Tesla out, ExxonMobil In. The S&P 500 ESG Index

Tesla out, ExxonMobil In. The S&P 500 ESG Index ...

The S&P 500 ESG Index just underwent its annual rebalancing and reconstitution. Of course, it made significant news for those who were left out as much as who made it in.

Exclusions are made based on involvement in the following industries:

  • Controversial weapons
  • Thermal coal
  • Tobacco
  • Oil sands
  • Small arms
  • Military contracting

Companies with the lowest scores are ranked based on their exposure to these industries along with other ESG criteria, such as global impact, human rights violations, corruption, fraud, and environmental disasters. Currently, 300 of the S&P 500 names are admissible for the ESG index.

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The SPDR S&P 500 ESG ETF (EFIV) and the Xtrackers S&P 500 ESG ETF (SNPE) are two ETFs linked to the S&P 500 ESG Index.

Here are the top ten holdings in the index.

Note: Click HERE to read the "new" index''s commentary.

There is one obvious name that''s not included here: Tesla.

Tesla is obviously well-known for its advancements in electric cars, but that''s not the only criteria that goes into selection. S&P provided the following explanation as to why Tesla was neglected.

"A number of factors contributing to the S&amp

Elon Musk was none too pleased, as you may imagine.

Is Tesla considering having the highest degree of authority in the ESG index? It certainly sounds like the answer is yes. I generally agree with S&P''s rating methodology and believe, for the most part, it does a good job of listing/excluding the appropriate names. However, it does not always get it right. This seems like a case of leaving the forest for the trees.

I was tipped up on Twitter earlier today to ask if S&P was correct when it came to booting Tesla from the index. It''s still very early, but the results right now are up 3/4 no and 1/4 yes.

Elon adds another good point: ExxonMobil cut the ESG index and is now in the top 10 holdings! This is the most outrageous decision I''ve ever seen.

In its latest sustainability report, the company highlighted its current efforts to become more environmentally conscious, including reduction of methane emissions and its efforts to carbon capture and biofuel development. Despite the fact, this is an oil company, and I believe fossil fuels were at the top of the list of exemptions from ESG indexes.

ExxonMobil is in, but Chevron is out.

S&P did not provide any explanation for this article, but it appears like a head scratcher.

Nvidia''s vice-eTF (VICE), which invests in the so-called "sin stocks," also includes the stock in its top 10 holdings, with an ESG index, and a sin stock index. Just goes to show you that everyone has their own criteria!

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