Elon Musk, the billionaire entrepreneur and CEO of Tesla, recently made headlines after he called ESG “the devil.” The term ESG refers to Environmental, Social, and Governance factors that investors consider when evaluating a company’s sustainability and societal impact. Musk’s comment sparked controversy in the investment community, as ESG has become an increasingly important consideration for many investors.
Musk’s criticism of ESG came as Tesla’s stock prices continued to struggle, while tobacco companies saw a surge in their shares. According to CNBC, the world’s largest tobacco companies, including Philip Morris International and British American Tobacco, saw their stocks rise by over 30% in 2020, while Tesla’s stock prices plummeted.
Musk’s comments suggest that he does not see much value in ESG investing. He argues that focusing too much on sustainability and social impact can distract from a company’s core mission. Musk is known for his ambitious projects, such as the development of electric cars and space exploration, and he believes that too much focus on ESG could hinder progress in these areas.
While Musk’s comments may be controversial, they do raise important questions about the role of ESG in investing. Critics of ESG argue that it can be difficult to measure the impact of sustainability and social factors on a company’s financial performance. They also argue that ESG investing can limit investment opportunities and prevent investors from maximizing returns.
On the other hand, supporters of ESG argue that it is possible to achieve both financial performance and social impact. They argue that companies that prioritize sustainability and social responsibility are more likely to have long-term success, as they are better positioned to adapt to changing social and environmental factors.
In recent years, ESG investing has become increasingly popular among both institutional investors and individual investors. According to Morningstar, sustainable funds in the US saw record inflows of $20.9 billion in the first quarter of 2021, and ESG assets under management reached $1.7 trillion by the end of 2020.
Regardless of Musk’s opinion on ESG, it is clear that many investors see value in investing in companies that prioritize sustainability and social responsibility. As issues like climate change, social justice, and consumer privacy continue to gain prominence, it is likely that ESG investing will only become more important in the future. Whether Musk likes it or not, companies will increasingly be judged by their impact on the environment and society.