Tesla CEO Elon Musk replied to an article by Tesmanian that focused on Tesla urging large funds to stop misleading investors and correct Tesla’s ESG score. Tesla raised the issue of its low ESG score in its 2021 Impact Report, where it stated that the current ESG reports don’t analyze the magnitude of the positive impact on the world. Instead, they focus on measuring the dollar value of risk/return. You can read the 2021 Impact Report for more details.
Not only did Elon Musk comment on this topic, but so did one of Tesla’s board members, Hiromichi Mizuno, who added that Tesla wasn’t denouncing ESG investment but wanted the rating scheme to be fair, and making it fair would include looking at more positive impacts companies have on the world — not just the negative ones.
To be clear, Tesla is not denouncing ESG investments but urges ESG rating scheme to fairly evaluate a company’s positive impacts as well as negative impacts.
The current ratings often overweight reduction of negative impacts while neglecting positive impacts.
— HIRO MIZUNO (@hiromichimizuno) May 8, 2022
I’m going to do a quick comparison of Tesla’s ESG score and the scores of four oil and gas companies that, according to Investopedia, protect the environment. I may be biased, but I don’t think any of the oil and gas companies actually protect the environment. They may fund initiatives and try to go carbon neutral, but fossil fuels themselves are what’s harming our climate. After this, I’ll share another article that sheds light on why Tesla has a low score.
Tesla Vs. Oil Companies ESG Score
Let’s look at Tesla’s ESG score and compare it with a few oil companies that Investopedia says protect the environment. Sustainalytics noted that Tesla’s ESG score is 28.5 with “medium risk.” (A lower score is better.) Tesla ranks 41 out of 82 automobiles and 8,192 out of 14,666 in the Global Universe. Tesla’s score is based on two things: Exposure and Management. Sustainalytics writes:
“Exposure refers to the extent to which a company is exposed to different material ESG issues. Our exposure score takes into consideration subindustry and company-specific factors such as its business model.
“Tesla Inc‘s Exposure is Medium.
“Management refers to how well a company is managing its relevant ESG issues. Our management score assesses the robustness of a company’s ESG programs, practices, and policies.
Tesla Inc‘s Management of ESG Material Risk is Average.”
In 2021, Investopedia published an article on the top four oil companies that protect the environment and highlighted the four companies and how they are concerned with their public images. For comparison with Tesla, I’ve grabbed the ESG ratings of these oil companies. They are as follows: