Large funds must stop misleading investors and change their ESG valuation of companies, according to Tesla
Tesla is urging major funds to quit deceiving investors and modify its company ESG valuations. This will prevent a situation in which investors seeking to invest primarily in environmentally good enterprises wind up investing in polluting industries.
Tesla released the 2021 Impact Report, which addressed ESG concerns (Environmental, Social, and Governance). The largest problem, according to the company, is that current ESG reports do not quantify the scale of the beneficial influence on the world. Instead, it concentrates on calculating the monetary value of risk/reward.
Individual investors who put their money in ESG funds run by huge investing firms may not realize that their money can be used to acquire shares in companies that exacerbate rather than mitigate climate change. Tesla uses the measurement of the car sector as an example. While the ordinary investor might believe that the higher an automaker’s ESG score, the more electric vehicles it sells as a percentage of overall volume, the truth is quite different.
The company’s ESG ratings are anticipated to improve as long as it continues to cut emissions from its manufacturing activities while also launching internal combustion engine vehicles. However, vehicle use-phase emissions, which account for 80-90 percent of total automotive emissions and are included in Scope 3 of ESG reporting, are frequently misreported or not reported at all.
As a result, certain oil and gas businesses appear to rank higher than Tesla in terms of “Environmental Impact,” which is false. To support its conclusion, Tesla cited Bloomberg Businessweek’s article on the ESG Mirage: “The most striking feature of the [ESG rating] system is how rarely a company’s record on climate change seems to get in the way of its climb up the ESG ladder—or even to factor at all.”
Tesla suggested based on the information that it believed would help to resolve the matter. The manufacturer is certain that a system that “tracks and scrutinizes the actual beneficial impact on our world” is required so that “unwitting private investors can choose to support enterprises that can make and prioritize positive change.” On the product front, companies should be forced to utilize real-world figures whenever possible and to identify when estimations, rather than actual numbers, are presented, according to Tesla.
For instance, emissions from automobiles in use, which account for the vast majority of life cycle emissions, are reported based on manufacturer projections that nearly never match the actual data. Automakers frequently have access to this information, but intentionally fail to provide it. As a reply to the tweet posted by Sawyer Merritt regarding the Tesla, Elon said: “Yes! Stop the outrageous false ESG assessments, where Tesla gets a bad grade, but an oil company can get a good grade. Total gaming of the system!”
Institutional investors, rating agencies, public firms, and the general public must all support the evolution of ESG so that the world will seek major positive influence and corporations will begin to communicate about their true impact.