When it comes to ethical investing, tobacco companies selling a lifestyle product proven to cause cancer are leaving Elon Musks 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 policieswhich Musk calls wokeit has earned a higher score when it comes to environmental, social and governance (ESG) criteria in the S&P 500 sustainability index.
Meanwhile, the electric vehicle pioneer has been penalized for its lack of DEI, including the sacking 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 towards 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 Teslas poor score upon re-entering 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 when the company broke up, are responsible for an estimated 8 million cancer-related deaths worldwide every year and would not seem obvious candidates for ESG investing.
Yet the right-leaning publication reported the two companies have bumped up their score by emphasizing diversity in their boards, the funding of minority businesses and other inclusive measures in an attempt to win back deep-pocket 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?
Alexandra Merz (@TeslaBoomerMama) May 31, 2023
And how come you didnt 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
Greenwashing has undermined credibility
The idea of ethical investing quickly caught on in Europe, where companies can 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 argument 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 systemknown as greenwashingwhich has undermined credibility in the system 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 industry.
Even Norges, which has long enjoyed the reputation of being a responsible investor, finds itself repeatedly under attack over its treatment of fossil fuels. While it is not permitted by law from investing in coal, it is free to invest in Exxon Mobil or 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 500s sustainability index a 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 *isnt* fraudulent
Elon Musk (@elonmusk) June 1, 2022
