Elon Musk is a smart person but he doesn’t understand ESG: tech CEO

In May, electric vehicle maker Tesla was removed from the S&P 500 ESG index. In response, CEO Elon Musk tweeted that ESG was “a scam” that had been “weaponized by fake warriors of the social justice”.

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Tesla chief Elon Musk may have misunderstood the meaning of ESG (environmental, social and governance), according to the CEO of Clarity AI, a tech company specializing in providing software to assess sustainability.

In an interview last month with CNBC’s “Squawk Box Europe,” Rebeca Minguela opened up about the confusion surrounding what ESG actually means.

“A lot of investors think it might just be focused on climate impact,” she said. “Not just ‘many investors’ – even Elon Musk tweeted about it.”

In May, electric vehicle maker Tesla was removed from the S&P 500 ESG index. In response, Musk tweeted that ESG was “a scam” that had “been weaponized by fake social justice warriors”.

The same tweet also noted that ExxonMobil was “ranked among the top ten in the world for Environmental, Social and Governance (ESG) by the S&P 500, while Tesla was not on the list!” The oil and gas supermajor is listed as one of the “top 10 constituents by index weight”.

Like its CEO, Tesla has also weighed in on the increasingly charged ESG debate. In its 2021 Impact Report, it said: “Current ESG assessment methodologies are fundamentally flawed. To achieve the change we sorely need, ESG must evolve to measure real-world impact. “

“Current environmental, social and governance (ESG) reports do not measure the magnitude of the positive impact on the world,” he added. “Instead, it focuses on measuring the dollar value of risk/reward.”

“Individual investors – who entrust their money to ESG funds from major investment institutions – may be unaware that their money can be used to buy stocks of companies that make climate change worse, not better.”

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Beyond the climate

During his interview with CNBC, Clarity AI’s Minguela argued that Musk’s reaction indicated a larger issue with people’s views on what ESG actually stands for.

“Elon Musk might have thought ESG measured climate impact,” she said. “And that’s why he was worried about Tesla dropping the ESG sustainability index and Exxon being in that index.”

“But it’s a good sign [of] …how Elon Musk doesn’t understand what ESG means… And he’s an incredibly smart person, isn’t he? So I guess, if it happens to him, it happens to many other investors.”

“That’s why it’s so important that they have tools and a better understanding of what ESG really means and what different frameworks are trying to measure.”

Tesla had not responded to CNBC’s request for comment on Minguela’s comments before they were published.

Definitions of what ESG actually means are wide and varied. While great attention is paid to the “environmental” aspect, the social and governance aspects are also important.

The state-owned British Business Bank, for example, describes ESG as “a collective term for a company’s impact on the environment and society, and the strength and transparency of its governance in terms of corporate leadership, executive compensation, audits, controls and shareholder rights.


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