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Environment Elon Musk

Elon Musk calls out ESG (Photo by Nathan Stirk/Getty Images)

By Tyler Hummel Leaders Staff

Tyler Hummel

Tyler Hummel

Tyler Hummel is a news writer for Leaders Media. He was the Fall 2021 College Fix Fellow and Health Care...

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Nov 28, 2022

Questioning the Mission Of This Business Metric 

Elon Musk is very publicly speaking out against the ESG corporate grade for measuring climate impact and other effects of corporate activity. 

Key Details

  • Environmental, social, and corporate governance (ESG) is a set of non-financial standards used by analysts to judge a corporation’s efforts in addressing sustainability, climate issues, and social responsibility. 
  • Elon Musk views ESG standards negatively, tweeting Sunday that “ESG is the devil.” He previously tweeted in May that “ESG is a scam. It has been weaponized by phony social-justice warriors.”
  • Musk is the CEO of Tesla, which was penalized earlier in 2022 by the S&P 500 ESG Index for not meeting industry standards.

Why it’s News 

The tweet was a response to small-business advisor Carol Roth’s comments that ESG standards are being used as a tool to pressure corporations through political narratives. 

“Remember when Elon Musk wanted to bring free speech to Twitter and then S&P removed Tesla from their ESG 500 index but kept in Exxon? ESG is business social credit. It’s a means to control capital, keep business people in line with the narrative, and, ultimately, control you,” says Roth. 

Elon Musk and Tesla have received criticism this year for falling behind on ESG goals. Tesla was removed from the S&P 500’s ESG Index early in 2022 for not meeting the standards of business conduct demanded by the index. 

Dow Jones senior director Margaret Dorn wrote in May that Tesla had fallen into the bottom 25% of its industry and that it was being excluded from the index. That this was partially due to its failure to adhere to “low carbon energy and codes of business conduct,” according to Fox Business.  

Advocates of ESG investing argue that public corporations have a duty to all stakeholders to behave responsibly toward citizens and the environment. Therefore instituting a metric into corporate behavior is the best way to ensure responsible behavior. And many argue it even has a positive impact on a company’s bottom line.

Backing up a Bit 

Clarity A.I. CEO Rebeca Minguela spoke on the issue of ESG recently, saying that “many investors” are confused about what it means and that it isn’t just narrowly focused on climate impact. 

“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,” says Minguela. 

Tesla previously criticized ESG standards in its 2021 Impact Report, stating that current methodologies are flawed and don’t address real-world impact. 

“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,” says Tesla. 

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