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Tesla, Echoing Musk, Says ESG Metrics Are ‘Fundamentally Flawed’

By Saijel Kishan | May 9, 2022
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Tesla Inc., whose Chief Executive Officer Elon Musk has criticized ESG for making little sense, said current ways of measuring environmental, social and governance issues are “fundamentally flawed.”

In a 144-page annual report, the electric vehicle-maker said ESG ratings are based on how corporate profits are affected by ESG-related factors, rather than gauging a company’s real-world impact on society and the environment. The ratings are used by money managers to help decide where to invest.

In effect, individual investors who park their money in ESG funds managed by large asset managers are unaware that their capital is being used to buy shares of companies that are exacerbating the effects of climate change, rather than mitigating it, Tesla said.

“We need to create a system that measures and scrutinizes actual positive impact on our planet, so unsuspecting individual investors can choose to support companies that can make and prioritize positive change,” the Austin, Texas-based company said. It added that large investors, ratings agencies, companies and the public need to push for change.

Musk has been a recent critic of ESG, and has said its investment principles should be “deleted if not fixed.”

I am increasingly convinced that corporate ESG is the Devil Incarnate

— Elon Musk (@elonmusk) April 3, 2022

In its report, Tesla cited how automakers may see their ESG ratings increase even though they are only slightly reducing their greenhouse gas emissions, while continuing to produce vehicles that burn fossil fuels. Most emissions from vehicles are produced when customers drive them and that data tends to be misreported, not reported at all or based on “unrealistic assumptions,” Tesla said.

Photo: Tesla Inc. electric vehicles charge at the Tesla Supercharger station in Fremont, California, U.S./Bloomberg

Copyright 2025 Bloomberg.

Topics Tesla

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Written By Saijel Kishan

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