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

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

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

In an interview last thirty day period with CNBC’s “Squawk Box Europe,” Rebeca Minguela spoke of the confusion surrounding what ESG truly signifies.

“Numerous investors believe it might be only centered on local climate effect,” she explained. “Not just ‘many investors’ — even Elon Musk tweeted about it.”

In Might, electric powered-auto maker Tesla was taken out from the S&P 500’s ESG Index. In response, Musk tweeted that ESG was “a fraud” that had “been weaponized by phony social justice warriors.”

The exact tweet also pointed out that ExxonMobil was “rated major ten most effective in entire world for atmosphere, social & governance (ESG) by S&P 500, while Tesla didn’t make the checklist!” The oil and fuel supermajor is shown as a single of the “Leading 10 Constituents by Index Pounds.”

Like its CEO, Tesla has also weighed in on the ever more charged discussion on ESG. In its Impression Report for 2021, it mentioned: “Recent ESG evaluation methodologies are fundamentally flawed. To obtain acutely-necessary improve, ESG requirements to evolve to evaluate real-entire world Impression.”

“Recent environmental, social and governance (ESG) reporting does not evaluate the scope of good effect on the earth,” it additional. “Rather, it focuses on measuring the greenback price of chance / return.”

“Particular person investors — who entrust their dollars to ESG resources of large financial commitment establishments — are perhaps unaware that their money can be utilised to get shares of businesses that make local weather change worse, not superior.”

Go through a lot more about electrical autos from CNBC Professional

Beyond local climate

For the duration of her job interview with CNBC, Clarity AI’s Minguela argued that Musk’s response pointed to a wider problem all around people’s sights of what ESG truly stands for.  

“Elon Musk could possibly have believed that ESG was measuring weather affect,” she stated. “And that is why he was worried about Tesla dropping off the ESG sustainability index and Exxon currently being in that index.”

“But that is a good indication [of] … how Elon Musk is not being familiar with what ESG implies … And he is an incredibly smart individual, proper? So I guess that, if that happens to him, that takes place to many other traders.”  

“So that is why it is so critical that they have equipment and a superior comprehension of what ESG really suggests and what the distinctive frameworks are seeking to evaluate.”

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

Definitions of what ESG in fact indicates are wide and various. When a excellent offer of interest is paid to the “environmental” facet, each the social and governance strands are important as well.

The governing administration-owned British Small business Financial institution, for example, describes ESG as getting a “collective expression for a business’s impact on the surroundings and culture as nicely as how strong and transparent its governance is in phrases of corporation leadership, govt spend, audits, interior controls, and shareholder legal rights.”


Discussions surrounding ESG and sustainability have captivated publicity in gentle of mounting worries above social troubles and the surroundings.

Organizations all over the planet are attempting to burnish their sustainability qualifications by asserting internet-zero plans and options to cut down the environmental footprint of their functions.

In some quarters, on the other hand, there is considerable skepticism about numerous of the sustainability-associated promises businesses make, provided that concrete details are normally really hard to appear by and the dates for reaching these targets are sometimes decades away.

That usually potential customers to accusations of greenwashing, a time period environmental marketing campaign group Greenpeace Uk has known as a “PR tactic” utilized “to make a firm or product show up environmentally pleasant without the need of meaningfully minimizing its environmental influence.”