Tesla has made its way back to the S&P 500 ESG index, a market index focused on sustainable investing, following the company’s inclusion of environmental disclosures. The electric car manufacturer had been removed from the index last year due to various concerns, including allegations of racial discrimination and accidents associated with its autopilot vehicles. Chief Executive Elon Musk responded to the removal with tweets dismissing ESG as a scam.
However, in a recent annual rebalancing, Tesla, along with 39 other companies such as Chevron and Fox, was added back to the S&P 500 ESG index, effective from May 1. This move is seen as a symbolic gesture since the S&P 500 ESG index only has approximately $8 billion in assets tracking it, a mere fraction compared to the $15.6 trillion in assets tracking the broader S&P 500 index, according to its provider, which is part of S&P Global.
While the financial impact may be limited, the re-inclusion of Tesla holds a softer benefit by instilling more confidence in the company’s relatively ESG-friendly stance. Todd Rosenbluth, the head of research at financial research firm VettaFi, explained that it signals to people that Tesla is aligned with ESG principles. This development is particularly noteworthy for a company like Tesla, operating in the automotive industry where environmental factors hold significant importance.
To regain its position in the S&P 500 ESG index, Tesla provided information regarding its evaluation of physical climate risks and considerations related to ESG in its supply chain management strategy. An S&P spokesperson highlighted that Tesla performed better this year, specifically in terms of environmental factors. However, ongoing ESG-related matters, such as a $3.2 million discrimination verdict against Tesla and a review of racial discrimination in its factories, could potentially affect its future scores.
While Tesla, Chevron, and Oracle did not provide comments on their inclusion in the index, Exxon and Fox declined to comment. Despite the mixed responses from the companies, the re-entry of Tesla into the S&P 500 ESG index signifies recognition of its efforts to address environmental concerns and align with sustainable investing principles.