“This exclusion will lead to some forced selling since funds benchmarked to the ESG index cannot hold the stock now,” said Gene Munster, former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. Tesla fell as much as 8% Wednesday, and Munster attributes about one-third of the drop to news of the index exclusion.
Kristin Hull, founder of Nia Impact Capital, a sustainability fund in Oakland, California that has been pressing Tesla to address worker issues, said she was relieved that there was “finally accountability.”
“This move signals to other companies that ESG standards, and improving them, matters,” she said. “And that there will be material, financial implications.”
But the decision didn’t sit well with some other clean energy supporters.
“This exclusion undermines the concept of ESG as a whole,” said Zach Stein, chief investment officer at Carbon Collective, a climate-change focused online investment adviser based out of Berkeley, California. “The number one issue in ESG is climate change and the company that is the leader in one of the most important solutions to climate change, which is electric vehicles, is now out, while companies like Exxon Mobil, which is one of the biggest contributors to climate change, is still in.”
The S&P ESG gauge does include some oil companies. Exxon Mobil Corp. is one of the largest companies in the benchmark, and the index recently added Marathon Oil Corp. and Baker Hughes Co.
The objective of the index “is to maintain similar overall industry group weights to the S&P 500 while enhancing the overall sustainability profile,” Raymond McConville, a spokesperson for S&P, said through email. S&P has other gauges that exclude oil companies, but “the S&P 500 ESG Index is meant to be broad based.”
Berkshire Hathaway, Johnson & Johnson and Meta Platforms Inc. are among other large companies that also didn’t make the list.
--With assistance from Sean O'Kane, Crayton Harrison and Saijel Kishan.
This article was provided by Bloomberg News.