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Tesla Creates Awkward ESG Questions With Ejection From S&P Index

May 19, 2022, 7:17 PM

Tesla Inc.’s removal this week from an industry benchmark index is raising new questions about what ESG actually means to investors.

The strategy, widely seen as favoring industries ostensibly interested in sustainability (of the environmental, social and governance sort), started about two decades ago as a way to protect investors from risks tied to things like global warming, labor violations and discrimination. Since then, it’s morphed into a $35 trillion industry that’s allowed millions of investors to feel as though they’re “doing good.” And now people are confused about what ESG is really supposed to achieve.

“The market continues to conflate ESG with sustainability, and you’re ...