Elon Musk is smart — but he doesn’t understand ESG, tech CEO says

Elon Musk is smart — but he doesn’t understand ESG, tech CEO says


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

Jim Watson | AFP | Getty Images

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

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

“Many investors believe it might be only 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’s ESG Index. In response, Musk tweeted that ESG was “a scam” that had “been weaponized by phony social justice warriors.”

The same tweet also noted that ExxonMobil was “rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make 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 debate on ESG. In its Impact Report for 2021, it said: “Current ESG evaluation methodologies are fundamentally flawed. To achieve acutely-needed change, ESG needs to evolve to measure real-world Impact.”

“Current environmental, social and governance (ESG) reporting does not measure the scope of positive impact on the world,” it added. “Instead, it focuses on measuring the dollar value of risk / return.”

“Individual investors — who entrust their money to ESG funds of large investment institutions — are perhaps unaware that their money can be used to buy shares of companies that make climate change worse, not better.”

Read more about electric vehicles from CNBC Pro

Beyond climate

During her interview with CNBC, Clarity AI’s Minguela argued that Musk’s reaction pointed to a wider issue around people’s views of what ESG actually stands for.  

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

“But that’s a good sign [of] … how Elon Musk is not understanding what ESG means … And he’s an incredibly smart person, right? So I guess that, if that happens to him, that happens to many other investors.”  

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

Tesla had not replied to CNBC’s request for comment on Minguela’s remarks before publication.

Definitions of what ESG actually means are broad and varied. While a great deal of attention is paid to the “environmental” aspect, both the social and governance strands are important too.

The government-owned British Business Bank, for example, describes ESG as being a “collective term for a business’s impact on the environment and society as well as how robust and transparent its governance is in terms of company leadership, executive pay, audits, internal controls, and shareholder rights.”

Greenwashing





Source

Space startup Varda raises 7 million in funding to make drugs in orbit
Business

Space startup Varda raises $187 million in funding to make drugs in orbit

Pavlo Gonchar | Lightrocket | Getty Images Space startup Varda announced on Thursday that it has raised $187 million in Series C funding, led by venture capital firms Natural Capital and Shrug Capital, to continue advancing drug manufacturing in space. The latest round included participation from Peter Thiel, Lux Capital, Khosla Ventures and Caffeinated Capital. […]

Read More
How family offices are betting on the sports boom from fantasy apps to pickleball courts
Business

How family offices are betting on the sports boom from fantasy apps to pickleball courts

Key Points A third of investment firms of the ultra-rich have invested in sports, according to a new family office survey by BNY Mellon. While billionaire sports-team buyouts get the headlines, family offices are increasingly investing in adjacent assets like live-viewing venues and betting apps. Here’s how the family offices of ultra-rich sports team owners […]

Read More
Delta’s summer travel outlook tops estimates as CEO says high-end demand is holding up
Business

Delta’s summer travel outlook tops estimates as CEO says high-end demand is holding up

A Boeing 767-332(ER) from Delta Air Lines takes off from Barcelona El Prat Airport in Barcelona on Oct. 8, 2024. Joan Valls | Nurphoto | Getty Images Delta Air Lines trimmed its 2025 profit forecast as it deals with lower-than-expected demand this year and the industry manages a glut of flights, but the carrier’s outlook […]

Read More