questions or if there's a particular aspect you'd like to explore further.
