In May, electric vehicle maker Tesla was removed from the S & P 500’s ESG index. In response, CEO Elon Musk tweeted that the ESG was “armed by a fake social justice warrior” and “a fraud.”
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Tesla Chief Elon Musk may have misunderstood the implications behind ESG (Environment, Society, Governance), according to CEO of Clarity AI, a technology company that specializes in providing software that assesses sustainability. I have.
Last month’s CNBC “Squaw box europe“Rebeca Minguela talked about the confusion over what ESG really means.
“Many investors believe it may only focus on its impact on the climate,” she said. “Not only’many investors’, but even Elon Musk tweeted about it.”
In May, electric vehicle maker Tesla was removed from the S & P 500’s ESG index. In response to the, Musk tweeted The ESG was “armed by a fake social justice warrior” and “fraud.”
The same tweet also Exxon Mobil “The S & P 500 ranked us in the top 10 in the world in terms of environment, society and governance (ESG), but Tesla wasn’t on the list!” Oil and gas super majors said. “Top 10 components by index weight”
Tesla, like the CEO, is part of the increasingly condemned debate about ESG. In the 2021 Impact Report, “Current ESG assessment methods have fundamental flaws. To achieve urgently needed changes, ESGs need to be evolved to measure real-world impacts.”
“Current environmental, social and governance (ESG) reports do not measure the extent of their positive impact on the world,” he added. “Instead, we focus on measuring the dollar value of risk / return.”
“Individual investors who outsource funds to ESG funds of large investment institutions may not be aware that they can use the funds to buy stock in companies that exacerbate climate change.”
In an interview with CNBC, Clarity AI’s Minguera argued that Mask’s reaction points to a broader issue of people’s view of what ESG really represents.
“Elon Musk might have thought that ESG was measuring its impact on climate,” she said. “Therefore, he was worried that Tesla would drop the ESG sustainability index and Exxon would be included in that index.”
“But that’s a good sign [of] … Elon Musk doesn’t understand the meaning of ESG … and he’s an incredibly smart person, right? So if that happens to him, I think it will happen to many other investors, “he said.
“That’s why it’s so important to have tools to understand what ESG really means and what different frameworks are trying to measure.”
Tesla did not respond to CNBC’s request for comment on Minguera’s remarks prior to its release.
The definition of what ESG really means is broad and diverse. Great attention is paid to the “environmental” aspect, but both the social and governance elements are also important.
For example, the government-owned UK Business Bank describes ESG as “a collective term for corporate environmental and social impact, and corporate leadership, executive compensation, auditing, and internal governance robustness and transparency.” .. Control and shareholder rights. “
The discussions surrounding ESG and sustainability are gathering publicity in the light of growing concerns about social issues and the environment.
Companies around the world Hone their sustainability qualifications We announce our Net Zero goals and plans to reduce our business’s environmental footprint.
However, given that in some quarters it is often difficult to obtain specific details and the date to reach these goals may be decades ahead, the sustainability that companies do. There is considerable skepticism in many of the possibility-related claims.
This often leads to accusations of greenwashing. The term Greenpeace UK The Environmental Campaign Group calls it a “PR tactic” used “to make a company or product look environmentally friendly without significantly reducing its environmental impact.”