S&P Global Clean Energy Index – Tesla excluded from market-listed companies

The inclusion of emerging market companies has created a ‘cleaner’ Clean Energy Index

Based on a consultation, the S&P Global Clean Energy Index, took steps to rebalance its methodology in October 2021, The steps taken improved transparency, reduced the index’s carbon footprint and better aligned the index methodology with market trends.¹

There was an additional rebalance in April 2022, with a focus on diversification by adding companies listed in emerging markets. The expansion to include companies listed in emerging markets allows the index to track a larger selection universe. The index is now composed of 100 constituents (formerly 75). Further, the broader index delivers greater geographical diversification. The International Energy Agency⁵ has seen a 50% increase in clean energy spending since October,

Who’s In and Who’s Out

Of the 308 constituents that were selected for inclusion in the S&P 500 ESG Index, names like Apple, Microsoft, Amazon and Alphabet once again made the cut (see Exhibit 3).

Why is Tesla missing from the Index?

One familiar name is absent from that list: Tesla. According to S&P Global Clean Energy Index, Tesla was ineligible for index inclusion due to its low S&P DJI ESG Score², which fell in the bottom 25% of its global GICS^® industry group peers.

Of note, Tesla joins Berkshire Hathaway, Johnson & Johnson and Meta, which have again not met the index’s methodology.

But, how can a company whose self-declared mission is to “accelerate the world’s transition to sustainable energy” not make the cut in an ESG index? There are many reasons.

Talking Tesla

According to the report, the GICS industry group in which Tesla is assessed (Automobiles & Components) experienced an overall increase in its average S&P DJI ESG Score. So, while Tesla’s S&P DJI ESG Score has remained fairly stable year-over-year, it was pushed further down the ranks relative to its global industry group peers.³ 

A few of the factors contributing to its 2021 S&P DJI ESG Score were a decline in criteria level scores related to Tesla’s (lack of) low carbon strategy⁴ and codes of business conduct.⁵

In addition, a Media and Stakeholder Analysis,⁶ a process that seeks to identify a company’s current and potential future exposure to risks stemming from its involvement in a controversial incident, identified two separate events centered around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles.

Both of these events had a negative impact on the company’s S&P DJI ESG Score at the criteria level, and subsequently its overall score. While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens.

Source: Zachary Botzenhart, Associate Director, Strategy Indices, S&P Dow Jones Indices

1. Rajendra, Ari. “S&P Global Clean Energy Index: A Path toward Greater Transparency.” S&P Dow Jones Indices. Oct. 20, 2021. ↩︎
2. The S&P DJI ESG Scores are the result of further scoring methodology refinements to the S&P Global ESG Scores that result from S&P Global’s annual Corporate Sustainability Assessment, a bottom-up research process that aggregates underlying company ESG data to score levels. ↩︎
3. Tesla’s S&P Global ESG Score improved 13 points from 2020 to 2021, whereas the S&P DJI ESG Score declined 2 points over the same time period. While several components of the scoring process are the same, such as the underlying research methodology, data collection and quality assurance, there are meaningful differences in the scoring process between S&P Global ESG Scores and S&P DJI ESG Scores. For more information on these differences, please visit FAQ: S&P DJI ESG Scores ↩︎
4. Low Carbon strategy criteria focus on companies’ strategies to reduce the carbon intensity of its car portfolio (efficient technologies), but also assess its current portfolio exposure to regulatory risks. ↩︎
5. Codes of business conduct criteria encompass a company’s implementation, transparent reporting on breaches and the occurrence of corruption and bribery cases and anti-competitive practices. ↩︎
6. The Media & Stakeholder Analysis is an ongoing screening of company controversies that may have financial or reputational impacts on companies assessed in the Corporate Sustainability Assessment. ↩︎

Source: S&P 500 Global Clean Index, May 2022