Electric vehicle (EV) maker Tesla’s stock has fallen after being excluded from an influential investing index in a recent reshuffle.
Tesla (TSLA) closed the prior session down 6%, while for the year to date it is down more than 40%.
Tesla (TSLA) stock
The EV stock has been removed from the S&P 500 ESG Index, which measures the performance of stocks meeting sustainability criteria, while matching the industry group weighting of the benchmark S&P 500 (US500).
“Tesla was ineligible for index inclusion due to its low S&P DJI ESG score, which fell in the bottom 25% of its global industry group peers,” Margaret Dorn, head of North American ESG indices at S&P Dow Jones Indices, wrote in a blog post.
Indices such as the S&P 500 ESG index do not manage money or trade directly but are the building blocks for financial products such as exchange-traded funds (ETFs).
Tesla was removed from the ethical index due to the lack of a low-carbon strategy and codes of business conduct, as well as future risks associated with employee discrimination claims and “multiple deaths and injuries related to its autopilot vehicles”, S&P Dow Jones Indices said.
Tesla’s media team did not immediately respond to an email seeking comment from Capital.com.
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Musk tweet
Tesla CEO Elon Musk was not pleased with the move and took to his favourite social media outlet to voice his concern.
Twitter
Musk is also in the process of acquiring Twitter (TWTR) itself for $43bn in total, seeking to make “free speech” changes to the social media platform.
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Analysts’ reaction
In another move, a US investment firm has trimmed its price target on Tesla stock due to ongoing Covid-19 lockdowns in China resulting in possible “modest delivery softness” and “slower growth trajectory” in the remainder of the year.
“We remain firmly bullish on Tesla over the long term and our thesis has not changed. However we have to reflect a new reality for Tesla in China, with headwinds abounding in a shakier macro backdrop,” Wedbush Securities analyst Daniel Ives wrote in a research note obtained by Capital.com.
“While the Twitter situation in theory does not impact the Tesla fundamental story, the distraction risks for Musk (perception is reality) are hard to ignore at a time that the Tesla ecosystem has never needed Musk more with the worst supply-chain crisis seen in modern history.”
The firm has lowered its 12-month price target to $1,000 from $1,400.
What is ESG?
CFA Institute
Environmental, social, and governance (ESG) criteria are corporate behaviour standards used by socially conscious investors such as pension funds to look at potential investments.
Although ESG is not officially part of any financial reporting standard, corporations are increasingly making disclosures in their external reports on their sustainability efforts on environmental and social grounds.
Investing along ESG guidelines can help investors prevent potential losses when corporations engaging in risky or unethical practices are held accountable.
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